TORCHMARK CORP (Form: 10-K, Received: 02/26/2016 18:15:59)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-08052

TORCHMARK CORPORATION

(Exact name of registrant as specified in its charter)



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

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

972-569-4000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	CUSIP	Name of each exchange on which registered
Common Stock, $1.00 par value per share	891027104	New York Stock Exchange
Common Stock, $1.00 par value per share	891027104	The International Stock Exchange, London, England

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ¨ No x

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 ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of June 30, 2015 , the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $7,291,560,829 based on the closing sale price as reported on the New York Stock Exchange.

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



Class		Outstanding at February 19, 2016
Common Stock, $1.00 par value per share		121,264,589 shares

DOCUMENTS INCORPORATED BY REFERENCE



Document		Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to be held May 12, 2016 (Proxy Statement)		Part III

TORCHMARK CORPORATION

INDEX



			Page

PART I.

	Item 1.	Business	1

	Item 1A.	Risk Factors	6

	Item 1B.	Unresolved Staff Comments	11

	Item 2.	Properties	12

	Item 3.	Legal Proceedings	12

	Item 4.	Mine Safety Disclosures	12

PART II.

	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13

	Item 6.	Selected Financial Data	15

	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	47

	Item 8.	Financial Statements and Supplementary Data	48
		Consolidated Balance Sheets	50
		Consolidated Statements of Operations	51
		Consolidated Statements of Comprehensive Income	52
		Consolidated Statements of Shareholders' Equity	53
		Consolidated Statements of Cash Flows	54
		Notes to Consolidated Financial Statements	55
		Note 1- Significant Accounting Policies	55
		Note 2- Statutory Accounting	64
		Note 3- Supplemental Information About Changes to Accumulated Other Comprehensive Income	65
		Note 4- Investments	67
		Note 5- Deferred Acquisition Costs	77
		Note 6- Discontinued Operations	78
		Note 7- Liability for Unpaid Health Claims	80
		Note 8- Income Taxes	81
		Note 9- Postretirement Benefits	83
		Note 10-Supplemental Disclosures of Cash Flow Information	90
		Note 11- Debt	91
		Note 12- Shareholders' Equity	93
		Note 13- Stock-Based Compensation	94
		Note 14- Business Segments	99
		Note 15- Commitments and Contingencies	106
		Note 16- Selected Quarterly Data	108
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	109

	Item 9A.	Controls and Procedures	109

	Item 9B.	Other Information	109



PART III.

	Item 10.	Directors, Executive Officers, and Corporate Governance	112

	Item 11.	Executive Compensation	112

	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	112

	Item 13.	Certain Relationships and Related Transactions and Director Independence	112

	Item 14.	Principal Accountant Fees and Services	112

PART IV.

	Item 15.	Exhibits and Financial Statement Schedules	113

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PART I

Item 1. Business

Torchmark Corporation (Torchmark) is an insurance holding company incorporated in Delaware in 1979. Its primary subsidiaries are American Income Life Insurance Company (American Income), Liberty National Life Insurance Company (Liberty National), Globe Life And Accident Insurance Company (Globe), United American Insurance Company (United American), and Family Heritage Life Insurance Company of America (Family Heritage).

Torchmark’s website is: www.torchmarkcorp.com. Torchmark makes available free of charge through its website, its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after they have been electronically filed with or furnished to the Securities and Exchange Commission.

The following table presents Torchmark’s business by primary marketing distribution method.



Primary Distribution Method	Company	Products and Target Markets	Distribution

American Income Exclusive Agency	American Income Life Insurance Company Waco, Texas	Individual life and supplemental health insurance marketed to working families.	6,552 producing agents in the U.S., Canada, and New Zealand.
Globe Life Direct Response	Globe Life And Accident Insurance Company Oklahoma City, Oklahoma	Individual life and supplemental health insurance including juvenile and senior life coverage and Medicare Supplement to middle-income Americans.	Direct mail, internet, television, magazine; nationwide.
Family Heritage Exclusive Agency	Family Heritage Life Insurance Company of America Cleveland, Ohio	Supplemental limited-benefit health insurance to middle-income families.	911 captive agents in the U.S.
Liberty National Exclusive Agency	Liberty National Life Insurance Company McKinney, Texas	Individual life and supplemental health insurance marketed to middle-income families.	1,478 producing agents in the U.S.
United American Independent Agency	United American Insurance Company McKinney, Texas	Medicare Supplement coverage to Medicare beneficiaries and, to a lesser extent, supplemental limited-benefit health coverage to people under age 65.	3,893 independent producing agents in the U.S.

Additional information concerning industry segments may be found in Management’s Discussion and Analysis and in Note 14—Business Segments in the Notes to the Consolidated Financial Statements.

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Insurance

Life Insurance

Torchmark’s insurance subsidiaries write a variety of nonparticipating ordinary life insurance products. These include traditional and interest sensitive whole-life insurance, term life insurance, and other life insurance. The following table presents selected information about Torchmark’s life products.



	Annualized Premium in Force (Amounts in thousands)
	2015		2014		2013
Whole life:
Traditional	$	1,378,290	$	1,296,403	$	1,235,904
Interest-sensitive	50,808		54,490		58,549
Term	642,599		619,782		591,628
Other	78,801		73,870		69,320
	$	2,150,498	$	2,044,545	$	1,955,401

The distribution methods for life insurance products include sales by direct response, exclusive agents and independent agents. These methods are described in more depth in the Distribution Method chart earlier in this report. The following table presents life annualized premium in force by distribution method.



	Annualized Premium in Force (Amounts in thousands)
	2015		2014		2013
Globe Life Direct Response	$	757,518	$	721,261	$	688,866
Exclusive agents:
American Income	880,021		807,935		749,165
Liberty National	284,597		285,201		287,079
Independent agents:
United American	14,488		15,831		17,846
Other	213,874		214,317		212,445
	$	2,150,498	$	2,044,545	$	1,955,401

Health Insurance

Torchmark offers limited-benefit supplemental health insurance products that include primarily critical illness and accident plans. These policies are designed to supplement health coverage that applicants already own. Medicare Supplements are also offered to enrollees in the traditional fee-for-service Medicare program. Medicare Supplement plans are standardized by federal regulation and are designed to pay deductibles and co-payments not paid by Medicare.

On February 4, 2016, Torchmark announced that management has committed to a plan to sell its Medicare Part D business during the calendar year 2016. Torchmark no longer wishes to emphasize its Medicare Part D business due to declining margins, increased risks, higher drug costs, and increased administrative and compliance costs. Management believes this sale will allow the Company to better focus on its core protection life and health insurance businesses. As the historical results for the Medicare Part D business are accounted for as discontinued operations, all business results and relevant forward looking statements of the Company are reported as continuing operations. For further discussion of the disposition of the Medicare Part D business, see Note 6—Discontinued Operations in the Notes to the Consolidated Financial Statements.

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The following table presents supplemental health annualized premium in force information for the three years ended December 31, 2015 by product category.



	Annualized Premium in Force (Amounts in thousands)
	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
Medicare Supplement	$	498,696	51	$	488,142	52	$	435,788	49
Limited-benefit plans	474,346		49	459,181		48	451,656		51
	$	973,042	100	$	947,323	100	$	887,444	100

The following table presents supplemental health annualized premium in force for the three years ended December 31, 2015 by marketing (distribution) method.



	Annualized Premium in Force (Amounts in thousands)
	2015		2014		2013
Globe Life Direct Response	$	72,423	$	72,659	$	55,270
Exclusive agents:
Liberty National	216,139		226,599		240,581
American Income	74,058		71,942		71,354
Family Heritage	234,120		217,742		201,054
Independent agents:
United American	376,302		358,381		319,185
	$	973,042	$	947,323	$	887,444

Annuities

Annuity products include single-premium and flexible-premium deferred annuities. Annuities in each of the three years ended December 31, 2015 comprised less than 1% of premium.

Pricing

Premium rates for life and health insurance products are established using assumptions as to future mortality, morbidity, persistency, and expenses. These assumptions are based on Company experience and projected investment earnings. Revenues for individual life and health insurance products are primarily derived from premium income, and, to a lesser extent, through policy charges to the policyholder account values on annuity products and certain individual life products. Profitability is affected to the extent actual experience deviates from the assumptions made in pricing and to the extent investment income varies from that which is required for policy reserves.

Collections for annuity products and certain life products are not recognized as revenues but are added to policyholder account values. Revenues from these products are derived from charges to the account balances for insurance risk and administrative costs. Profits are earned to the extent these revenues exceed actual costs. Profits are also earned from investment income on the deposits invested in excess of the amounts credited to policyholder accounts.

Underwriting

The underwriting standards of each Torchmark insurance subsidiary are established by management. Each subsidiary uses information from the application and, in some cases, telephone interviews with applicants, inspection reports, pharmacy data, doctors’ statements and/or medical examinations to determine whether a policy should be issued in accordance with the application, with a different rating, with a rider, with reduced coverage or rejected.

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Reserves

The life insurance policy reserves reflected in Torchmark’s financial statements as future policy benefits are calculated based on generally accepted accounting principles (GAAP). These reserves, with premiums to be received in the future and the interest thereon compounded annually at assumed rates, must be sufficient to cover policy and contract obligations as they mature. Generally, the mortality and persistency assumptions used in the calculations of reserves are based on Company experience. Similar reserves are held on most of the health policies written by Torchmark’s insurance subsidiaries, since these policies generally are issued on a guaranteed-renewable basis. The assumptions used in the calculation of Torchmark’s reserves are reported in Note 1—Significant Accounting Policies in the Notes to the Consolidated Financial Statements. Reserves for annuity products and certain life products consist of the policyholders’ account values and are increased by policyholder deposits and interest credited and are decreased by policy charges and benefit payments.

Investments

The nature, quality, and percentage mix of insurance company investments are regulated by state laws. The investments of Torchmark insurance subsidiaries consist predominantly of high-quality, investment-grade securities. Fixed maturities represented 96% of total investments at fair value at December 31, 2015 . ( See Note 4—Investments in the Notes to Consolidated Financial Statements and Management’s Discussion and Analysis . )

Competition

Torchmark competes with other insurance carriers through policyholder service, price, product design, and sales efforts. While there are insurance companies competing with Torchmark, no individual company dominates any of Torchmark’s life or health markets.

Torchmark’s health insurance products compete with, in addition to the products of other health insurance carriers, health maintenance organizations, preferred provider organizations, and other health care-related institutions which provide medical benefits based on contractual agreements.

Management believes Torchmark companies operate at lower policy acquisition and administrative expense levels than peer companies. This allows Torchmark to have competitive rates while maintaining higher underwriting margins.

Regulation

Insurance. Insurance companies are subject to regulation and supervision in the states in which they do business. The laws of the various states establish agencies with broad administrative and supervisory powers which include, among other things, granting and revoking licenses to transact business, regulating trade practices, licensing agents, approving policy forms, approving certain premium rates, setting minimum reserve and loss ratio requirements, determining the form and content of required financial statements, and prescribing the type and amount of investments permitted. They are also required to file detailed annual reports with supervisory agencies, and records of their business are subject to examination at any time. Under the rules of the National Association of Insurance Commissioners (NAIC), insurance companies are examined periodically by one or more of the supervisory agencies.

Risk Based Capital. The NAIC requires a risk based capital formula be applied to all life and health insurers. The risk based capital formula is a threshold formula rather than a target capital formula. It is designed only to identify companies that require regulatory attention and is not to be used to rate or rank companies that are adequately capitalized. All Torchmark insurance subsidiaries are more than adequately capitalized under the risk based capital formula.

Guaranty Assessments. State guaranty laws provide for assessments from insurance companies to be placed into a fund which is used, in the event of failure or insolvency of an insurance company, to fulfill the obligations of that company to its policyholders. The amount which a company is assessed is based on its proportional share of the premium in each state. Assessments are recoverable to a great extent as offsets against state premium taxes.

Holding Company. States have enacted legislation requiring registration and periodic reporting by insurance companies domiciled within their respective jurisdictions that control or are controlled by other corporations so as to constitute a holding company system. Torchmark and its subsidiaries have registered as a holding company system pursuant to such legislation in Indiana, Nebraska, Ohio, and New York.

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Insurance holding company system statutes and regulations impose various limitations on investments in subsidiaries, and may require prior regulatory approval for material transactions between insurers and affiliates and for the payment of certain dividends and other distributions.

Personnel

At the end of 2015 , Torchmark had 3,115 employees.

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Item 1A. Risk Factors

Risks Related to Our Business

Product Marketplace and Operational Risks:

The insurance industry is a regulated industry, populated by many firms. We operate in the life and health insurance sectors of the insurance industry, each with its own set of risks.

The development and maintenance of our various distribution systems are critical to growth in product sales and profits. As our life and health insurance sales are primarily made to individuals, rather than groups, and the face amounts sold are lower than that of policies sold in the higher income market, the development, maintenance, and retention of adequate numbers of producing agents and Globe Life Direct Response systems to support growth of sales in this market are critical. Adequate compensation that is competitive with other career opportunities and that also motivates producing agents to increase sales is critical. In Globe Life Direct Response, continuous development of new offerings and cost efficiency are key. Less than optimum execution of these strategies may result in reduced sales and profits.

Economic conditions may materially adversely affect our business and results of operations. We serve primarily the middle-income market for individual protection life and health insurance and, as a result, we compete directly with alternative uses of a customer’s disposable income. If disposable income within this demographic group declines or the use of disposable income becomes more limited, as a result of a significant, sustained economic downturn or otherwise, then new sales of our insurance products could become more challenging, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. Economic conditions could also impact our investment portfolio as discussed under Investment Risks below.

Variations in expected to actual rates of mortality, morbidity, and persistency could materially negatively affect our results of operations and financial condition. We establish a liability for our policy reserves to pay future policyholder benefits and claims. These reserves do not represent an exact calculation of liability, but rather are actuarial estimates based on models that include many assumptions and projections which are inherently uncertain. The reserve computations involve the exercise of significant judgment with respect to levels of mortality, morbidity, and persistency as well as the timing of premium and benefit payments. Even though our actuaries continually test expected-to-actual results, actual levels that occur may differ significantly from the levels assumed when premium rates were first set. Accordingly, we cannot determine with precision the ultimate amounts of claims or benefits that we will pay or the timing of such payments. Significant variations from the levels assumed when policy reserves are first set could require policy obligations to be increased and negatively affect our profit margins and income.

A ratings downgrade or other negative action by a rating agency could materially affect our business, financial condition and results of operations. Various rating agencies review the financial performance and condition of insurers, including our insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in our insurance products. A downgrade or other negative action by a rating agency with respect to the financial strength ratings of our insurance subsidiaries could negatively affect us in many ways, including the following: limiting or restricting the ability of our insurance subsidiaries to pay dividends to us and adversely affecting our ability to sell insurance products through our independent agencies.

Rating agencies also publish credit ratings for us. Credit ratings are indicators of a debt issuer’s ability to meet the terms of debt obligations in a timely manner. These ratings are important to our overall ability to access certain types of liquidity. Actual or anticipated downgrades in our credit ratings, or an announcement that our ratings are under further review for a downgrade, could potentially have a negative effect on our operations, by limiting our access to capital markets, increasing the cost of debt, impairing our ability to raise capital to refinance maturing debt obligations, limiting our capacity to support growth at our insurance subsidiaries, or making it more difficult to maintain or improve the current financial strength ratings of our insurance subsidiaries.

Ratings reflect only the rating agency’s views and are not recommendations to buy, sell or hold our securities. Rating agencies assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to the views of the rating agency, general economic conditions and circumstances outside the rated company’s control. In addition, rating agencies use various models and formulas to assess the strength of a rated

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company, and from time to time rating agencies have, in their discretion, altered the models. Changes to the models could impact the rating agencies’ judgment of the rating to be assigned to the rated company. There can be no assurance that current credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if in each rating agency’s judgment, circumstances so warrant. We cannot predict what actions the rating agencies may take, or what actions we may take in response to the actions of the rating agencies, which could negatively affect our business, financial condition and results of operations.

Reputational Risk:

Damage to the reputation of Torchmark or its subsidiaries could affect our ability to conduct business. Negative publicity through traditional media, internet, social media, and other public forums could damage our reputation and adversely impact our agent recruiting efforts, the ability to market our products, and the persistency of our block of inforce policies.

Life Insurance Marketplace Risk:

Our life products are sold in selected niche markets. We are at risk should any of these markets diminish. We have two life distribution channels that focus on distinct market niches: labor union members and sales via Globe Life Direct Response solicitation. Deterioration of our relationships with organized labor or adverse changes in the public’s receptivity to unsolicited Globe Life Direct Response marketing could negatively affect this business.

Health Insurance Marketplace Risks:

The health insurance market is subject to substantial legislative scrutiny. Legislative changes could impact our Medicare Supplement and other supplemental health businesses. The nature and timing of any such changes cannot be predicted and could have a material adverse effect on that business.

Competition in the health market can be significant. Sales of our health insurance products are subject to competition from other health insurance companies and alternative healthcare providers, such as those that provide alternatives to traditional Medicare to seniors. In addition, some insurers may be willing to significantly reduce their profit margins or under price new sales in order to gain market share. We choose not to compete for market share based on these terms. Accordingly, changes in the competitive landscape, including the pricing strategies employed by our competitors, could negatively impact the future sales of our health insurance products.

An inability to obtain timely and appropriate premium rate increases for the health insurance policies we sell due to regulatory delay could adversely affect our results of operations and financial condition. A significant percentage of the health insurance premiums that our insurance subsidiaries earn is from Medicare Supplement insurance. Medicare Supplement insurance and the terms under which the premiums for such policies may be increased are highly regulated at both the state and federal level. As a result, it is characterized by lower profit margins than life insurance and requires strict administrative discipline and economies of scale for success. Because Medicare Supplement policies are coordinated with the federal Medicare program, which experiences health care inflation every year, annual premium rate increases for the Medicare Supplement policies are necessary. Obtaining timely rate increases is of critical importance to our success in this market. Accordingly, the inability of our insurance subsidiaries to obtain approval of premium rate increases in a timely manner from state insurance regulatory authorities in the future could adversely impact their profitability.

Investment Risks:

Our investments are subject to market and credit risks. Our invested assets are subject to the customary risks of defaults, downgrades, and changes in market values. Substantially all of our investment portfolio consists of fixed-maturity and short-term investments. A significant portion of our fixed-maturity investments is comprised of corporate bonds, exposing us to the risk that individual corporate issuers will not have the ability to make required interest or principal payments on the investment. Factors that may affect both market and credit risks include interest rate levels, financial market performance, disruptions in credit markets, general economic conditions, legislative changes, particular circumstances affecting the businesses or industries of each issuer, and other factors beyond our control. Additionally, because the majority of our investments are longer-term fixed maturities that we typically hold until maturity, significant increases in interest rates, widening of credit spreads, or inactive markets associated with market downturns could cause a material temporary decline in the fair value of our fixed investment portfolio, even with regard to performing assets. These declines could cause a material increase in unrealized losses in our investment portfolio. Significant

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unrealized losses can substantially reduce our capital position and shareholders’ equity. It is possible that our investment in certain of these securities with unrealized losses may experience a default event and that a portion or all of that unrealized loss may not be recoverable. In that case, the unrealized loss will be realized, at which point we would take an impairment charge, reducing our net income.

Difficulties in the business of particular issuers or in industries in which we hold investments could cause significant downgrades, delinquencies and defaults in our investment portfolio, potentially resulting in lower net investment income and increased realized and unrealized investment losses. A default by an issuer could result in a significant other-than-temporary impairment of that investment, causing us to write the investment down and take a charge against net income. The risk of default is higher for bonds with longer-term maturities, which we acquire in order to match our long-term insurance obligations. We attempt to reduce this risk by purchasing only investment grade securities and by carefully evaluating an issuer before entering into an investment. We cannot be assured that any particular issuer, regardless of industry, will be able to make required interest and principal payments, on a timely basis or at all. Significant downgrades of issuers could negatively impact our risk-based capital ratios, leading to potential downgrades by our rating agencies, potential reduction in future dividend capacity, and/or higher financing costs at the holding company should additional statutory capital be required. Material other-than-temporary impairments could reduce our statutory surplus, leading to lower risk-based capital ratios, potential downgrades of our ratings by rating agencies and a potential reduction of future dividend capacity from our insurance subsidiaries. While we intend to hold our investments until maturity, a severe increase in defaults could cause us to suffer a significant decrease in investment income or principal repayments, resulting in substantial realized losses from the write downs of impaired investments. Current net income would be negatively impacted by the write downs, and prospective net income would be adversely impacted by the loss of future interest income.

Declines in interest rates could negatively affect income. Declines in interest rates expose insurance companies to the risk of not earning anticipated spreads between the interest rate earned on investments and the discount rates used to calculate the net policy liabilities. While we attempt to manage our investments to preserve the excess investment income spread, we provide no assurance that a significant and persistent decline in interest rates will not materially affect such spreads. Significant decreases in interest rates could result in calls by issuers of investments, where such features are available to issuers. These calls could result in a decline in our investment income, as reinvestment of the proceeds would likely be at lower rates.

Liquidity Risks:

Our liquidity to fund operations is substantially dependent on funds available, primarily dividends, from our insurance subsidiaries. As a holding company with no direct operations, our principal asset is the capital stock of our insurance subsidiaries, which periodically declare and distribute dividends on their capital stock. Moreover, our liquidity, including our ability to pay our operating expenses and to make principal and interest payments on debt securities or other indebtedness owed by us, as well as our ability to pay dividends on our common stock or any preferred stock, depends significantly upon the surplus and earnings of our insurance subsidiaries and the ability of these subsidiaries to pay dividends or to advance or repay funds to us. Other sources of liquidity also include a variety of short-term and long-term instruments, including our credit facility, commercial paper, long-term debt, intercompany financing, and reinsurance.

The principal sources of our insurance subsidiaries’ liquidity are insurance premiums, as well as investment income, maturities, repayments, and other cash flow from our investment portfolio. Our insurance subsidiaries are subject to various state statutory and regulatory restrictions applicable to insurance companies that limit the amount of cash dividends, loans, and advances that those subsidiaries may pay to us, including laws establishing minimum solvency and liquidity thresholds. For example, in the states where our companies are domiciled, an insurance company generally may pay dividends only out of its unassigned surplus as reflected in its statutory financial statements filed in that state. Additionally, dividends paid by insurance subsidiaries are generally limited to the greater of prior year statutory net income, excluding capital gains, on an annual noncumulative basis or 10% of prior year statutory surplus without regulatory approval. Accordingly, impairments in invested assets or a disruption in our insurance subsidiaries’ operations that reduces their capital or cash flow could limit or disallow payment of dividends to us, a principal source of our cash flow.

We can give no assurance that more stringent restrictions will not be adopted from time to time by states in which our insurance subsidiaries are domiciled, which could, under certain circumstances, significantly reduce dividends or other amounts paid to us by our subsidiaries. Although we do not anticipate changes, changes in these laws could constrain

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the ability of our subsidiaries to pay dividends or to advance or repay funds to us in sufficient amounts and at times necessary to meet our debt obligations and corporate expenses. Additionally, the inability of our insurance subsidiaries to obtain approval of premium rate increases in a timely manner from state insurance regulatory authorities could adversely impact their profitability, and thus their ability to declare and distribute dividends to us. Limitations on the flow of dividends from our subsidiaries could limit our ability to service and repay debt or to pay dividends on our capital stock.

Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs or access capital, as well as affect our cost of capital. Should credit spreads widen in the future, the interest rate on any new debt obligation we may issue could increase, and our net income could be reduced. If the credit and capital markets were to experience significant disruption, uncertainty, and instability, these conditions could adversely affect our access to capital. Such market conditions may limit our ability to replace maturing liabilities (in a timely manner or at all) and/or access the capital necessary to grow our business.

In the unlikely event that current resources do not satisfy our needs, we may have to seek additional financing or raise capital. The availability of additional financing or capital will depend on a variety of factors such as market conditions, the general availability of credit or capital, the volume of trading activities, the overall availability of credit to the insurance industry, and our credit ratings and credit capacity. Additionally, customers, lenders, or investors could develop a negative perception of our long- or short-term financial prospects if we incur large investment losses or if the level of our business activity decreases due to a market downturn. Our access to funds may also be impaired if regulatory authorities or rating agencies take negative actions against us. Our internal sources of liquidity may prove to be insufficient, and, in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all. As such, we may be forced to delay raising capital, issue shorter term securities than we prefer, or bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility. Therefore, as a result, our results of operations, financial condition, and cash flows could be materially negatively affected by disruptions in the financial markets.

Regulatory Risks:

Our businesses are heavily regulated, and changes in regulation may reduce our profitability and growth. Insurance companies, including our insurance subsidiaries, are subject to extensive supervision and regulation in the states in which we do business. The primary purpose of this supervision and regulation is the protection of our policyholders, not our investors. State agencies have broad administrative power over numerous aspects of our business, including premium rates and other terms and conditions that we can include in the insurance policies offered by our insurance subsidiaries, marketing practices, advertising, licensing agents, policy forms, capital adequacy, solvency, reserves, and permitted investments. Also, regulatory authorities have relatively broad discretion to grant, renew, or initiate procedures to revoke licenses or approvals. The insurance laws, regulations and policies currently affecting Torchmark and its insurance subsidiaries may change at any time, possibly having an adverse effect on our business. Should these changes to our business occur, we may be unable to maintain all required licenses and approvals, and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations, which may change from time to time. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or impose substantial fines.

We cannot predict the timing or substance of any future regulatory initiatives. In recent years, there has been increased scrutiny of insurance companies, including our insurance subsidiaries, by insurance regulatory authorities, which has included more extensive examinations and more detailed review of disclosure documents. These regulatory authorities may bring regulatory or other legal actions against us if, in their view, our practices, or those of our agents or employees, are improper. These actions can result in substantial fines, penalties, or prohibitions or restrictions on our business activities and could have a material adverse effect on our business, results of operations, or financial condition. Additionally, changes in the overall legal or regulatory environment may, even absent any particular regulatory authority’s interpretation of an issue changing, cause us to change our views regarding the actions that we need to take from a legal or regulatory risk management perspective, thus necessitating changes to our practices that may, in some cases, limit our ability to grow, impact regulatory capital requirements, or otherwise negatively impact the profitability of our business.

Currently, the U.S. federal government does not directly regulate the business of insurance. However, the Dodd-Frank Wall Street Record and Consumer Protection Act of 2010 has established a Federal Insurance Office (FIO) within the

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Department of the Treasury, and the Affordable Care Act and a Financial Stability Oversight Council (FSOC) created the Center for Consumer Information and Insurance Oversight (CCIIO), originally established under the Department of Health and Human Services and subsequently transferred to the Centers for Medicare and Medicaid Services (CMS). The creation of these insurance regulatory offices may indicate that the federal government intends to play a larger role in the direct oversight or regulation of the insurance industry. We cannot predict what impact, if any, the FIO, FSOC and CCIIO, as well as any other proposals for federal oversight or regulation of insurance could have on our business, results of operations, or financial condition.

Changes in U.S. federal income tax law could increase our tax costs. Changes to the Internal Revenue Code, administrative rulings, or court decisions affecting the insurance industry, including the products it offers, could increase our effective tax rate and lower our net income, or negatively affect our ability to sell some of our products.

Changes in accounting standards issued by accounting standard-setting bodies may affect our financial statements, reduce our reported profitability, and change the timing of profit recognition. Our financial statements are subject to the application of generally accepted accounting principles in the United States of America (GAAP), which principles are periodically revised and/or expanded. Accordingly, from time to time, we are required to adopt new or revised accounting standards or guidance issued by recognized authoritative bodies. It is possible that future accounting standards that we are required to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have a material adverse effect on our financial condition and results of operations. Further, standard setters have a full agenda of unissued topics under review at any given time, any of which have the potential to negatively impact our profitability.

If we fail to comply with restrictions on patient privacy and information security, including taking steps to ensure that our business associates who obtain access to sensitive patient information maintain its confidentiality, our reputation and business operations could be materially adversely affected. The collection, maintenance, use, disclosure and disposal of individually identifiable data by our insurance subsidiaries are regulated at the international, federal and state levels. These laws and rules are subject to change by legislation or administrative or judicial interpretation. Various state laws address the use and disclosure of individually identifiable health data to the extent they are more restrictive than those contained in the privacy and security provisions in the federal Gramm-Leach-Bliley Act of 1999 (GLBA) and in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA also requires that we impose privacy and security requirements on our business associates (as that term is defined in the HIPAA regulations). Noncompliance with any privacy laws or any security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information, whether by us or by one of our business associates, could have a material adverse effect on our business, reputation and results of operations and could include material fines and penalties, various forms of damages, consent orders regarding our privacy and security practices, adverse actions against our licenses to do business and injunctive relief.

Litigation Risk:

Litigation could result in substantial judgments against us or our subsidiaries. We are, and in the future may be, subject to litigation in the ordinary course of business. Some of these proceedings have been brought on behalf of various alleged classes of complainants, and, in certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. Members of our management and legal teams review litigation on a quarterly and annual basis. However, the outcome of any such litigation cannot be predicted with certainty. A number of civil jury verdicts have been returned against insurers in the jurisdictions in which Torchmark and its insurance subsidiaries do business involving the insurers’ sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. These lawsuits have resulted in the award of substantial judgments against insurers that are disproportionate to the actual damages, including material amounts of punitive damages. In some states in which we operate, juries have substantial discretion in awarding punitive damages. This discretion creates the potential for unpredictable material adverse judgments in any given punitive damages suit.

Our pending and future litigation could adversely affect us because of the costs of defending these cases, the costs of settlement or judgments against us, or changes in our operations that could result from litigation. Substantial legal liability in these or future legal actions could also have a material financial effect or cause significant harm to our reputation, which, in turn, could materially harm our business and our business prospects.

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Catastrophic Event Risk:

Our business is subject to the risk of the occurrence of catastrophic events. Our insurance policies are issued to and held by a large number of policyholders throughout the United States in relatively low-face amounts. Accordingly, it is unlikely that a large portion of our policyholder base would be affected by a single natural disaster. However, our insurance operations could be exposed to the risk of catastrophic mortality or morbidity, caused by events such as a pandemic, hurricane, earthquake, or man-made catastrophes, including acts of terrorism or war, which may produce significant claims in larger areas, especially those that are heavily populated. Claims resulting from natural or man-made catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or harm our financial condition.

Information Security and Technology Risk:

A security breach, the introduction of malware in our computing environment, employee error or malfeasance, unauthorized access, a natural or man-made disaster, or other unanticipated event could compromise the information security systems of Torchmark or its subsidiaries, and could damage our business and adversely affect our financial condition and results of operations.

A failure in our information security systems could result in a loss or disclosure of confidential information, damage to our reputation, loss of cash flow and impairment of our ability to conduct business effectively. In some cases we may not become aware of such incident for some time after it occurs, which could increase our exposure.

Anyone who is able to circumvent our security measures could access, view, misappropriate, alter or delete confidential information in the systems, including personally identifiable customer information and proprietary business information. In addition, an increasing number of states require that customers be notified of unauthorized access, use, or disclosure of their information. Any such breach of confidential information could damage our reputation in the marketplace, deter people from purchasing our products, result in the loss of existing customers, subject us to significant civil and criminal liability, and require us to incur significant technical, legal and other expenses.

In the event of a disaster, such as a natural catastrophe, an industrial accident, a blackout, or a terrorist attack or war, our computer systems may be inaccessible to our employees or customers for a period of time. Even if our employees are able to report to work, they may be unable to perform their duties for an extended period of time if our data or systems are disabled or destroyed and if existing contingency plans cannot function as designed.

Item 1B. Unresolved Staff Comments

As of December 31, 2015 , Torchmark had no unresolved staff comments.

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Item 2. Properties

Torchmark, through its subsidiaries, owns or leases buildings that are used in the normal course of business. Torchmark owns and occupies a 300,000 square foot facility in McKinney, Texas (a north Dallas suburb). This facility is Torchmark’s corporate headquarters and also houses the operations of a subsidiary, United American, as well as the operations of other subsidiaries. In addition, United American leases 5,000 square feet of space in Omaha, Nebraska and, through a subsidiary, leases 2,500 square feet in an office area in Syracuse, New York.

Liberty National, though headquartered in McKinney, Texas, operates its main activities out of a 24,000 square foot facility leased in Hoover, Alabama (a Birmingham suburb). An 8,000 square foot facility is leased for storage in Pelham, Alabama, close to the Hoover facility.

Globe leases a 30,300 square foot office area in the City Place Tower building located in downtown Oklahoma City, Oklahoma. Globe also leases 11,000 square feet at a nearby facility used for storage. Globe Marketing Services, a subsidiary of Globe, owns a 133,000 square foot facility in Oklahoma City which houses the Globe Life Direct Response operation.

American Income owns and is the sole occupant of an office building located in Waco, Texas. The two-floored building contains 70,000 square feet. American Income also has leased 10,800 square feet in a building across the street from the main office building. American Income Marketing Services, a subsidiary of American Income, owns a 43,000 square foot facility located in Waco, Texas, housing American Income’s direct response operation. American Income also leases office space throughout the United States to support its marketing operations.

Family Heritage owns 50% of a partnership that owns an approximate 66,000 square foot building in Broadview Heights, Ohio (a suburb of Cleveland), serving as Family Heritage’s headquarters. The partnership also leases a portion of the building to unrelated tenants.

Item 3. Legal Proceedings

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

Torchmark subsidiaries are currently the subject of audits regarding the identification, reporting and escheatment of unclaimed property arising from life insurance policies and a limited number of annuity contracts. These audits are being conducted by private entities that have contracted with forty-seven various states through their respective Departments of Revenue, and have not resulted in any financial assessment from any state nor indicated any liability. The audits are wide-ranging and seek large amounts of data regarding claims handling, procedures, and payments of contract benefits arising from unreported death claims. No estimate of range can be made at this time for loss contingencies related to possible administrative penalties or amounts that could be payable to the states for the escheatment of abandoned property.

Item 4. Mine Safety Disclosures.

Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity,

Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The principal market in which Torchmark’s common stock is traded is the New York Stock Exchange. There were 2,915 shareholders of record on December 31, 2015 , excluding shareholder accounts held in nominee form. The market prices and cash dividends paid by calendar quarter for the past two years are presented in the following table.



			2015 Market Price				Dividends Per Share
Quarter			High		Low		Dividends Per Share
1			$	55.66	$	50.07	$	0.1267
2			59.15		54.98		0.1350
3			63.12		55.62		0.1350
4			61.19		55.36		0.1350
Year-end closing price	$	57.16
			2014 Market Price				Dividends Per Share
Quarter			High		Low		Dividends Per Share
1			$	53.51	$	48.37	$	0.1133
2			55.07		50.97		0.1267
3			55.68		52.37		0.1267
4			55.42		50.32		0.1267
Year-end closing price	$	54.17

The line graph shown below compares Torchmark’s cumulative total return on its common stock with the cumulative total returns of the Standard and Poor’s 500 Stock Index (S&P 500) and the Standard and Poor’s Life & Health Insurance Index (S&P Life & Health Insurance). Torchmark is one of the companies whose stock is included within both the S&P 500 and the S&P Life & Health Insurance Index.

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Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares (or Approximate Dollar Amount) that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2015	400,649	$	56.95	400,649
November 1-30, 2015	447,661	59.69		447,661
December 1-31, 2015	657,764	59.17		657,764

On August 5, 2015 , Torchmark’s Board reaffirmed its continued authorization of the Company’s stock repurchase program in amounts and with timing that management, in consultation with the Board, determined to be in the best interest of the Company. The program has no defined expiration date or maximum shares to be purchased.

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Item 6. Selected Financial Data

The following information should be read in conjunction with Torchmark’s Consolidated Financial Statements and related notes reported elsewhere in this Form 10-K:

(Amounts in thousands except per share and percentage data)



Year ended December 31,	2015			2014		2013		2012		2011
Premium revenue:
Life	$	2,073,065		$	1,966,300	$	1,885,332	$	1,808,524	$	1,726,244
Health	925,520			869,440		863,818		730,019		733,783
Other	135			400		532		559		608
Total	2,998,720			2,836,140		2,749,682		2,539,102		2,460,635
Net investment income ⁽¹⁾	773,951			758,286		734,650		716,132		707,305
Realized investment gains (losses)	(8,791		)	23,548		7,990		37,833		25,904
Total revenue ⁽¹⁾	3,766,065			3,620,095		3,494,253		3,294,644		3,195,995
Income from continuing operations	516,293			528,074		507,205		509,297		483,237
Income from discontinued operations, net of tax	10,807			14,865		21,267		20,027		14,379
Loss on disposal, net of tax	—			—		—		—		(455		)
Net income	527,100			542,939		528,472		529,324		497,161
Per common share:
Basic earnings:
Income from continuing operations	4.13			4.04		3.68		3.51		2.98
Income (loss) from discontinued operations	0.08			0.11		0.16		0.14		0.08
Net income	4.21			4.15		3.84		3.65		3.06
Diluted earnings:
Income from continuing operations	4.07			3.98		3.63		3.47		2.93
Income (loss) from discontinued operations	0.09			0.11		0.16		0.13		0.09
Net income	4.16			4.09		3.79		3.60		3.02
Cash dividends declared	0.54			0.51		0.45		0.40		0.31
Cash dividends paid	0.53			0.49		0.44		0.38		0.30
Basic average shares outstanding	125,095			130,722		137,647		144,921		162,417
Diluted average shares outstanding	126,757			132,640		139,564		146,848		164,723
As of December 31,	2015			2014		2013		2012		2011
Cash and invested assets ⁽²⁾	$	14,405,073		$	15,058,996	$	13,456,944	$	14,155,919	$	12,437,699
Total assets ⁽²⁾	19,853,213			20,272,259		18,217,757		18,810,132		16,611,781
Short-term debt	490,129			238,398		229,070		319,043		224,842
Long-term debt ⁽³⁾	743,733			992,130		990,865		989,686		914,282
Shareholders' equity	4,055,552			4,697,466		3,776,342		4,361,786		3,859,631
Per diluted share	32.71			36.19		27.66		30.56		25.27
Effect of fixed maturity revaluation on diluted equity per share ⁽⁴⁾	2.62			8.28		1.81		7.07		3.96
Annualized premium in force:
Life ⁽²⁾	2,150,498			2,044,545		1,955,401		1,895,017		1,813,705
Health ⁽²⁾	973,042			947,323		887,444		902,753		733,406
Total	3,123,540			2,991,868		2,842,845		2,797,770		2,547,111
Basic shares outstanding	122,370			127,930		134,252		141,353		150,869
Diluted shares outstanding	123,996			129,812		136,537		142,707		152,712

Note: Certain balances were retrospectively adjusted to give effect to the discontinued continued operations presentation as described in Note 6-Discontinued Operations .

(1) Net investment income retrospectively adjusted to give effect to the adoption of new accounting guidance as described in Note 1- Significant Accounting Policies under the caption "Low-Income Housing Tax Credit Interests."

(2) At December 31, 2012, cash and invested assets included $615 million, total assets included $869 million, annualized life premium in force included $949 thousand, and annualized health premium in force included $188 million, representing the business acquired in the acquisition of Family Heritage in 2012.

(3) Includes Torchmark's 7.1% Junior Subordinated Debentures reported as "Due to affiliates" on the Consolidated Balance Sheet at year end 2011 in the amount of $123.7 million.

(4) There is an accounting rule (ASC 320-10-35-1, Investments- Debt and Equity Securities ) requiring available-for-sale fixed maturities to be revalued at fair value each period. The effect of this rule on diluted equity per share reflects the amount added or (deducted) under this rule to produce GAAP Shareholders’ equity per share. See discussion under the caption Capital Resources in Management’s Discussion and Analysis in this report concerning the effect this rule has on Torchmark’s equity.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Selected Financial Data and Torchmark’s Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.

RESULTS OF OPERATIONS

How Torchmark Views Its Operations: Torchmark is the holding company for a group of insurance companies which market primarily individual life, and supplemental health insurance to middle income households throughout the United States. We view our operations by segments, which are the insurance product lines of life, health, and annuities, and the investment segment that supports the product lines. Segments are aligned based on their common characteristics, comparability of the profit margins, and management techniques used to operate each segment.

Insurance Product Line Segments. As fully explained in Note 14—Business Segments in the Notes to the Consolidated Financial Statements , the insurance product line segments involve the marketing, underwriting, and the administration of policies. Each product line is further segmented by the various distribution units that market the insurance policies. Each distribution unit operates in a niche market offering insurance products designed for that particular market. Whether analyzing profitability of a segment as a whole, or the individual distribution units within the segment, the measure of profitability used by management is the underwriting margin, which is:

Premium revenue

Less:

Policy obligations

Policy acquisition costs and commissions

Investment Segment. The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability for the investment segment is excess investment income, which is:

Net investment income

Less:

Required interest on net policy liabilities

Financing costs

The tables in Note 14—Business Segments in the Notes to the Consolidated Financial Statements reconcile Torchmark’s revenues and expenses by segment to its major income statement line items for each of the years in the three-year period ended December 31, 2015 . Additionally, this Note provides a summary of the profitability measures that demonstrates year-to-year comparability and which reconciles to net income. That summary is reproduced below from the Consolidated Financial Statements to present our overall operations in the manner that we use to manage the business.

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Analysis of Profitability by Segment

(Dollar amounts in thousands)



	2015			2014			2013			2015 Change			%		2014 Change			%
Life insurance underwriting margin	$	569,402		$	556,489		$	545,059		$	12,913		2		$	11,430		2
Health insurance underwriting margin	204,377			199,319			196,507			5,058			3		2,812			1
Annuity underwriting margin	4,568			4,312			3,939			256			6		373			9
Excess investment income	219,504			224,364			218,161			(4,860		)	(2	)	6,203			3
Other insurance:
Other income	2,379			2,354			2,208			25			1		146			7
Administrative expense	(186,191		)	(174,832		)	(175,651		)	(11,359		)	6		819			—
Corporate and adjustments	(37,667		)	(40,362		)	(34,137		)	2,695			(7	)	(6,225		)	18
Pre-tax total	776,372			771,644			756,086			4,728			1		15,558			2
Applicable taxes	(253,459		)	(252,041		)	(246,686		)	(1,418		)	1		(5,355		)	2
After-tax total, before discontinued operations	522,913			519,603			509,400			3,310			1		10,203			2
Discontinued operations (after tax) ⁽¹⁾	10,807			14,865			21,267			(4,058		)	(27	)	(6,402		)	(30	)
Total	533,720			534,468			530,667			(748		)	—		3,801			1
Realized gains (losses)—investments (after tax)	(5,714		)	15,306			3,965			(21,020		)			11,341
Family Heritage acquisition finalization adjustments (after tax)	—			—			522			—					(522		)
Legal settlement expenses (after tax)	—			(1,519		)	(5,931		)	1,519					4,412
Guaranty Fund assessment (after tax)	—			—			(751		)	—					751
Administrative settlements (after tax)	(906		)	(5,316		)	—			4,410					(5,316		)
Net income	$	527,100		$	542,939		$	528,472		$	(15,839	)	(3	)	$	14,467		3

(1) Income from discontinued operations (after tax) is included for purposes of reconciling to net income.

Torchmark’s operations on a segment-by-segment basis are discussed in depth under the appropriate captions following in this report.

Summary of Operations: Net income was $527 million in 2015 , compared with $543 million in 2014 . Net income increased in 2014 from $528 million in 2013 . On a diluted per share basis, 2015 net income rose 2% to $4.16 after an 8% increase in 2014 . Net income per diluted share in 2014 rose to $4.09 from $3.79 in 2013 . The per-share results have exceeded the growth in dollar amounts due to our share repurchase program. Also, each year’s per share net income was affected by realized investment gains, which were $(0.05) , $0.12 , and $0.03 , in 2015 , 2014 and 2013 , respectively. More information concerning realized investment gains and losses can be found under the caption Realized Gains and Losses in this report where there is a more complete discussion. Also, as explained in Note 14—Business Segments in the Notes to the Consolidated Financial Statements , we do not consider realized gains and losses to be a component of our core insurance operations or operating segments. Additionally, we do not consider non-operating items which are not related to the current ongoing reporting performance of our segments to be part of our segment operating income.

Management has committed to a plan to sell the Medicare Part D business in 2016. Torchmark no longer emphasizes its Medicare Part D business due to declining margins, increased risks, higher drug costs, and increased administrative and compliance costs. Management believes this sale will allow the Company to better focus on its core protection life and health insurance businesses as well as provide additional capital to invest. The Medicare Part D business met the criteria for discontinued operations in accordance with applicable accounting guidance, and as such, the business is reflected as discontinued operations in the financial statements. As this business has been classified as held for sale and its operations are discontinued, the financial results of this business are excluded from Torchmark's continuing operations. For more information, refer to Note 6—Discontinued Operations in the Notes to the Consolidated Financial Statements.

As shown in the above chart, after-tax segment results of continuing operations rose each year over the prior year from $509 million in 2013 to $520 million in 2014 to $523 million in 2015 . The primary contributor to the growth in both 2015 and 2014 was the underwriting margin in our life insurance segment, in which margins rose $13 million in 2015 and $11 million in 2014 . The life insurance segment is our strongest segment and is the largest contributor to earnings

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in each year presented. Also contributing to growth in income in both years was our health insurance segment, which provided $5 million of additional margin in 2015 and $3 million in 2014 .

Excess investment income, the measure of profitability of our investment segment, decreased to $220 million or 2% from the prior year amount of $224 million . In 2014 , excess investment income increased 3%. Although interest rates increased slightly in 2015 , the low interest rate environment continued to pressure investment yields and spreads related to required interest on net policy liabilities throughout the three-year period. Excess investment income has also been hampered by a lag in government reimbursements of Medicare Part D costs. The impact of the lost investment income from delayed receipt of reimbursements is reflected in income from continuing operations rather than discontinued operations in accordance with applicable accounting rules. As noted previously, the Medicare Part D business has been classified as discontinued operations. In 2015 and 2014, the timing of cash flows in the Medicare Part D business had a negative impact on excess investment income, pre-tax of approximately $8 million and $5 million, respectively.

Total revenues rose 4% in 2015 to $3.8 billion , or $146 million over the prior year total of $3.6 billion . Life premium rose 5% or $107 million in 2015 to $2.1 billion . Life premium increased $81 million in 2014 to $2.0 billion . Net investment income rose $24 million or 3% in 2014 , and rose 2% or $16 million in 2015 . Health premium increased 6% to $926 million in 2015 and contributed $56 million to 2015 revenue growth, after having gained 1% to $869 million in 2014 . Health premium contributed $6 million to 2014 revenue growth.

Life insurance premium and underwriting margins have grown steadily in each of the three years ended December 31, 2015. The increase in life premium was driven by sales growth and improvements in persistency. While premium and underwriting margins grew, margin as a percent of premium fell slightly in 2015 to 27% , after decreasing from 29% to 28% from 2013 to 2014 . These fluctuations were due primarily to higher than expected claims. Net life sales increased 9% in 2015 to $412 million after increasing 12% in 2014 . The life insurance segment is discussed further in this report under the caption Life Insurance .

With regard to health insurance, we primarily market Medicare Supplement insurance and limited-benefit products including critical illness and accident products. In 2013 and 2014, the limited-benefit health premiums have exceeded the Medicare supplement premiums due to the inclusion of Family Heritage at the end of 2012. In late 2014, we experienced an unusually large volume of group sales of our Medicare Supplement product. As a result of increased growth in group sales, the Medicare Supplement premiums increased $43 million , which exceeded the limit-benefit premiums. Health insurance premium income increased 6% to $926 million in 2015. Health net sales fell 13% to $156 million during 2015 , as a result of a 29% decrease in Medicare Supplement sales. First-year collected health premium rose 32% to $157 million from the prior year total of $119 million . The decrease in 2015 Health net sales and increase in 2015 first-year collected premium was reflective of the previously mentioned large volume of group sales in 2014 . Health margins declined to 22% , with underwriting income increasing to $204 million for 2015 . Margins were $199 million for the same period in 2014 . The 2015 change was due to lower pricing margins on the group business sold in 2014.

We do not currently market annuities. See the caption Annuities for discussion of the Annuity segment.

The investment segment’s pretax profitability, or excess investment income, is based on three major components: net investment income, required interest on net policy liabilities (interest applicable to insurance products), and financing costs. In 2015 , net investment income rose 2% , compared with 3% in 2014 . At the same time, our investment portfolio grew 3% in both 2015 and 2014 . In recent years, net investment income has not grown as fast as the portfolio due to new investments being made at yield rates lower than the yield rates earned on securities that matured or were otherwise disposed of. Also, there is sometimes a lag between the time when proceeds from maturities and dispositions are received and when the proceeds are reinvested, during which the funds are held in cash. Growth in total investment income is also somewhat negatively affected by Torchmark’s share repurchase program (described later under this caption), which has diverted cash that could have otherwise been used to acquire investments. In 2015 and 2014 , net investment income was negatively impacted by our Medicare Part D business. Under the program, we are required to cover certain claim costs in the current period that are the federal government’s responsibility, but are not reimbursed until late in the next calendar year. This delay in reimbursement reduced our funds available for investment in 2015 and 2014 , resulting in reduced investment income in both periods.

The interest required on net policy liabilities is deducted from net investment income, and generally grows in conjunction with the net policy liabilities that are supported by the invested assets. The lower new-money yields resulting from the

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low-interest-rate environment noted above have compressed excess investment income as required interest has continued to grow at approximately the same rate that net policy liabilities have grown. Financing costs, which consist of the interest required for debt service on our long and short-term debt, are also deducted from net investment income. Financing costs in 2015 were up slightly to $77 million from $76 million in 2014 . This increase was primarily the result of increased short term borrowings coupled with slightly higher short term interest rates. The 2014 decline resulted from the maturity and repayment in 2013 of our $94.5 million principal amount 7.375% Notes.

Torchmark’s current investment policy regarding fixed maturities limits new fixed maturity acquisitions to investment-grade securities generally with longer maturities (often exceeding twenty years) that meet our quality and yield objectives. Approximately 96% of our invested assets at fair value consist of fixed maturities of which 96% were investment grade at December 31, 2015 . The average quality rating of the portfolio was A-. The portfolio contains no securities backed by sub prime or Alt-A mortgages, no direct investment in residential mortgages, no credit default swaps, or other derivative contracts. See the analysis of excess investment income and investment activities under the caption Investments in this report and Note 4—Investments in the Notes to the Consolidated Financial Statements for a more detailed discussion of this segment.

Insurance administrative expenses were up 6.5% in 2015 when compared with the prior year period. The primary reasons for the increase in administrative expenses are higher information technology and employee costs, including pension-related costs. Stock compensation expense declined $4 million in 2015 to $28.7 million compared with an increase of $7 million in 2014 to $32.2 million . The decline in stock compensation expense in 2015 resulted primarily from lower expense associated with performance shares as well as lower option values on 2015 option awards.

In each of the years 2013 through 2015 , net income was affected by certain significant, unusual, and nonrecurring nonoperating items. We do not view these items as components of core operating results because they are not indicative of past performance or future prospects of the insurance operations. Accordingly, as described in Note 14—Business Segments in the Notes to the Consolidated Financial Statements , we remove items such as these that relate to prior periods or are non-operating items when evaluating the results of current operations, and therefore exclude such matters from our segment analysis for current periods.

Torchmark has in place an ongoing share repurchase program which began in 1986. With no specified authorization amount, we determine the amount of repurchases based on the amount of the Company’s excess cash flow, general market conditions, and other alternative uses. The majority of these purchases are made from excess operating cash flow. Additionally, when stock options are exercised, proceeds from these exercises and the tax benefit are used to repurchase additional shares on the open market to minimize dilution as a result of the option exercises. The Board of Directors has authorized the Company’s share repurchase program in amounts and with timing that management, in consultation with the Board, determines to be in the best interest of the Company and its shareholders. The following chart summarizes share purchase activity for each of the last three years.

Analysis of Share Purchases

(Amounts in thousands)



	2015			2014			2013
Purchases	Shares	Amount		Shares	Amount		Shares	Amount
Excess cash flow	6,292	$	358,552	7,155	$	375,042	8,280	$	360,001
Option proceeds	1,049	59,974		1,394	74,266		2,789	122,263
Total	7,341	$	418,526	8,549	$	449,308	11,069	$	482,264

Throughout the remainder of this discussion, share purchases refer only to those made from excess cash flow and borrowings.

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A discussion of each of Torchmark’s segments follows. The following discussions are presented in the manner we view our operations, as described in Note 14—Business Segments in the Notes to the Consolidated Financial Statements .

Life Insurance. Life insurance is our largest insurance segment, with 2015 life premium representing 69% of total premium. Life underwriting income before other income and administrative expense represented 73% of the total in 2015 . Additionally, investments supporting the reserves for life products produce the majority of excess investment income attributable to the investment segment.

Life insurance premium rose 5% to $2.1 billion in 2015 after having increased 4% in 2014 to $2.0 billion . Life insurance products are marketed through several distribution channels. Premium income by channel for each of the last three years is as follows:

LIFE INSURANCE

Premium by Distribution Method

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income Exclusive Agency	$	830,903	40	$	766,458	39	$	715,366	38
Globe Life Direct Response	746,693		36	702,023		36	663,544		35
Liberty National Exclusive Agency	271,113		13	272,265		14	275,980		15
Other Agencies	224,356		11	225,554		11	230,442		12
	$	2,073,065	100	$	1,966,300	100	$	1,885,332	100

We use three statistical measures as indicators of premium growth and sales over the near term: “annualized premium in force,” “net sales,” and “first-year collected premium.” Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve-month period. Annualized premium in force is an indicator of potential growth in premium revenue. Net sales is annualized premium issued, net of cancellations in the first thirty days after issue, except in the case of Globe Life Direct Response where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. We believe that net sales is a superior indicator of the rate of premium growth relative to annualized premium issued. First-year collected premium is defined as the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future.

Annualized life premium in force was $2.15 billion at December 31, 2015 , an increase of 5% over $2.04 billion a year earlier. Annualized life premium in force was $1.96 billion at December 31, 2013 .

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The following table shows net sales information for each of the last three years by distribution method.

LIFE INSURANCE

Net Sales by Distribution Method

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income Exclusive Agency	$	198,046	48	$	172,271	45	$	152,646	45
Globe Life Direct Response	164,348		40	158,089		42	144,363		43
Liberty National Exclusive Agency	35,782		9	34,402		9	31,050		9
Other Agencies	13,705		3	13,492		4	11,000		3
	$	411,881	100	$	378,254	100	$	339,059	100

The table below discloses first-year collected life premium by distribution channel.

LIFE INSURANCE

First-Year Collected Premium by Distribution Method

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
American Income Exclusive Agency	$	156,206	52	$	134,202	50	$	127,978	50
Globe Life Direct Response	106,417		35	100,287		37	93,089		36
Liberty National Exclusive Agency	27,554		9	25,777		9	25,580		10
Other Agencies	12,036		4	10,473		4	9,962		4
	$	302,213	100	$	270,739	100	$	256,609	100

The American Income Exclusive Agency has historically marketed primarily to members of labor unions. While labor unions are still the core market for this agency, American Income has diversified in recent years by focusing heavily on other affinity groups and referrals to help ensure sustainable growth. The life business of this agency is Torchmark’s highest-margin life business and it is the largest contributor to life premium of any distribution channel at 40% of Torchmark’s 2015 total. This group produced premium income of $831 million , an increase of 8% over the prior year total of $766 million , after having risen 7% in 2014 . First-year collected premium was $156 million compared to $134 million in 2014 , an increase of 16% . First-year collected premium rose 5% in 2014 . Net sales increased 15% to $198 million in 2015 over the 2014 total of $172 million . Net sales increased 13% in 2014 over the 2013 total of $153 million . Sales growth in our captive agencies is generally dependent on growth in the size of the agency force. The American Income Agency's average agent count rose 11% to 6,529 for the year ended December 31, 2015 compared with 5,868 for the same period in 2014 . The average agent count is based on the actual count at the end of each week during the period. The American Income Agency has been focusing on growing and strengthening middle management to support sustainable growth of the agency force. To accomplish this, we have placed an increased emphasis on agent training programs and financial incentives that appropriately reward agents at all levels for helping develop and train personnel. The agency continues to provide more home-office and webinar training programs. These programs are designed to provide each agent, from new recruits to top level managers, coaching and instruction specifically designed for each individual’s level of experience and responsibility.

The Globe Life Direct Response unit offers adult and juvenile life insurance through a variety of direct-to-consumer marketing approaches, which include direct mailings, insert media, and electronic media. These different approaches support and complement one another in the unit’s efforts to reach the consumer. The Globe Life Direct Response channel’s growth has been fueled by constant innovation. In recent years, electronic media production has grown rapidly as management has aggressively increased marketing activities related to internet and mobile technology, and

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has focused on driving traffic to the inbound call center. We continually introduce new initiatives in this unit in an attempt to increase response rates.

While the juvenile market is an important source of sales, it also is a vehicle to reach the parents and grandparents of juvenile policyholders, who are more likely to respond favorably to a Globe Life Direct Response solicitation for life coverage on themselves than is the general adult population. Also, both juvenile policyholders and their parents are low acquisition-cost targets for sales of additional coverage over time.

Globe Life Direct Response’s life premium income rose 6% to $747 million , representing 36% of Torchmark’s total life premium during 2015 . Life premium in this channel increased 6% in 2014 to $702 million over the 2013 total of $664 million . Net sales of $164 million for this group increased 4% from $158 million in 2014 , after a 10% in 2014 . First-year collected premium increased 6% to $106 million in 2015 after having risen 8% in 2014 .

The Liberty National Exclusive Agency markets individual and group life insurance to middle-income customers. Life premium income for this agency was $271 million in 2015 , a slight decline from $272 million in 2014 . Life premium income in 2013 totaled $276 million . Net sales increased 4% during 2015 to $36 million over the 2014 total of $34 million . Net sales in 2014 increased 11%. The increase in net sales during 2014 marked the first increase in several years, reflecting changes in structure of the agency that management has put in place in recent years. First-year collected premium increased 7% to $28 million during 2015 and was flat in 2014 compared to 2013 at $26 million .

The Liberty average agent count increased 2% to 1,535 for the year ended December 31, 2015 compared with 1,505 for the same period in 2014 . We continue to execute our long term plan to grow this agency through expansion from small-town markets in the southeast to more densely populated areas with larger pools of potential agent recruits and customers. Expansion of this agency’s presence into more heavily populated, less-penetrated areas will help create long term agency growth. Additionally, our prospecting training program has helped to improve the ability of agents to develop new work site marketing business.

The Other Agencies distribution channels offering life insurance include the Military Agency, the UA Independent Agency (which predominantly writes health insurance), and various smaller distribution channels. The Other Agencies contributed $224 million of life premium income, or 11% of Torchmark’s total in 2015 , but contributed only 3% of net sales for the year.

LIFE INSURANCE

Summary of Results

(Dollar amounts in thousands)



	2015					2014					2013
	Amount			% of Premium		Amount			% of Premium		Amount			% of Premium
Premium and policy charges	$	2,073,065		100		$	1,966,300		100		$	1,885,332		100
Policy obligations	1,374,608			67		1,293,384			66		1,227,857			65
Required interest on reserves	(552,298		)	(27	)	(530,192		)	(27	)	(508,236		)	(27	)
Net policy obligations	822,310			40		763,192			39		719,621			38
Commissions, premium taxes, and non-deferred acquisition expenses	154,811			8		143,174			7		131,721			7
Amortization of acquisition costs	526,542			25		503,445			26		488,931			26
Total expense	1,503,663			73		1,409,811			72		1,340,273			71
Insurance underwriting margin before other income and administrative expenses	$	569,402		27		$	556,489		28		$	545,059		29

Life insurance underwriting income before insurance administrative expense was $569 million in 2015 compared with $556 million in 2014 and $545 million in 2013 . As a percentage of premium, underwriting margins declined to 27% in 2015 from 28% in 2014 . The decrease in underwriting margin as a percentage of premium in 2015 and 2014 was due primarily to higher than expected Globe Life Direct Response policy obligations and to increases in non-deferred acquisition costs in the Globe Life Direct Response and American Income units. Non-deferred acquisition expense

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increased primarily as a result of additional investments made to support our distribution channels which are expected to result in increased sales and premium income in future periods. The higher than expected claims in the Globe Life Direct Response Unit primarily relate to policies issued since 2011 where prescription information was used in the underwriting process for certain policies in order to improve the overall mortality of the policies written. To date, improvements in the actual mortality on such policies have been less than expected, causing an increase in our net policy obligations.

Health Insurance. Health insurance sold by Torchmark includes primarily Medicare Supplement insurance, critical illness coverage, accident coverage, and other limited-benefit supplemental health products. In this analysis, all health coverage plans other than Medicare Supplement are classified as limited-benefit plans.

Health premium accounted for 31% of our total premium in 2015 , while the health underwriting margin accounted for 26% of total underwriting margin, reflective of the lower underwriting margin as a percent of premium for health compared with life insurance. As noted under the caption Life Insurance, we have emphasized life insurance sales relative to health, due to life’s superior profitability and its greater contribution to excess investment income.

HEALTH INSURANCE

Premium by Distribution Method

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent Agency
Limited-benefit plans	$	15,260		$	19,028		$	24,173
Medicare Supplement	330,070			286,340			274,125
	345,330		37	305,368		35	298,298		35
Family Heritage Exclusive Agency
Limited-benefit plans	221,091			204,667			190,923
Medicare Supplement	—			—			—
	221,091		24	204,667		24	190,923		22
Liberty National Exclusive Agency
Limited-benefit plans	142,130			143,722			152,415
Medicare Supplement	67,020			78,295			88,849
	209,150		23	222,017		25	241,264		28
American Income Exclusive Agency
Limited-benefit plans	79,984			78,244			78,862
Medicare Supplement	355			478			573
	80,339		9	78,722		9	79,435		9
Direct Response
Limited-benefit plans	869			805			313
Medicare Supplement	68,741			57,861			53,585
	69,610		7	58,666		7	53,898		6
Total Premium
Limited-benefit plans	459,334		50	446,466		51	446,686		52
Medicare Supplement	466,186		50	422,974		49	417,132		48
	$	925,520	100	$	869,440	100	$	863,818	100

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We market supplemental health insurance products through a number of distribution channels. The following table presents net sales by distribution method for the last three years.

HEALTH INSURANCE

Net Sales by Distribution Method

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent Agency
Limited-benefit plans	$	734		$	873		$	916
Medicare Supplement	70,891			82,971			40,512
	71,625		46	83,844		46	41,428		38
Family Heritage Exclusive Agency
Limited-benefit plans	50,266			47,102			43,520
Medicare Supplement	—			—			—
	50,266		32	47,102		26	43,520		39
Liberty National Exclusive Agency
Limited-benefit plans	18,021			17,084			13,906
Medicare Supplement	41			299			394
	18,062		12	17,383		10	14,300		13
American Income Exclusive Agency
Limited-benefit plans	11,501			9,162			6,985
Medicare Supplement	—			—			—
	11,501		7	9,162		5	6,985		6
Direct Response
Limited-benefit plans	—			6			591
Medicare Supplement	5,003			23,099			3,685
	5,003		3	23,105		13	4,276		4
Total Net Sales
Limited-benefit plans	80,522		51	74,227		41	65,918		60
Medicare Supplement	75,935		49	106,369		59	44,591		40
	$	156,457	100	$	180,596	100	$	110,509	100

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The following table discloses first-year collected health premium by distribution method.

HEALTH INSURANCE

First-Year Collected Premium by Distribution Method

(Dollar amounts in thousands)



	2015				2014			2013
	Amount			% of Total	Amount		% of Total	Amount		% of Total
United American Independent Agency
Limited-benefit plans	$	660			$	710		$	795
Medicare Supplement	76,575				49,519			38,399
	77,235			49	50,229		42	39,194		39
Family Heritage Exclusive Agency
Limited-benefit plans	39,196				36,392			36,340
Medicare Supplement	—				—			—
	39,196			25	36,392		31	36,340		36
Liberty National Exclusive Agency
Limited-benefit plans	14,690				13,132			12,010
Medicare Supplement	168				306			558
	14,858			9	13,438		11	12,568		12
American Income Exclusive Agency
Limited-benefit plans	12,041				9,500			8,957
Medicare Supplement	—				—			—
	12,041			8	9,500		8	8,957		9
Direct Response
Limited-benefit plans	(2		)		143			544
Medicare Supplement	13,843				9,196			3,310
	13,841			9	9,339		8	3,854		4
Total First-Year Collected Premium
Limited-benefit plans	66,585			42	59,877		50	58,646		58
Medicare Supplement	90,586			58	59,021		50	42,267		42
	$	157,171		100	$	118,898	100	$	100,913	100

Health premium increased 6% to $926 million in 2015 compared with $869 million in 2014 after an increase of 1% in 2014 over the 2013 total of $864 million. Medicare Supplement premium increased 10% to $466 million , while other limited-benefit health premium increased 3% to $459 million .

Health net sales declined 13% to $156 million in 2015 from $181 million in 2014 . Net sales in 2013 totaled $111 million. Medicare Supplement net sales decreased 29% to $76 million in 2015 . A decrease in 2015 Medicare Supplement net sales was expected due to the unusually high level of group sales and individual sales in late 2014 . Group sales can vary significantly from period to period due to the impact of large groups that can occur from time to time. Limited-benefit net sales increased 8% to $81 million . Health first-year collected premium rose 32% to $157 million due to the aforementioned high level of group sales in 2014 . Health first-year collected premium was up 18% during 2014 . First year Medicare Supplement premium was up 53% as a result of an increase in the UA independent agency individual sales and the 2014 group sales noted above. As a result of the Medicare Supplement sales activity occurring in the fourth quarter, the full impact of this activity on collected premium is seen in the following year.

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We do not expect recent health care reform activity to have a significant impact on our operations. The Affordable Care Act (ACA) imposes an annual fee to health insurance issuers offering commercial health insurance as well as another fee for premium stabilization. These taxes totaled $1.2 million and $1.8 million in 2015 and 2014 , respectively.

The UA Independent Agency consists of independent agencies appointed with Torchmark who may also sell for other companies. The UA Independent Agency was Torchmark’s largest health agency in terms of health premium income. In 2015, premium income was $345 million , representing 37% of Torchmark’s total health premium. Net sales were $72 million , or 46% of Torchmark’s health sales. This agency is Torchmark’s largest producer of Medicare Supplement insurance, with Medicare Supplement premium income of $330 million . The UA Independent Agency represents approximately 71% of all Torchmark Medicare Supplement premium and 93% of Medicare Supplement net sales. Medicare Supplement premium in this agency rose 15%. Total health premium increased 13% in 2015 and 2% in 2014 . Medicare Supplement net sales decreased 15% in 2015 from prior year. Individual sales were up 36% due to the high volume of sales in late 2014 and 2015. As previously discussed, group sales significantly increased in late 2014 resulting in a 42% decline in the current year, which is consistent with historical fluctuation from period to period.

The Family Heritage Exclusive Agency primarily markets limited-benefit supplemental health insurance in non-urban areas. Most of their policies include a cash-back feature, such as a return of premium whereby any excess of premiums over claims paid is returned to the policyholder at the end of a specified period stated within the insurance policy. Management expects to grow this agency through geographic expansion and continuing incorporation of Torchmark’s recruiting programs. The Family Heritage Agency contributed $50 million in net sales in 2015 , compared with $47 million in 2014 and $44 million in 2013 . Health premium income was $221 million in 2015 , representing 24% of Torchmark’s health premium. This compared with $205 million or 24% of health premium in 2014 and $191 million or 22% in 2013 . The average agent count was 882 for the year ended December 31, 2015 , compared with 740 for the same period in 2014 , an increase of 19%.

The Liberty National Exclusive Agency represented 23% of all Torchmark health premium income at $209 million in 2015 . The Liberty Agency markets limited-benefit supplemental health products consisting primarily of critical illness insurance. Much of Liberty’s health business is now generated through work site marketing targeting small businesses of 10 to 25 employees. In 2015 , health premium income in the Agency declined 6% from prior year premium of $222 million after declining 8% during 2014. Liberty’s health premium decline has been due primarily to its declining Medicare Supplement block.

Other distribution. Certain of our other distribution channels market health products, although their main emphasis is on life insurance. On a combined basis, they accounted for 16% of health premium in 2015 . The American Income Exclusive Agency primarily markets accident plans. The Direct Response group markets primarily Medicare Supplements to employer or union-sponsored groups. Direct Response added $5 million of Medicare Supplement net sales in 2015 compared with $23 million in 2014 . The higher net sales in 2014 were due to the addition of a large new group in the third quarter of 2014 .

As presented in the following table, Torchmark’s health insurance underwriting margin before other income and administrative expense increased 3% to $204 million in 2015 , after an increase of 1% to $199 million in 2014. As a percentage of health premium, margins were down slightly to 22% in 2015, due to increased benefit ratios in the Direct Response and UA channels. The group business sold in 2014 was priced at higher benefit ratios.

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HEALTH INSURANCE

Summary of Results

(Dollar amounts in thousands)



	2015					2014					2013
	Amount			% of Premium		Amount			% of Premium		Amount			% of Premium
Premium	$	925,520		100		$	869,440		100		$	863,818		100
Policy obligations	602,610			65		559,817			64		558,982			65
Required interest on reserves	(69,057		)	(7	)	(64,401		)	(7	)	(59,858		)	(7	)
Net policy obligations	533,553			58		495,416			57		499,124			58
Commissions, premium taxes, and non-deferred acquisition expenses	81,489			9		79,475			9		75,895			9
Amortization of acquisition costs	106,101			11		95,230			11		92,292			10
Total expense	721,143			78		670,121			77		667,311			77
Insurance underwriting income before other income and administrative expense	$	204,377		22		$	199,319		23		$	196,507		23

Annuities. Our fixed annuity balances at the end of 2015 , 2014 , and 2013 were $1.32 billion, $1.36 billion, and $1.38 billion, respectively. Underwriting income was $4.6 million , $4.3 million , and $3.9 million in each of the respective years.

While the fixed annuity account balance has been declining slightly year over year, underwriting income has increased each year over the prior year. Policy charges have actually declined slightly in each successive year. The majority of policy charges consist of surrender charges which are based on a function of account size and time lapsed since deposit. A considerable portion of fixed annuity profitability is derived from the spread of investment income exceeding contractual interest requirements, which can result in negative net policy obligations. In the three-year period, however, spreads tended to level as crediting rates reached guaranteed minimums.

We do not currently market annuity products, favoring instead protection-oriented life and health insurance products. Therefore, we do not expect that annuities will be a significant portion of our business or marketing strategy going forward.

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Administrative expenses. Operating expenses are included in the Other and Corporate Segments and are classified into two categories: insurance administrative expenses and expenses of the parent company. The following table is an analysis of operating expenses for the three years ended December 31, 2015 .

Operating Expenses Selected Information

(Dollar amounts in thousands)



	2015			2014			2013
	Amount		% of Premium	Amount		% of Premium	Amount		% of Premium
Insurance administrative expenses:
Salaries	$	87,262	2.9	$	81,227	2.9	$	81,002	2.9
Non-salary employee costs	30,683		1.0	27,471		1.0	33,221		1.2
Other administrative expense	61,001		2.0	56,169		2.0	51,834		1.9
Legal expense—insurance	7,245		0.3	9,965		0.3	9,594		0.4
Total insurance administrative expenses	186,191		6.2	174,832		6.2	175,651		6.4
Parent company expense	9,003			8,159			8,495
Stock compensation expense	28,664			32,203			25,642
Litigation settlements	—			2,337			500
State Guaranty Fund Assessment	—			—			1,155
Total operating expenses, per Consolidated Statements of Operations	$	223,858		$	217,531		$	211,443



Insurance administrative expenses:
Increase (decrease) over prior year	6.5	%	(0.5	)%	8.2	%
Total operating expenses:
Increase (decrease) over prior year	2.9	%	2.9	%	8.4	%

Insurance administrative expenses were up 6.5% in 2015 when compared with the prior year after declining slightly during 2014 . As a percentage of total premium, insurance administrative expenses were flat during 2015 when compared to 2014 at 6.2% and down when compared to 2013 which stood at 6.4% . Total operating expenses increased 2.9% , consistent with the 2014 increase over 2013 . The primary reasons for the increase in administrative expenses are higher information technology and employee costs, including pension-related costs. The decline in stock compensation expense is primarily due to lower expense associated with performance share awards and lower option values on the 2015 grants. The decline in legal settlement expense was attributable to certain legal and administrative settlements that occurred in 2014 . As described in Note 14—Business Segments in the Notes on the Consolidated Financial Statements , we recorded legal accruals involving non-insurance matters, partially offset by proceeds for investment litigation. Litigation not related to our direct insurance operations is not considered an insurance administrative expense by Torchmark management and is removed from its analysis of core insurance operations in its segment reporting.

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Investments. We manage our capital resources including investments, debt, and cash flow through the investment segment. Excess investment income represents the profit margin attributable to investment operations. It is the measure that we use to evaluate the performance of the investment segment as described in Note 14—Business Segments in the Notes to the Consolidated Financial Statements. It is defined as net investment income less both the required interest attributable to net policy liabilities and the interest cost associated with capital funding or “financing costs.”

We also view excess investment income per diluted share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. Since implementing our share repurchase program in 1986, we have used over $6.5 billion of cash flow to repurchase Torchmark shares after determining that the repurchases provided a greater return than other investment alternatives. Share repurchases reduce excess investment income because of the foregone earnings on the cash that would otherwise have been invested in interest-bearing assets, but they also reduce the number of shares outstanding. In order to put all capital resource uses on a comparable basis, we believe that excess investment income per diluted share is an appropriate measure of the investment segment.

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

Analysis of Excess Investment Income

(Dollar amounts in thousands except for per share data)



	2015			2014			2013
Net investment income ⁽¹⁾	$	773,951		$	758,286		$	734,650
Interest on net insurance policy liabilities:
Interest on reserves	(674,650		)	(649,848		)	(625,388		)
Interest on deferred acquisition costs	196,845			192,052			189,360
Net required interest	(477,805		)	(457,796		)	(436,028		)
Financing costs	(76,642		)	(76,126		)	(80,461		)
Excess investment income	$	219,504		$	224,364		$	218,161
Excess investment income per diluted share	$	1.73		$	1.69		$	1.56
Mean invested assets (at amortized cost)	$	13,697,129		$	13,278,028		$	12,838,010
Average net insurance policy liabilities ⁽²⁾	8,574,699			8,240,435			7,851,625
Average debt and preferred securities (at amortized cost)	1,343,663			1,287,740			1,321,102

(1) Net investment income has been retrospectively adjusted for ASU 2014-01 Investments-Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects ; see additional information at Note 1—Significant Accounting Policies in the Notes to the Consolidated Financial Statements .

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

Excess investment income decreased $5 million or 2% in 2015 over the prior year. Excess investment income increased $6 million or 3% in 2014 . Excess investment income has been pressured over the past three years as a result of the impact of lower interest rates on net investment income coupled with the increase in required interest on net policy liabilities discussed later under this caption. On a per diluted share basis, excess investment income increased 2% to $1.73 in 2015 . Excess investment income increased 8% to $1.69 per share in 2014 , after having declined 3% in the prior year. The significant increase in the 2014 per share amount over 2013 and the increase in the 2015 per share amount over 2014, versus the decrease in dollar amount of excess investment income, is a result of the share repurchase program.

The largest component of excess investment income is net investment income, which rose 2% to $774 million in 2015 . It increased 3% to $758 million in 2014 from $735 million in 2013 . Growth in net investment income has generally been slower than growth in mean invested assets in recent years due to the declining interest rate environment. In 2015 , fixed maturity yields averaged 5.84% on a tax-equivalent and effective-yield basis, compared with 5.91% in 2014 and 5.94% in 2013 . Even though mean invested assets have increased each period, net investment income has grown at a slower pace as a result of the decline in average yields. The overall average portfolio yield decreased in the 2013

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to 2015 periods as new money is being invested at lower prevailing yields, and from the result of reinvesting proceeds from bonds that matured or were called at yield rates less than the rates we earned on the bonds before they matured or were called. A significant amount of calls were a negative factor on net investment income in 2013, but calls and maturities were very limited in their affect in 2014 and 2015. During 2014 and 2015, the proceeds from all dispositions have been reinvested at yield rates closer to the yield rates on the disposed assets.

Net investment income has also been negatively affected in 2014 and 2015 by the CMS requirement for us to pay certain Medicare Part D claims costs during the current period that are ultimately the responsibility of the government, but are not reimbursed until the following year. Because of the overall design of the program and higher Part D claims due to the approval of new Hepatitis C drugs and higher overall drug costs, we have incurred extensive upfront costs that are not reimbursed by CMS until late in the following respective year. These delays in reimbursements have caused a delay in cash flows available for new investments that resulted in a loss of approximately $5 million and $8 million of pre-tax net investment income in 2014 and 2015 , respectively, and will cause us to lose approximately $9 million of additional investment income in 2016.

Presented in the following chart is the growth in net investment income and the growth in mean invested assets.



	2015		2014		2013
Growth in net investment income	2.1	%	3.2	%	2.6	%
Growth in mean invested assets (at amortized cost)	3.2	%	3.4	%	9.3	%

While net investment income in recent years has been negatively impacted by the factors discussed above, we would expect to see only modest declines in the average portfolio yield rate over the next few years. We anticipate that less than 2% of fixed maturities on average are expected to run off each year over the next five years and the average yield rate on assets acquired with the proceeds of dispositions is not expected to be significantly less than the yield rate earned on the assets prior to their disposal. Accordingly, we believe it is unlikely that dispositions will have a significant negative impact on net investment income and the growth rate of net investment income in the next few years.

Required interest on net insurance policy liabilities r educes net investment income as it is the amount of net investment income considered by management necessary to “fund” the required interest included in the insurance segments. As such, it is removed from the investment segment and applied to the insurance segments to offset the effect of the required interest from the insurance segments. As discussed in Note 14-Business Segments in the Notes to the Consolidated Financial Statements, management believes this provides a more meaningful analysis of the investment and insurance segments. Required interest is based on the actuarial interest assumptions used in discounting the benefit reserve liability and the amortization of deferred acquisition costs for our insurance policies in force. The great majority of our life and health insurance policies are fixed interest-rate protection policies, not investment products, and are accounted for under current accounting guidance for long-duration insurance products which mandates that interest rate assumptions for a particular block of business be “locked in” for the life of that block of business. Each calendar year, we set the discount rate to be used to calculate the benefit reserve liability and the amortization of the deferred acquisition cost asset for all insurance policies issued that year. That rate is based on the new money yields that we expect to earn on cash flow received in the future from policies of that issue year, and cannot be changed. The discount rate used for policies issued in the current year has no impact on the in force policies issued in prior years as the rates of all prior issue years are also locked in. As such, the overall discount rate for the entire in force block is a weighted average of the discount rates being used from all issue years. Changes in the overall weighted-average discount rate over time are caused by changes in the mix of the reserves and the deferred acquisition cost asset by issue year on the entire block of in force business. Business issued in the current year has very little impact on the overall weighted-average discount rate due to the size of our in force business.

Because actuarial discount rates are locked in for life on essentially all of our business, benefit reserves and deferred acquisition costs are not affected by interest rate fluctuations unless a loss recognition event occurs. Due to the strength of our underwriting margins and the current positive spread between the yield on our investment portfolio and the weighted-average discount rate of our in force block, we don’t expect an extended low-interest-rate environment to cause a loss recognition event.

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Information about interest on policy liabilities is shown in the following table.

Required Interest on Net Insurance Policy Liabilities

(Dollar amounts in thousands)



	Required Interest			Average Net Insurance Policy Liabilities			Average Discount Rate
2015
Life and Health	$	418,432		$	7,256,732		5.77	%
Annuity	59,373			1,317,967			4.50
Total	$	477,805		$	8,574,699		5.57
Increase in 2015	4.37		%	4.06		%
2014
Life and Health	$	396,658		$	6,901,566		5.75	%
Annuity	61,138			1,338,869			4.57
Total	$	457,796		$	8,240,435		5.56
Increase in 2014	4.99		%	4.95		%
2013
Life and Health	$	373,079		$	6,528,469		5.71	%
Annuity	62,949			1,323,156			4.76
Total	$	436,028		$	7,851,625		5.55
Increase in 2013	9.13		%	10.53		%

The large increases in 2013 are due to the inclusion of Family Heritage for a full year.

Excess investment income is also impacted by financing costs. Financing costs for the investment segment primarily consist of interest on our various debt instruments and are deducted from excess investment income. The table below presents the components of financing costs and reconciles interest expense per the Consolidated Statements of Operations.

Analysis of Financing Costs

(Amounts in thousands)



	2015		2014		2013
Interest on funded debt	$	71,180	$	71,072	$	75,136
Interest on short-term debt	5,457		5,013		5,299
Other	5		41		26
Financing costs	$	76,642	$	76,126	$	80,461

Financing costs increased slightly from 2014 to 2015. The decrease of $4 million or 5% in 2014 was related to the maturity and repayment of our $94 million par amount 7.375% Notes during the third quarter of 2013. In 2015 , interest on short-term debt increased primarily because of the increase in the weighted-average interest rate and the average balance on short-term debt. More information on our debt transactions are disclosed in the Financial Condition section of this report and in Note 11—Debt in the Notes to Consolidated Financial Statements .

As previously noted, growth rates in our excess investment income decline when growth in income from the portfolio is less than that of the interest required by policy liabilities and financing costs as has been the case in recent years. In an extended low-interest-rate environment, the portfolio yield will tend to decline as we invest new money at lower long-term rates. We believe, however, the decline would be relatively slow as on average less than 2% of fixed maturities are expected to run off each year over the next five years.

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In response to the lower interest rates, we raised the premium rates for new business on major life products in early 2012 and again in late 2013. The increased premium provides additional margin on these policies to help offset higher mandatory cash values and the possible future reductions in excess investment income. Despite these increases in premium rates, we have continued to see growth in net sales.

Excess investment income benefits from increases in long-term rates available on new investments and decreases in short-term borrowing rates. Of these two factors, higher investment rates have the greater impact because the amount of cash that we invest is significantly greater than the amount that we borrow at short-term rates. Therefore, Torchmark would benefit if rates, especially long-term rates, were to rise.

Investment Acquisitions . Torchmark’s investment policy calls for investing in fixed maturities that are investment grade and meet our quality and yield objectives. We generally prefer to invest in securities with longer maturities because they more closely match the long-term nature of our policy liabilities. We believe this strategy is appropriate because our cash flows are generally stable and predictable. If longer-term securities that meet our quality and yield objectives are not available, we do not relax our quality objectives, but instead, consider investing in shorter term or lower yielding securities, taking into consideration the slope of the yield curve and other factors.

During calendar years 2013 through 2015 , Torchmark invested almost exclusively in fixed maturity securities, primarily in corporate bonds with longer-term maturities. The following table summarizes selected information for fixed maturity purchases for the last three years. The effective annual yield shown is the yield calculated to the potential termination date that produces the lowest yield, commonly referred to as the “worst call date.” For non-callable bonds, the worst-call date is always the maturity date. For callable bonds, the worst-call date is the call date that produces the lowest yield, typically the first call date.

Fixed Maturity Acquisitions Selected Information

(Dollar amounts in thousands)



	Year Ended December 31,
	2015			2014			2013
Cost of acquisitions:
Investment-grade corporate securities	$	1,026,520		$	696,264		$	1,113,175
Taxable municipal securities	29,092			—			—
Other investment-grade securities	15,296			8,729			30,666
Total fixed-maturity acquisitions	$	1,070,908		$	704,993		$	1,143,841
Effective annual yield (one year compounded) ⁽¹⁾	4.79		%	4.77		%	4.65		%
Average life (in years, to next call)	27.2			22.9			26.0
Average life (in years to maturity)	27.9			23.4			26.5
Average rating	BBB+			BBB+			BBB+

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

We prefer to invest primarily in bonds that are not callable (on other than a make-whole basis) prior to maturity, but we periodically invest some funds in callable bonds when the incremental yield available on such bonds warrants doing so. For investments in callable bonds, the actual life of the investment will depend on whether the issuer calls the investment prior to the maturity date. Given our investments in callable bonds, the actual average life of our investments cannot be known at the time of the investment. However absent sales, the average life will not be less than the average life to next call and will not exceed the average life to maturity. Data for both of these average life measures is provided in the above chart.

During the three years 2013 through 2015 , acquisitions consisted of securities spanning a diversified range of issuers, industry sectors, and geographical regions. All of the acquired securities were investment grade. In addition to the fixed maturity acquisitions, Torchmark invested $30 million in a limited partnership in 2015 . The limited partnership is a diversified investment fund that currently invests opportunistically in global credit assets with the potential for attractive returns relative to risk. It is classified within long-term investments.

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New cash flow available for investment has been primarily provided through our insurance operations and coupons received on existing investments. In some years, a significant amount of new investments can be derived from proceeds from dispositions including issuer calls. Issuer calls, as a result of the low-interest environment experienced during the past three years were an important factor, especially in 2013 . Calls increase funds available for investment, but as noted earlier in this discussion, they can have a negative impact on investment income if the proceeds from the calls are reinvested in bonds that have lower yields than those of the bonds that were called. Issuer calls were $178 million in 2015 , $160 million in 2014 , and $344 million in 2013 . The higher level of acquisitions in 2013 was primarily due to the additional funds available from the higher level of 2013 calls. The lower level of acquisitions in 2014 was primarily due to the delay in receiving CMS reimbursements as discussed earlier.

Portfolio Composition. The composition of the investment portfolio at book value on December 31, 2015 was as follows:

Invested Assets At December 31, 2015

(Dollar amounts in thousands)



	Amount		% of Total
Fixed maturities(at amortized cost)	$	13,251,871	96
Equities (at cost)	776		—
Policy loans	492,462		4
Other long-term investments	36,803		—
Short-term investments	54,766		—
Total	$	13,836,678	100

Approximately 96% of our investments at book value are in a diversified fixed maturity portfolio. Policy loans, which are secured by policy cash values, make up approximately 4% of our investments. We also have insignificant investments in equity securities and other long-term investments. Because fixed maturities represent such a significant portion of our investment portfolio, the remainder of the discussion of portfolio composition will focus on fixed maturities.

Selected information concerning the fixed maturity portfolio is as follows:

Fixed Maturities

Fixed Maturity Portfolio Selected Information



	At December 31,
	2015		2014
Average annual effective yield ⁽¹⁾	5.83	%	5.89	%
Average life, in years, to:
Next call ⁽²⁾	17.8		17.8
Maturity ⁽²⁾	20.3		20.5
Effective duration to:
Next call ^{(2, 3)}	10.2		10.9
Maturity ^{(2, 3)}	11.2		12.0


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


(2)	Torchmark calculates the average life and duration of the fixed-maturity portfolio two ways:


(a)	based on the next call date which is the next call date for callable bonds and the maturity date for noncallable bonds, and


(b)	based on the maturity date of all bonds, whether callable or not.


(3)	Effective duration is a measure of the price sensitivity of a fixed-income security to a particular change in interest rates.

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Credit Risk Sensitivity . The following table summarizes certain information about the major corporate sectors (representing 4% or more of the portfolio) and security types held in our fixed-maturity portfolio at December 31, 2015 .

Fixed Maturities by Sector

At December 31, 2015

(Dollar amounts in thousands)



	Below Investment Grade									Total FIxed Maturities									% of Total Fixed Maturities
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		At Amortized Cost	At Fair Value
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		At Amortized Cost	At Fair Value
Corporates:
Financial
Insurance - life, health, P&C	$	58,534	$	2,410	$	(6,366	)	$	54,578	$	1,912,580	$	212,640	$	(21,634	)	$	2,103,586	14	15
Banks	41,606		452		(4,781		)	37,277		605,957		65,740		(5,942		)	665,755		5	5
Other financial	74,954		—		(29,916		)	45,038		624,532		69,170		(32,086		)	661,616		5	5
Total financial	175,094		2,862		(41,063		)	136,893		3,143,069		347,550		(59,662		)	3,430,957		24	25
Utilities
Electric	9,646		1,003		—			10,649		1,571,784		194,932		(20,000		)	1,746,716		12	13
Gas and water	—		—		—			—		438,101		29,334		(8,319		)	459,116		3	3
Total utilities	9,646		1,003		—			10,649		2,009,885		224,266		(28,319		)	2,205,832		15	16
Industrial - Energy
Pipelines	45,420		—		(16,971		)	28,449		830,190		29,638		(124,357		)	735,471		6	5
Exploration and production	10,923		—		(872		)	10,051		532,425		15,975		(61,838		)	486,562		4	4
Oil field services	38,962		—		(11,088		)	27,874		87,986		4,226		(11,455		)	80,757		1	1
Refiner	—		—		—			—		63,072		3,937		(1,162		)	65,847		1	—
Driller	5,382		—		(2,600		)	2,782		54,719		—		(20,289		)	34,430		—	—
Total energy	100,687		—		(31,531		)	69,156		1,568,392		53,776		(219,101		)	1,403,067		12	10
Industrial - Basic materials
Chemicals	—		—		—			—		493,634		16,254		(21,339		)	488,549		4	4
Metals and mining	49,891		—		(27,661		)	22,230		402,545		4,389		(90,070		)	316,864		3	2
Forestry products and paper	—		—		—			—		103,599		8,386		(2,952		)	109,033		1	1
Total basic materials	49,891		—		(27,661		)	22,230		999,778		29,029		(114,361		)	914,446		8	7
Industrial - Consumer, non-cyclical	13,499		1,106		—			14,605		1,158,828		86,401		(26,917		)	1,218,312		9	9
Other industrials	76,457		1,195		(5,704		)	71,948		979,187		64,579		(36,555		)	1,007,211		7	7
Industrial - Transportation	26,771		—		(7,953		)	18,818		571,474		44,720		(26,702		)	589,492		4	4
Other corporate sectors	123,889		1,337		(7,339		)	117,887		1,051,925		69,297		(26,376		)	1,094,846		8	8
Total corporates	575,934		7,503		(121,251		)	462,186		11,482,538		919,618		(537,993		)	11,864,163		87	86
Other fixed maturities:
Government (U.S., municipal, and foreign)	554		—		(255		)	299		1,684,846		133,117		(16,148		)	1,801,815		13	13
Collateralized debt obligations	63,662		16,158		(9,438		)	70,382		63,662		16,158		(9,438		)	70,382		—	1
Other asset-backed securities	—		—		—			—		16,078		550		—			16,628		—	—
Mortgage-backed securities ⁽¹⁾	—		0		0			—		4,747		290		(1		)	5,036		—	—
Total fixed maturities	$	640,150	$	23,661	$	(130,944	)	$	532,867	$	13,251,871	$	1,069,733	$	(563,580	)	$	13,758,024	100	100
(1) Includes GNMA's

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At December 31, 2015 , fixed maturities had a fair value of $13.8 billion , compared with $14.5 billion at December 31, 2014 . The net unrealized gain position in the fixed maturity portfolio decreased from $1.7 billion at December 31, 2014 to $506 million at December 31, 2015 , primarily as a result of an increase in market interest rates. The December 31, 2015 net unrealized gain consisted of gross unrealized gains of $1.1 billion offset by $564 million of gross unrealized losses, compared with the December 31, 2014 net unrealized gain which consisted of a gross unrealized gain of $1.7 billion and a gross unrealized loss of $79 million . As described in Note 4—Investments in the Notes to the Consolidated Financial Statements, the increase in gross unrealized losses was partially attributable to rising interest rates in the financial markets, but also resulted from deteriorating conditions in the energy and metals and mining sectors.

Corporate securities are diversified over a variety of industry sectors and issuers.The total fixed maturity portfolio consists of 563 issuers, with 205 issuers within the financial, utility, and energy sectors.

Financial and Utilities. At December 31, 2015 , the fixed maturity securities in the financial and utility sectors had net unrealized gains of $288 million and $196 million, respectively. Less than 6% of the book value of the holdings in each of these sectors was rated below-investment grade. While the fair market value of the securities in these two sectors declined during the year, Torchmark does not believe that its fixed maturity securities in the financial and utility sectors pose a significant credit risk in the foreseeable future or that any of these securities are other-than-temporarily impaired.

Energy and Basic Materials . The current low price of oil and other commodities is putting some downward price pressure on some of our holdings in the energy and basic materials sectors, resulting in lower fair values of these sectors as noted above. Our energy sector investments accounted for 12% of fixed maturities at amortized cost and 10% of fixed maturities at fair value as of December 31, 2015 . At amortized cost, over 93% of the energy holdings are investment grade. Within our energy portfolio, 53% of the holdings at amortized cost are in pipelines, 34% are in exploration and production, 6% are in oil field services, and the remainder are in refineries and drilling. We believe securities in drilling and oil field services with an amortized cost of $44 million rated below investment grade have the greatest risk of exposure to the current market conditions. Our investments in basic materials accounted for 8% of fixed maturities at amortized cost and 7% of fixed maturities at fair value as of December 31, 2015 . At amortized cost, over 95% of these holdings are investment grade. Within this sector, 49% of the holdings at amortized cost are in chemicals, 40% are in mining, and the remainder are in forestry products.

While a sustained period of low oil and natural gas prices and depressed demand for commodities may lead to some downgrades in these sectors, we believe that our investments will be able to withstand lower energy and commodity prices for an extended duration. Due to the strong and stable cash flows generated by our insurance products, Torchmark has the ability to hold securities with temporary unrealized losses until recovery. Even though these fixed maturity investments are classified as available for sale, Torchmark generally intends to hold to maturity any securities which are temporarily impaired. As of December 31, 2015 , Torchmark does not believe that any of its holdings in the energy and basic materials sectors are other-than-temporarily impaired.

For more information about our fixed maturity portfolio by component at December 31, 2015 and 2014 , including a discussion of other-than-temporary impairments, an analysis of unrealized investment losses and a schedule of maturities, see Note 4—Investments in the Notes to the Consolidated Financial Statements .

An analysis of the fixed maturity portfolio by a composite rating at December 31, 2015 is shown in the following table. The composite rating for each security, other than private-placement securities managed by third parties, is the average of the security’s ratings as assigned by Moody’s Investor Service, Standard & Poor’s, Fitch Ratings, and Dominion Bond Rating Service, LTD. The ratings assigned by these four nationally recognized statistical rating organizations are evenly weighted when calculating the average. Included in the chart below are private placement fixed maturity holdings of $542 million at amortized cost ( $546 million at fair value) for which the ratings were assigned by the third party managers.

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Fixed Maturities by Rating

At December 31, 2015

(Dollar amounts in thousands)



	Amortized Cost		%	Fair Value		%
Investment grade:
AAA	$	679,571	5	$	692,509	5
AA	1,377,164		10	1,516,112		11
A	3,880,303		29	4,281,509		31
BBB+	2,746,917		21	2,874,861		21
BBB	2,881,888		22	2,861,855		21
BBB-	1,045,878		8	998,311		7
Investment grade	12,611,721		95	13,225,157		96
Below investment grade:
BB	396,995		3	308,036		2
B	125,018		1	101,979		1
Below B	118,137		1	122,852		1
Below investment grade	640,150		5	532,867		4
	$	13,251,871	100	$	13,758,024	100

Of the $13.3 billion of fixed maturities at amortized cost as of December 31, 2015 , $12.6 billion or 95% were investment grade with an average rating of A-. Below-investment-grade bonds were $640 million with an average rating of B+. Below-investment-grade bonds at amortized cost were 17% of our shareholders’ equity, excluding the effect of unrealized gains and losses on fixed maturities as of December 31, 2015 . Overall, the total portfolio had a weighted average quality rating of A- based on amortized cost, the same as at the end of 2014 .

An analysis of changes in our portfolio of below-investment grade fixed maturities at amortized cost is as follows:

Below-investment grade fixed maturities

At December 31, 2015

(Dollar amounts in thousands)



	2015
Balance at December 31, 2014	$	560,890
Downgrades by rating agencies	164,968
Upgrades by rating agencies	(38,821		)
Disposals	(51,322		)
Amortization	4,435
Balance at December 31, 2015	$	640,150

Our investment policy regarding fixed maturities is to acquire only investment-grade obligations. Thus, any increases in below investment-grade issues are a result of ratings downgrades of existing holdings. Our investment portfolio contains no securities backed by sub-prime or Alt-A mortgages (loans for which some of the typical documentation was not provided by the borrower). We have no direct investments in residential mortgages and we are not a party to any credit default swaps or other derivative contracts. We do not participate in securities lending, we have no off-balance sheet investments, and we have only an insignificant exposure to European sovereign debt consisting of $2 million in German government bonds at December 31, 2015 . Our exposure to Puerto Rican obligations is insignificant.

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Market Risk Sensitivity. Torchmark’s investment securities are exposed to interest rate risk, meaning the effect of changes in financial market interest rates on the current fair value of the company’s investment portfolio. Since 96% of the book value of our investments is attributable to fixed maturity investments (and virtually all of these investments are fixed-rate investments), the portfolio is highly subject to market risk. Declines in market interest rates generally result in the fair value of the investment portfolio exceeding the book value of the portfolio and increases in interest rates cause the fair value to decline below the book value. Under normal market conditions, we do not expect to realize these unrealized gains and losses because we have the ability and the intent to hold these investments to maturity. The long-term nature of our insurance policy liabilities and strong cash-flow operating position substantially mitigate any future need to liquidate portions of the portfolio. The increase or decrease in the fair value of insurance liabilities and debt due to increases or decreases in market interest rates largely offsets the impact of rates on the investment portfolio. However, as is permitted by GAAP, these liabilities are not recorded at fair value.

The following table illustrates the market risk sensitivity of our interest-rate sensitive fixed-maturity portfolio at December 31, 2015 and 2014 . This table measures the effect of a change in interest rates (as represented by the U.S. Treasury curve) on the fair value of the fixed-maturity portfolio. The data measures the change in fair value arising from an immediate and sustained change in interest rates in increments of 100 basis points.

Market Value of Fixed Maturity Portfolio

(Dollar amounts in thousands)



	At December 31,
Change in Interest Rates ⁽¹⁾	2015		2014
(200)	$	17,184,975	$	18,401,177
(100)	15,337,923		16,286,904
0	13,758,025		14,493,061
100	12,397,872		12,961,260
200	11,219,241		11,644,621

(1) In basis points.

Realized Gains and Losses. Our life and health insurance companies collect premium income from policyholders for the eventual payment of policyholder benefits, sometimes paid many years or even decades in the future. In addition to the payment of these benefits, we also incur acquisition costs, administrative expenses, and taxes as a part of insurance operations. Because benefits are expected to be paid in future periods, premium receipts in excess of current expenses are invested to provide for these obligations. For this reason, we hold a significant investment portfolio as a part of our core insurance operations. This portfolio consists primarily of high-quality fixed maturities containing an adequate yield to provide for the cost of carrying these long-term insurance product obligations. As a result, fixed maturities are generally held for long periods to support the liabilities. Expected yields on these investments are taken into account when setting insurance premium rates and product profitability expectations.

Investments are occasionally sold or called, resulting in a realized gain or loss. These gains and losses generally occur only incidentally, usually as the result of bonds sold because of deterioration in investment quality of issuers or calls by the issuers. Investment losses are also caused by write downs due to impairments. We do not engage in trading investments for profit. Therefore, gains or losses which occur in protecting the portfolio or its yield, or which result from events that are beyond our control, are only secondary to our core insurance operations of providing insurance coverage to policyholders.

Realized gains and losses can be significant in relation to the earnings from core insurance operations, and as a result, can have a material positive or negative impact on net income. The significant fluctuations caused by gains and losses can cause period-to-period trends of net income that are not indicative of historical core operating results or predictive of the future trends of core operations. Accordingly, they have no bearing on core insurance operations or segment results as we view operations. For these reasons, and in line with industry practice, we remove the effects of realized gains and losses when evaluating overall insurance operating results.

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The following table summarizes our tax-effected realized gains (losses) by component for each of the years in the three-year period ended December 31, 2015 .

Analysis of Realized Gains (Losses), Net of Tax

(Dollar amounts in thousands, except for per share data)



	Year Ended December 31,
	2015						2014					2013
	Amount			Per Share			Amount			Per Share		Amount			Per Share
Fixed maturities:
Sales	$	(10,813	)	$	(0.09	)	$	10,209		$	0.08	$	3,015		$	0.02
Called or tendered	4,652			0.04			4,851			0.04		5,525			0.04
Loss on redemption of debt	—			—			(168		)	—		—			—
Other	447			—			414			—		(4,575		)	(0.03		)
Total	$	(5,714	)	$	(0.05	)	$	15,306		$	0.12	$	3,965		$	0.03

As described in Note 4—Investments under the caption Other-than-temporary impairments, we have not incurred any write downs in our fixed maturity portfolio as a result of other-than-temporary impairment for the years 2013 through 2015 . During 2013 , we sold investment real estate for an after-tax loss of $1.9 million, of which $1.7 million had been written down due to other-than-temporary impairment earlier in that year.

FINANCIAL CONDITION

Liquidity. Liquidity provides Torchmark with the ability to meet on demand the cash commitments required by its business operations and financial obligations. Our liquidity is primarily derived from three sources: positive cash flow from operations, a portfolio of marketable securities, and a line of credit facility.

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

Parent Company Liquidity. Cash flows from the insurance subsidiaries are used to pay interest and principal repayments on Parent Company debt, operating expenses of the Parent, and Parent Company dividends to Torchmark shareholders. In 2015 , the Parent received $466 million of cash dividends from its subsidiaries, compared with $479 million in 2014 and $488 million in 2013 . Including transfers from other subsidiaries and after paying debt obligations, shareholder dividends, and other expenses (but before share repurchases), Torchmark Parent had excess operating cash flow in 2015 of approximately $358 million, compared with $377 million in 2014 and $364 million in 2013 . Parent Company cash flow in excess of its operating requirements is available for other corporate purposes, such as insurance subsidiary capital or financing needs, strategic acquisitions or share repurchases. In 2016 , it is expected that the Parent Company will receive approximately $450 million in dividends and transfers from subsidiaries and that approximately $320 to $330 million will be available as excess cash flow. Certain restrictions exist on the payment of these dividends. For more information on the restrictions on the payment of dividends by subsidiaries, see the restrictions section of Note 12—Shareholders’ Equity in the Notes to Consolidated Financial Statements. Although these restrictions exist, dividend availability from subsidiaries historically has been more than sufficient for the cash flow needs of the Parent Company.

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Short-Term Borrowings. An additional source of parent company liquidity is a line of credit facility with a group of lenders which allows unsecured borrowings and stand-by letters of credit up to $750 million. In July 2014, Torchmark replaced a $600 million facility with this agreement, as discussed in Note 11—Debt in the Notes to Consolidated Financial Statements, under the caption Commercial Paper . The facility, like the previous, is further designated as a back-up line of credit for a commercial paper program. As of December 31, 2015 , we had available $332 million of additional borrowing capacity under this new facility, compared with $314 million a year earlier. There have been no difficulties in accessing the commercial paper market during the three years ended December 31, 2015 .

In summary, Torchmark expects to have readily available funds for 2016 and the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiaries through internally generated cash flow and the credit facility. In the unlikely event that more liquidity is needed, the Company could generate additional funds through multiple sources including, but not limited to, the issuance of additional debt, additional borrowings on our short-term credit facility, and intercompany borrowing.

Consolidated Liquidity . Consolidated net cash inflows provided from operations were $1.1 billion in 2015 , compared with $880 million in 2014 and $1.1 billion in 2013 . In addition to cash inflows from operations, our companies received proceeds from maturities, calls, and repayments of fixed maturities in the amount of $376 million in 2015, compared with $273 million in 2014 and $494 million in 2013.

Our cash and short-term investments were $116 million at year-end 2015 and $82 million at year-end 2014 . Additionally, we have a portfolio of marketable fixed and equity securities that are available for sale in the event of an unexpected need. These securities had a fair value of $13.8 billion at December 31, 2015 . However, our strong cash flows from operations, investment maturities, and the availability of our credit line make any need to sell securities for liquidity unlikely.

Off-Balance Sheet Arrangements. As a part of its aforementioned credit facility, Torchmark had outstanding $177 million in stand-by letters of credit at December 31, 2015 , compared with $198 million a year earlier. These letters are issued among our subsidiaries, one of which is an offshore captive reinsurer, and have no impact on company obligations as a whole. Any future regulatory changes that restrict the use of off-shore captive reinsurers might require Torchmark to obtain third-party financing, which could cause an immaterial increase in financing costs.

As of December 31, 2015 , we had no unconsolidated affiliates and no guarantees of the obligations of third party entities. All of our guarantees were guarantees of the performance of consolidated subsidiaries, as disclosed in Note 15—Commitments and Contingencies in the Notes to Consolidated Financial Statements.

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The following table presents information about future payments under our contractual obligations for the selected periods as of December 31, 2015 .

Contractual Obligations

(Amounts in thousands)



	Actual Liability		Total Payments		Less than One Year		One to Three Years		Three to Five Years		More than Five Years
Fixed and determinable:
Debt—principal ⁽¹⁾	$	1,233,862	$	1,243,803	$	490,544	$	—	$	292,647	$	460,612
Debt—interest ⁽²⁾	6,284		523,332		62,018		109,090		65,997		286,227
Capital leases	—		—		—		—		—		—
Operating leases	—		40,955		8,304		12,626		8,903		11,122
Purchase obligations	68,949		68,949		36,582		31,215		767		385
Pension obligations ⁽³⁾	191,464		263,063		19,273		43,064		48,316		152,410
Future insurance obligations ⁽⁴⁾	12,245,811		48,489,163		1,387,014		2,732,840		2,720,684		41,648,625
Total	$	13,746,370	$	50,629,265	$	2,003,735	$	2,928,835	$	3,137,314	$	42,559,381


(1)	Funded debt is itemized in Note 11—Debt and includes short-term commercial paper.


(2)	Interest on debt is based on our fixed contractual obligations.

(3)

Pension obligations are primarily liabilities in trust funds that are calculated in accordance with the terms of the pension plans. They are offset by invested assets in the trusts, which are funded through periodic contributions by Torchmark in a manner which will provide for the settlement of the obligations as they become due. Therefore, our obligations are offset by those assets when reported on Torchmark’s Consolidated Balance Sheets . At December 31, 2015 , these pension obligations were $477 million , but there were also assets of $308 million in the pension entities. The schedule of pension benefit payments covers ten years and is based on the same assumptions used to measure the pension obligations, except there is no interest assumption because the payments are undiscounted. There are also obligations for benefits other than pensions with a liability of $22 million. Please refer to Note 9—Postretirement Benefits in the Notes to Consolidated Financial Statements for more information on pension obligations.

(4)

Future insurance obligations consist primarily of estimated future contingent benefit payments on policies in force at December 31, 2015 . These estimated payments were computed using assumptions for future mortality, morbidity and persistency. The actual amount and timing of such payments may differ significantly from the estimated amounts shown. Management believes that the assets supporting the liability of $12.2 billion at December 31, 2015 , along with future premiums and investment income, will be sufficient to fund all future insurance obligations.

Capital Resources. Torchmark’s capital structure consists of short-term debt (the commercial paper facility described in Note 11—Debt in the Notes to Consolidated Financial Statements and the current maturity of funded debt ), long-term funded debt, and shareholders’ equity. A complete analysis and description of long-term debt issues outstanding is presented in Note 11 .

The carrying value of the funded debt was $993 million at December 31, 2015 , compared with $992 million a year earlier. Torchmark has a 6.375% Senior Note that matures on June 15, 2016 with a par value and book value of $250 million . As this issue matures within one year, it has been reclassified to short term debt. Torchmark intends to refinance the debt during calendar 2016 with a hybrid debt instrument.

Our insurance subsidiaries generally target a capital ratio of 325% of Company action level regulatory capital under Risk-Based Capital (RBC), a formula designed by insurance regulatory authorities to monitor the adequacy of capital. The 325% target is considered sufficient for the subsidiaries because of their strong reliable cash flows, the relatively low risk of their product mix, and because that ratio is in line with rating agency expectations for Torchmark. At December 31, 2015 , our insurance subsidiaries in the aggregate had RBC ratios of approximately 320%. Should we experience impairments and/or ratings downgrades within its fixed maturity portfolio in the future, the ratio could fall below targeted levels. In such a case, management believes more than sufficient liquidity exists at the Parent Company to make additional contributions as necessary to maintain the targeted ratio.

As noted under the caption Summary of Operations in this report, we have an ongoing share repurchase program. Under this program, we acquired 6 million shares at a cost of $359 million in 2015 , 7 million shares at a cost of $375 million in 2014 , and 8 million shares for $360 million in 2013 . The majority of purchased shares are retired each

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year. Please refer to the description of our share repurchase program under the caption Summary of Operations in this report.

Torchmark has continually increased the quarterly dividend on its common shares over the past three years. In the first quarter of 2013 , it was increased to $0.1133 per share from $0.10 per share. In the first quarter of 2014 , it was raised to $0.1267 per share. Finally, in the first quarter of 2015 , dividends were raised to $0.135 per share.

Shareholders’ equity was $4.1 billion at December 31, 2015 , compared with $4.7 billion at December 31, 2014 . During the twelve months since December 31, 2014 , shareholders’ equity was reduced by the $359 million in share purchases under the repurchase program, $60 million to offset the dilution from stock option exercises, and $750 million of after-tax unrealized losses in the fixed maturity portfolio. However, it was increased by $527 million of net income.

We plan to use excess cash available at the Parent Company as efficiently as possible in the future. Possible uses of excess cash flow include, but are not limited to share repurchases, acquisitions, increases in shareholder dividends, investment in fixed maturities, or repayment of short-term debt. We will determine the best use of excess cash after ensuring that desired capital levels are maintained in our companies.

We maintain a significant available-for-sale fixed maturity portfolio to support our insurance policyholders’ liabilities. Current accounting guidance requires that we revalue our portfolio to fair market value at the end of each accounting period. The period-to-period changes in fair value, net of their associated impact on deferred acquisition costs and income tax, are reflected directly in shareholders’ equity. Changes in the fair value of the portfolio can result from changes in interest rates and liquidity in financial markets. While invested assets are revalued, accounting rules do not permit interest-bearing insurance policy liabilities to be valued at fair value in a consistent manner as that of assets, with changes in value applied directly to shareholders’ equity. Due to the size of our policy liabilities in relation to our shareholders’ equity, this inconsistency in measurement usually has a material impact on the reported value of shareholders’ equity. If these liabilities were revalued in the same manner as the assets, the effect on equity would be largely offset. Fluctuations in interest rates cause undue volatility in the period-to-period presentation of our shareholders’ equity, capital structure, and financial ratios which would be essentially removed if interest-bearing liabilities were valued in the same manner as assets. From time to time, the market value of our fixed maturity portfolio may be depressed as a result of bond market illiquidity which could result in a significant decrease in shareholders’ equity. Because of the long-term nature of our fixed maturities and liabilities and the strong cash flows consistently generated by our insurance subsidiaries, we have the intent and ability to hold our securities to maturity. As such, we do not expect to incur losses due to fluctuations in market value of fixed maturities caused by interest rate changes and temporarily illiquid markets. Accordingly, our management, credit rating agencies, lenders, many industry analysts, and certain other financial statement users prefer to remove the effect of this accounting rule when analyzing our balance sheet, capital structure, and financial ratios.

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The following tables present selected data related to our capital resources. Additionally, the tables present the effect of this accounting guidance on relevant line items, so that investors and other financial statement users may determine its impact on Torchmark’s capital structure.



Selected Financial Data
(Amounts in thousands except per share and percentage data)

	At December 31, 2015						At December 31, 2014						At December 31, 2013
	GAAP			Effect of Accounting Rule Requiring Revaluation ⁽¹⁾			GAAP			Effect of Accounting Rule Requiring Revaluation ⁽¹⁾			GAAP			Effect of Accounting Rule Requiring Revaluation ⁽¹⁾
Fixed maturities	$	13,758,024		$	506,153		$	14,493,060		$	1,669,448		$	12,879,133		$	390,258
Deferred acquisition costs ⁽²⁾	3,617,135			(7,869		)	3,457,397			(16,551		)	3,325,433			(10,351		)
Total assets	19,853,213			498,284			20,272,259			1,652,897			18,217,757			379,907
Short-term debt	490,129			—			238,398			—			229,070			—
Long-term debt	743,733			—			992,130			—			990,865			—
Shareholders’ equity	4,055,552			323,885			4,697,466			1,074,383			3,776,342			246,940
Book value per diluted share	32.71			2.62			36.19			8.28			27.66			1.81
Debt to capitalization ⁽³⁾	23.3		%	(1.5		)%	20.8		%	(4.6		)%	24.4		%	(1.3		)%
Diluted shares outstanding	123,996						129,812						136,537
Actual shares outstanding	122,370						127,930						134,252


(1)	Amount added to (deducted from) comprehensive income to produce the stated GAAP item.


(2)	Includes the value of insurance purchased.


(3)	Torchmark’s debt covenants require that the effect of the accounting rule requiring revaluation be removed to determine this ratio. This ratio is computed by dividing total debt by the sum of debt and shareholders’ equity.

FASB guidance provides for an option which, if elected, would permit us to value our interest-bearing policy liabilities and debt at fair value in our Consolidated Balance Sheets . However, unlike the accounting rule which permits us to account for changes in our available-for-sale bond portfolio through other comprehensive income, the guidance requires such changes to be recorded in earnings. Because both the size and duration of the investment portfolio do not match those attributes of our policyholder liabilities and debt, the impact on earnings could be very significant and volatile, causing reported earnings not to be reflective of core results. Therefore, we have not elected this option.

Torchmark’s ratio of earnings before interest and taxes to interest requirements (times interest earned) was 11.0 times in 2015 , compared with 11.3 times in 2014 and 10.4 times in 2013 (as adjusted for discontinued operations and the adoption of ASU 2014-01 Investments-Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects ). This times-interest-earned ratio is computed by dividing interest expense into the sum of pre-tax income from continuing operations and interest expense. A discussion of our interest expense is included in the discussion of financing costs under the caption Investments in this report.

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Financial Strength Ratings. The financial strength of our major insurance subsidiaries is rated by Standard & Poor’s and A. M. Best. The following chart presents these ratings for our five largest insurance subsidiaries at December 31, 2015 .



	Standard & Poor’s	A.M Best
Liberty	AA-	A+ (Superior)
Globe	AA-	A+ (Superior)
United American	AA-	A+ (Superior)
American Income	AA-	A+ (Superior)
Family Heritage	NR	A (Excellent)

A.M. Best states that it assigns an A+ (Superior) rating to insurance companies that have, in its opinion, a superior ability to meet their ongoing insurance obligations. It assigns an A (Excellent) rating to insurance companies that have, in its opinion, an excellent ability to meet their ongoing insurance obligations.

The AA financial strength rating category is assigned by Standard & Poor’s Corporation (S&P) to those insurers which have very strong capacity to meet its financial commitments which differs from the highest-rated insurers only to a small degree. An insurer rated A has strong capacity to meet its financial commitments but it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than insurers in higher-rated categories. The plus sign (+) or minus sign (-) shows the relative standing within the major rating category.

In the third quarter of 2014, Standard and Poor's (S&P) revised its outlook on Torchmark's capital position to a negative outlook. That updated outlook was due to S&P's view at that time at certain internal components of Torchmark's capital position rather than a change in the capital position itself. However, during the fourth quarter of 2015 , S&P formally reviewed our operations and financial outlook. Based on their review, they revised their outlook from negative to stable and confirmed our "AA-" financial strength ratings at our insurance subsidiaries and Torchmark Corporation's senior debt "A" credit rating. We intend to maintain adequate capital levels for S&P and any changes to our capital position to maintain such levels are not expected to have any significant impact on our share repurchase program or our financial results in future periods.

OTHER ITEMS

Litigation. Torchmark and its subsidiaries are subject to being named as parties to pending or threatened litigation, much of which involves punitive damage claims based upon allegations of agent misconduct at the insurance subsidiaries. Such punitive damage claims may have the potential for significant adverse results since Torchmark and its subsidiaries operate in jurisdictions where large punitive damage awards bearing little or no relation to actual damages continue to be awarded. This bespeaks caution since it is impossible to predict the likelihood or extent of punitive damages that may be awarded if liability is found in any given case. 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 us to be material. For more information concerning litigation, please refer to Note 15—Commitments and Contingencies in the Notes to Consolidated Financial Statements .

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CRITICAL ACCOUNTING POLICIES

Future Policy Benefits: Due to the long-term nature of insurance contracts, our insurance companies are liable for policy benefit payments that will be made in the future. The liability for future policy benefits is determined by standard actuarial procedures common to the life insurance industry. The accounting policies for determining this liability are disclosed in Note 1—Significant Accounting Policies in the Notes to Consolidated Financial Statements.

Approximately 85% of our liabilities for future policy benefits at December 31, 2015 were traditional insurance liabilities where the liability is determined as the present value of future benefits less the present value of the portion of the gross premium required to pay for such benefits. The assumptions used in estimating the future benefits for this portion of business are set at the time of contract issue. These assumptions are “locked in” and are not revised for the lifetime of the contracts, except where there is a premium deficiency, as defined in Note 1—Significant Accounting Policies in the Notes to Consolidated Financial Statements under the caption Future Policy Benefits. Otherwise, variability in the accrual of policy reserve liabilities after policy issuance is caused only by variability of the inventory of in force policies. Torchmark did not have a premium deficiency event for its traditional business during the three years ended December 31, 2015 .

The remaining portion of liabilities for future policy benefits pertains to business accounted for as deposit business, where the recorded liability is the fund balance attributable to the benefit of policyholders as determined by the policy contract at the financial statement date. Accordingly, there are no assumptions used to determine the future policy benefit liability for deposit business.

Deferred Acquisition Costs : Certain costs of acquiring new business are deferred and recorded as an asset. Deferred acquisition costs consist primarily of sales commissions and other underwriting costs related to the successful issuance of a new insurance contract as indicated in Note 1 — Significant Accounting Policies under the caption Deferred Acquisition Costs in the Notes to Consolidated Financial Statements. Additionally, the cost of acquiring blocks of insurance business or insurance business through the purchase of other companies, known as the value of insurance purchased, is included in deferred acquisition costs. Our policies for accounting for deferred acquisition costs and the associated amortization are reported under the same caption in Note 1.

Approximately 99% of our recorded amounts for deferred acquisition costs at December 31, 2015 were related to traditional products and are being amortized over the premium-paying period in proportion to the present value of actual historic and estimated future gross premiums. The projection assumptions for this business are set at the time of contract issue. These assumptions are “locked-in” at that time and, except where there is a loss recognition issue, are not revised for the lifetime of the contracts. Absent a premium deficiency, variability in amortization after policy issuance is caused only by variability in premium volume. We have not recorded a deferred acquisition cost loss recognition event for assets related to this business for any period in the three years ended December 31, 2015 .

The remaining 1% of deferred acquisition costs pertain to deposit business for which deferred acquisition costs are amortized over the estimated lives of the contracts in proportion to actual and estimated future gross profits. These contracts are not subject to lock-in. The assumptions must be updated when actual experience or other evidence suggests that earlier estimates should be revised. Revisions related to our deposit business assets have not had a material impact on the amortization of deferred acquisition costs during the three years ended December 31, 2015 .

Policy Claims and Other Benefits Payable : This liability consists of known benefits currently payable and an estimate of claims that have been incurred but not yet reported to us. The estimate of unreported claims is based on prior experience and is made after careful evaluation of all information available to us. However, the factors upon which these estimates are based can be subject to change from historical patterns. Factors involved include the litigation environment, regulatory mandates, and the introduction of policy types for which claim patterns are not well established, and medical trend rates and medical cost inflation as they affect our health claims. Changes in these estimates, if any, are reflected in the earnings of the period in which the adjustment is made. We believe that the estimates used to produce the liability for claims and other benefits, including the estimate of unsubmitted claims, are the most appropriate under the circumstances. However, there is no certainty that the resulting stated liability will be our ultimate obligation. At this time, we do not expect any change in this estimate to have a material impact on earnings or financial position consistent with our historical experience.

Valuation of Fixed Maturities : We hold a substantial investment in high-quality fixed maturities to provide for the funding of our future policy contractual obligations over long periods of time. While these securities are generally expected to

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be held to maturity, they are classified as available for sale and are sold from time to time, primarily to manage risk. We report this portfolio at fair value. Fair value is the price that we would expect to receive upon sale of the asset in an orderly transaction. The fair value of the fixed maturity portfolio is primarily affected by changes in interest rates in financial markets, having a greater impact on longer-term maturities. Because of the size of our fixed maturity portfolio, small changes in rates can have a significant effect on the portfolio and the reported financial position of the Company. This impact is disclosed in 100 basis point increments under the caption Market Risk Sensitivity in this report. However, as discussed under the caption Financial Condition in this report, we believe these unrealized fluctuations in value have no meaningful impact on our actual financial condition and, as such, we remove them from consideration when viewing our financial position and financial ratios.

At times, the values of our fixed maturities can also be affected by illiquidity in the financial markets. Illiquidity would contribute to a spread widening, and accordingly unrealized losses, on many securities that we would expect to be fully recoverable. Even though our fixed maturity portfolio is available for sale, we have the ability and intent to hold the securities until maturity as a result of our strong and stable cash flows generated from our insurance products. Considerable information concerning the policies, procedures, classification levels, and other relevant data concerning the valuation of our fixed-maturity investments is presented in Note 1—Significant Accounting Policies and in Note 4—Investments in the Notes to Consolidated Financial Statements under the captions Fair Value Measurements in both notes.

Impairment of Investments : We continually monitor our investment portfolio for investments where fair value has declined below carrying value and that have become impaired in value. While the values of the investments in our portfolio constantly fluctuate due to market conditions, an other-than-temporary impairment charge is recorded only when a security has experienced a decline in fair market value which is deemed to be other than temporary. The policies and procedures that we use to evaluate and account for impairments of investments are disclosed in Note 1—Significant Accounting Policies in the Notes to Consolidated Financial Statements and the discussions under the captions Investments and Realized Gains and Losses in this report. While every effort is made to make the best estimate of status and value with the information available regarding an other-than-temporary impairment, it is difficult to predict the future prospects of a distressed or impaired security.

Defined benefit pension plans : We maintain funded defined benefit plans covering most full-time employees. We also have unfunded nonqualified defined benefit plans covering certain key and other employees. Our obligations under these plans are determined actuarially based on specified actuarial assumptions. In accordance with GAAP, an expense is recorded each year as these pension obligations grow due to the increase in the service period of employees and the interest cost associated with the passage of time. These obligations are offset, at least in part, by the growth in value of the assets in the funded plans. At December 31, 2015 , our gross liability under these funded plans was $477 million , but was offset by assets of $308 million .

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The actuarial assumptions used in determining our obligations for pensions include employee mortality and turnover, retirement age, the expected return on plan assets, projected salary increases, and the discount rate at which future obligations could be settled. These assumptions have an important effect on the pension obligation. A decrease in the discount rate or rate of return on plan assets will cause an increase in the pension obligation. A decrease in projected salary increases will cause a decrease in this obligation. Small changes in assumptions may cause significant differences in reported results for these plans. For example, a sensitivity analysis is presented below for the impact of change in the discount rate and the long-term rate of return on assets assumed on our defined benefit pension plans expense for the year 2015 and projected benefit obligation as of December 31, 2015 .



Assumption	% Change		Impact on Expense			Impact on Projected Benefit Obligation
			(Dollars in Thousands)
Discount Rate: ⁽¹⁾
Increase	0.25		$	(2,335	)	$	(17,795	)
Decrease	(0.25	)	2,455			18,850
Expected Return: ⁽²⁾
Increase	0.25		(799		)
Decrease	(0.25	)	799


(1)	The discount rate was 4.23% for 2015 expense and 4.64% for the projected benefit obligation at December 31, 2015 .


(2)	The expected return rate assumed was 6.96%.

The Company determines mortality assumptions through the use of published mortality tables that reflect broad-based studies of mortality and published longevity improvement scales. During 2014, the Company revised the mortality assumptions based on an evaluation of a new mortality table and longevity scale released by the Society of Actuaries. The change in these assumptions added approximately $26 million to the projected benefit obligation as of December 31, 2014.

The criteria used to determine the primary assumptions are discussed in Note 9—Postretirement Benefits in the Notes to Consolidated Financial Statements. While we have used our best efforts to determine the most reliable assumptions, given the information available from company experience, economic data, independent consultants and other sources, we cannot be certain that actual results will be the same as expected. The assumptions are reviewed annually and revised, if necessary, based on more current information available to us. Note 9 also contains information about pension plan assets, investment policies, and other related data.

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CAUTIONARY STATEMENTS

We caution readers regarding certain forward-looking statements contained in the foregoing discussion and elsewhere in this document, and in any other statements made by us or on our behalf 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 us or our business, whether express or implied, is meant as and should be considered a forward-looking statement. Such statements represent our 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 our control. If these estimates or assumptions prove to be incorrect, the actual results 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) Changes in lapse rates and/or sales of our insurance policies as well as levels of mortality, morbidity and utilization of healthcare services that differ from our assumptions;

2) Federal and state legislative and regulatory developments, particularly those impacting taxes and changes to the federal Medicare program that would affect Medicare Supplement and Medicare Part D insurance;

3) Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare, such as health maintenance organizations (HMOs) 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 debt issuers’ financial conditions that may affect the current market value of securities that we own, or that may impair issuers’ ability to pay interest due us on those securities;

6) Changes in pricing competition;

7) Litigation results;

8) Levels of administrative and operational efficiencies that differ from our assumptions;

9) Our inability 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 our estimates and judgments which may differ from the actual amounts ultimately realized.

Readers are also directed to consider other risks and uncertainties described in our other documents on file with the Securities and Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Information required by this item is found under the heading Market Risk Sensitivity in Item 7 of this report.

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Item 8. Financial Statements and Supplementary Data



	Page
Report of Independent Registered Public Accounting Firm	49
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 2015 and 2014	50
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2015	51
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2015	52
Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2015	53
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2015	54
Notes to Consolidated Financial Statements	55

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Torchmark Corporation

McKinney, Texas

We have audited the accompanying consolidated balance sheets of Torchmark Corporation and subsidiaries (Torchmark) as of December 31, 2015 and 2014 , and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 . Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of Torchmark’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Torchmark Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Torchmark’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2016 expressed an unqualified opinion on Torchmark’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Dallas, Texas

February 26, 2016

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TORCHMARK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands except per share data)



	December 31,
	2015			2014 ⁽¹⁾
Assets:
Investments:
Fixed maturities-available for sale, at fair value (amortized cost: 2015–$13,251,871; 2014–$12,823,612)	$	13,758,024		$	14,493,060
Equity securities, at fair value (cost: 2015–$776; 2014–$776)	1,635			1,477
Policy loans	492,462			472,109
Other long-term investments	36,803			10,449
Short-term investments	54,766			15,882
Total investments	14,343,690			14,992,977
Cash	61,383			66,019
Accrued investment income	209,915			204,879
Other receivables	344,552			327,856
Deferred acquisition costs	3,617,135			3,457,397
Goodwill	441,591			441,591
Other assets	522,104			493,495
Assets held for sale	312,843			288,045
Total assets	$	19,853,213		$	20,272,259
Liabilities:
Future policy benefits	$	12,245,811		$	11,750,495
Unearned and advance premiums	67,021			71,703
Policy claims and other benefits payable	272,898			254,149
Other policyholders' funds	95,988			95,446
Total policy liabilities	12,681,718			12,171,793
Current and deferred income taxes payable	1,450,888			1,786,070
Other liabilities	380,158			347,526
Short-term debt	490,129			238,398
Long-term debt (estimated fair value: 2015–$856,291; 2014–$1,148,749)	743,733			992,130
Liabilities held for sale	51,035			38,876
Total liabilities	15,797,661			15,574,793
Commitments and Contingencies (Note 15)
Shareholders' equity:
Preferred stock, par value $1 per share–Authorized 5,000,000 shares; outstanding: -0- in 2015 and 2014	—			—
Common stock, par value $1 per share–Authorized 320,000,000 shares; outstanding: (2015–130,218,183 issued, less 7,848,231 held in treasury and 2014–134,218,183 issued, less 6,287,907 held in treasury)	130,218			134,218
Additional paid-in capital	482,284			457,613
Accumulated other comprehensive income (loss)	231,947			997,452
Retained earnings	3,614,369			3,376,846
Treasury stock	(403,266		)	(268,663		)
Total shareholders' equity	4,055,552			4,697,466
Total liabilities and shareholders' equity	$	19,853,213		$	20,272,259

(1) Certain balances were adjusted to give effect to discontinued operations as described in Note 1—Significant Accounting Policies .

See accompanying Notes to Consolidated Financial Statements.

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TORCHMARK CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except per share data)



	Year Ended December 31,
	2015			2014 ⁽¹⁾			2013 ⁽¹⁾
Revenue:
Life premium	$	2,073,065		$	1,966,300		$	1,885,332
Health premium	925,520			869,440			863,818
Other premium	135			400			532
Total premium	2,998,720			2,836,140			2,749,682

Net investment income	773,951			758,286			734,650
Realized investment gains (losses)	(8,791		)	23,548			10,668
Other-than-temporary impairments	—			—			(2,678		)
Other income	2,185			2,121			1,931
Total revenue	3,766,065			3,620,095			3,494,253

Benefits and expenses:
Life policyholder benefits	1,374,608			1,301,562			1,227,857
Health policyholder benefits	602,610			559,817			567,607
Other policyholder benefits	38,994			42,005			43,302
Total policyholder benefits	2,016,212			1,903,384			1,838,766

Amortization of deferred acquisition costs	445,625			415,914			400,869
Commissions, premium taxes, and non-deferred acquisition expenses	237,541			222,463			207,399
Other operating expense	223,858			217,531			211,443
Interest expense	76,642			76,126			80,461
Total benefits and expenses	2,999,878			2,835,418			2,738,938

Income before income taxes	766,187			784,677			755,315
Income taxes	(249,894		)	(256,603		)	(248,110		)
Income from continuing operations	516,293			528,074			507,205

Discontinued operations:
Income from discontinued operations, net of tax	10,807			14,865			21,267
Net income	$	527,100		$	542,939		$	528,472

Basic net income per common share:
Continuing operations	$	4.13		$	4.04		$	3.68
Discontinued operations	0.08			0.11			0.16
Total basic net income per common share	$	4.21		$	4.15		$	3.84

Diluted net income per common share:
Continuing operations	$	4.07		$	3.98		$	3.63
Discontinued operations	0.09			0.11			0.16
Total diluted net income per common share	$	4.16		$	4.09		$	3.79

(1) Certain balances were adjusted to give effect to discontinued operations and the adoption of new accounting guidance as described in Note 1- Significant Accounting Policies under the caption "Low-Income Housing Tax Credit Interests."

See accompanying Notes to Consolidated Financial Statements.

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TORCHMARK CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)



	Year Ended December 31,
	2015			2014			2013
Net income	$	527,100		$	542,939		$	528,472

Other comprehensive income (loss):
Unrealized investment gains (losses):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period	(1,163,259		)	1,312,841			(1,166,332		)
Reclassification adjustment for (gains) losses on securities included in net income	9,478			(23,771		)	(13,138		)
Reclassification adjustment for amortization of (discount) premium	(6,346		)	(8,621		)	(6,569		)
Foreign exchange adjustment on securities recorded at fair value	(3,010		)	(1,567		)	(1,173		)
Unrealized gains (losses) on securities	(1,163,137		)	1,278,882			(1,187,212		)

Unrealized gains (losses) on other investments:
Unrealized holding gains (losses) arising during period	(1,793		)	4,180			28
Reclassification adjustment for (gains) losses included in net income	(1,102		)	—			3,532
Unrealized gains (losses) on other investments	(2,895		)	4,180			3,560
Total unrealized investment gains (losses)	(1,166,032		)	1,283,062			(1,183,652		)
Less applicable (taxes) benefits	408,092			(448,985		)	415,481
Unrealized gains (losses) on investments, net of tax	(757,940		)	834,077			(768,171		)

Unrealized gains (losses) attributable to deferred acquisition costs	8,682			(6,200		)	14,906
Less applicable (taxes) benefits	(3,039		)	2,170			(5,217		)
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax	5,643			(4,030		)	9,689

Foreign exchange translation adjustments, other than securities	(20,651		)	(10,770		)	(2,962		)
Less applicable (taxes) benefits	6,892			3,290			1,220
Foreign exchange translation adjustments, other than securities, net of tax	(13,759		)	(7,480		)	(1,742		)

Pension adjustments:
Amortization of pension costs	14,586			10,285			18,366
Plan amendments	(2,104		)	—			—
Experience gain (loss)	(11,632		)	(65,817		)	52,296
Pension adjustments	850			(55,532		)	70,662
Less applicable (taxes) benefits	(299		)	19,436			(24,732		)
Pension adjustments, net of tax	551			(36,096		)	45,930

Other comprehensive income (loss)	(765,505		)	786,471			(714,294		)
Comprehensive income (loss)	$	(238,405	)	$	1,329,410		$	(185,822	)

See accompanying Notes to Consolidated Financial Statements.

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TORCHMARK CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands except per share data)



	Preferred Stock		Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Year Ended December 31, 2013
Balance at January 1, 2013	$	—	$	158,718		$	439,782		$	925,275		$	3,350,432		$	(512,421	)	$	4,361,786
Other Comprehensive income (loss)									(714,294		)	528,472						(185,822		)
Common dividends declared ($.45 per share)												(61,991		)				(61,991		)
Acquisition of treasury stock															(482,264		)	(482,264		)
Stock-based compensation						23,464						563			1,615			25,642
Exercise of stock options						21,315						(25,195		)	122,871			118,991
Retirement of treasury stock			(7,500		)	(22,503		)				(296,748		)	326,751			—
Balance at December 31, 2013	—		151,218			462,058			210,981			3,495,533			(543,448		)	3,776,342
Year Ended December 31, 2014
Other Comprehensive income (loss)									786,471			542,939						1,329,410
Common dividends declared ($.51 per share)												(65,998		)				(65,998		)
Acquisition of treasury stock															(449,308		)	(449,308		)
Stock-based compensation						31,315						362			526			32,203
Exercise of stock options						18,524						(22,641		)	78,934			74,817
Retirement of treasury stock			(17,000		)	(54,284		)				(573,349		)	644,633			—
Balance at December 31, 2014	—		134,218			457,613			997,452			3,376,846			(268,663		)	4,697,466
Year Ended December 31, 2015
Other Comprehensive income (loss)									(765,505		)	527,100						(238,405		)
Common dividends declared ($.54 per share)												(67,182		)				(67,182		)
Acquisition of treasury stock															(418,526		)	(418,526		)
Stock-based compensation						21,813						(2,132		)	8,983			28,664
Exercise of stock options						17,577						(36,322		)	72,280			53,535
Retirement of treasury stock			(4,000		)	(14,719		)				(183,941		)	202,660			—
Balance at December 31, 2015	$	—	$	130,218		$	482,284		$	231,947		$	3,614,369		$	(403,266	)	$	4,055,552

See accompanying Notes to Consolidated Financial Statements.

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TORCHMARK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)



	Year Ended December 31,
	2015			2014 ⁽¹⁾			2013 ⁽¹⁾
Net income	$	527,100		$	542,939		$	528,472
Adjustments to reconcile net income from continuing operations to cash provided from continuing operations:
(Income) from discontinued operations, net of income taxes	(10,807		)	(14,865		)	(21,267		)
Increase in future policy benefits	631,202			585,632			578,217
Increase (decrease) in other policy benefits	14,609			12,521			(7,151		)
Deferral of policy acquisition costs	(612,181		)	(562,245		)	(520,248		)
Amortization of deferred policy acquisition costs	445,625			415,914			400,869
Change in current and deferred income taxes	103,558			102,720			74,989
Realized (gains) losses on sale of investments and properties	8,791			(23,548		)	(7,990		)
Other, net	13,985			(38,354		)	27,230
Net cash provided from (used for) continuing operations	1,121,882			1,020,714			1,053,121
Net cash provided from (used for) discontinued operations	(1,832		)	(156,006		)	66,159
Cash provided from (used for) operations	1,120,050			864,708			1,119,280

Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale—sold	226,792			109,024			133,463
Fixed maturities available for sale—matured, called, and repaid	376,158			273,223			493,885
Equity securities	—			700			14,000
Other long-term investments	3,740			795			1,333
Total investments sold or matured	606,690			383,742			642,681
Acquisition of investments:
Fixed maturities—available for sale	(1,070,908		)	(704,993		)	(1,143,840		)
Other long-term investments	(31,707		)	—			(591		)
Total investments acquired	(1,102,615		)	(704,993		)	(1,144,431		)
Net increase in policy loans	(20,353		)	(23,222		)	(24,837		)
Net (increase) decrease in short-term investments	(38,884		)	61,008			17,970
Net change in payable or receivable for securities	—			—			(43,987		)
Additions to properties	(36,957		)	(19,367		)	(11,168		)
Sales of properties	—			8,752			570
Investments in low-income housing interests	(41,231		)	(56,083		)	(51,176		)
Cash provided from (used for) inves tment activities	(633,350		)	(350,163		)	(614,378		)

Cash provided from (used for) financing activities:
Issuance of common stock	35,958			56,294			97,816
Cash dividends paid to shareholders	(66,899		)	(65,006		)	(60,911		)
Repayment of 7.375% Notes	—			—			(94,050		)
Net borrowing (repayment) of commercial paper	1,978			9,328			3,983
Excess tax benefit from stock option exercises	17,577			18,524			21,315
Acquisition of treasury stock	(418,526		)	(449,308		)	(482,264		)
Net receipts (payments) from deposit-type product	(95,793		)	(69,792		)	(21,808		)
Cash provided from (used for) financing activities	(525,705		)	(499,960		)	(535,919		)

Effect of foreign exchange rate changes on cash	34,369			14,491			6,250
Increase (decrease) in cash	(4,636		)	29,076			(24,767		)
Cash at beginning of year	66,019			36,943			61,710
Cash at end of year	$	61,383		$	66,019		$	36,943

(1) Certain balances were adjusted to give effect to discontinued operations as described in Note 1—Significant Accounting Policies .

See accompanying Notes to Consolidated Financial Statements.

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Index to Financial Statements

TORCHMARK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies

Business : Torchmark Corporation (Torchmark or alternatively, the Company) through its subsidiaries provides a variety of life and health insurance products and annuities to a broad base of customers.

Basis of Presentation : The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), under guidance issued by the Financial Accounting Standards Board (FASB). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation: The consolidated financial statements include the results of Torchmark and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. When Torchmark acquires a subsidiary or a block of business, the assets acquired and the liabilities assumed are measured at fair value at the acquisition date. Any excess of acquisition cost over the fair value of net assets is recorded as goodwill. Expenses incurred to effect the acquisition are charged to earnings as of the acquisition date. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date.

Torchmark accounts for its variable interest entities (VIEs) under accounting guidance which clarifies the definition of a variable interest and the instructions for consolidating VIEs. Only primary beneficiaries are required or allowed to consolidate VIEs. Therefore, a company may have voting control of a VIE, but if it is not the primary beneficiary, it is not permitted to consolidate the VIE. As further described under the caption Low-Income Housing Tax Credit Interests below in this note, Torchmark holds passive interests in limited partnerships which provide investment returns through the provision of tax benefits (principally from the transfer of federal or state tax credits related to federal low-income housing). These interests are considered to be VIEs. They are not consolidated because the Company has no power to control the activities that most significantly affect the economic performance of these entities and therefore the Company is not the primary beneficiary of any of these interests. Torchmark’s involvement is limited to its limited partnership interest in the entities. Torchmark has not provided any other financial support to the entities beyond its commitments to fund its limited partnership interests, and there are no arrangements or agreements with any of the interests to provide other financial support. The maximum loss exposure relative to these interests is limited to their carrying value.

When a component of Torchmark’s business is expected to be sold during the ensuing year, Torchmark considers whether the criteria of ASC 205-20, Discontinued Operations , have been met, which includes evaluating if the disposal of a component represents a strategic shift that has, or will have, a major effect on the Company. If the disposal meets the criteria for discontinued operations, the assets and liabilities of components held for sale are segregated and are recorded in the Consolidated Balance Sheets as assets held for sale and liabilities held for sale for all periods presented. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. The results of operations for the component held for sale are reported in "Income from discontinued operations, net of tax" in the Consolidated Statements of Operations for current and prior periods. Discontinued operations are reported commencing in the period in which the business is either disposed of or meets the accounting criteria for discontinued operations, including any gain or loss recognized on the sale or adjustment of the carrying amount to the estimated fair value less cost to sell. As discussed in further detail in Note 6—Discontinued Operations , Torchmark has classified one of its operating segments, Medicare Part D, as held for sale and it is reflected as a discontinued operation for the year ended December 31, 2015 . As this business has been classified as held for sale and its operations are discontinued, the financial results of this business are excluded from Torchmark's continuing operations and the Notes to the Consolidated Financial Statements , other than Note 2—Statutory Accounting and Note 6—Discontinued Operations .

Investments : Torchmark classifies all of its fixed maturity investments, which include bonds and redeemable preferred stocks, as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Investments in equity securities, which include common and nonredeemable preferred stocks, are reported at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Policy loans are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

carried at unpaid principal balances. Investments in real estate, included in “Other long-term investments,” are reported at cost less allowances for depreciation. Depreciation is calculated on the straight-line method. Investments in limited partnerships, also included in "Other long-term investments," are accounted for using the cost method of accounting as Torchmark's partnership interest is minor since Torchmark lacks the ability to exercise significant influence over the partnership's operating and financial policies. The Company considers its cost method investments for impairment when the carrying value of such investments exceeds the net asset value (“NAV”). Short-term investments include investments in interest-bearing time deposits with original maturities of twelve months or less.

Gains and losses realized on the disposition of investments are determined on a specific identification basis. Income attributable to investments is included in Torchmark’s net investment income. Net investment income and realized investment gains and losses are not allocated to insurance policyholders’ liabilities.

Fair Value Measurements, Investments in Securities : Torchmark measures the fair value of its fixed maturities and equity securities based on a hierarchy consisting of three levels which indicate the quality of the fair value measurements as described below:


•	Level 1 – fair values are based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

•

Level 2 – fair values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that can otherwise be corroborated by observable market data.

•

Level 3 – fair values are based on inputs that are considered unobservable where there is little, if any, market activity for the asset or liability as of the measurement date. In this circumstance, the Company has to rely on values derived by independent brokers or internally-developed assumptions. Unobservable inputs are developed based on the best information available to the Company which may include the Company’s own data or bid and ask prices in the dealer market.

The great majority of Torchmark's fixed maturities are not actively traded and direct quotes are not generally available. Management therefore determines the fair values of these securities after consideration of data provided by third-party pricing services, independent broker/dealers, and other resources. At December 31, 2015 , Torchmark's investments in fixed maturities were primarily composed of the following significant security types: Corporate securities, state and municipal securities, redeemable preferred stocks, and U.S. government securities. The remaining security types represented less than 1% of the total in the aggregate.

Over 95% of the fair value reported at December 31, 2015 was determined using data provided by third-party pricing services. Prices provided by these services are not binding offers but are estimated exit values. Third-party pricing services use proprietary pricing models to determine security values by discounting cash flows using a market-adjusted spread to a benchmark yield. For all asset classes within Torchmark’s significant security types, third-party pricing services use a common valuation technique to model the price of the investments using observable market data. The foundation for these models consists of developing yield spreads based on multiple observable market inputs, including but not limited to: benchmark yield curves, actual trading activity, new issue yields, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector-specific data, economic data, and other inputs that are corroborated in the market. Pricing vendors monitor and review their pricing data continuously with current market and economic data feeds, augmented by ongoing communication within the dealer community.

Using the observable market inputs described above, spreads to an appropriate benchmark yield are further developed by the vendors for each security based on security-specific and/or sector-specific risk factors, such as a security’s terms and conditions (coupon, maturity, and call features), credit rating, sector, liquidity, collateral or other cash flow options, and other factors that could impact the risk of the security. Embedded repayment options, such as call and redemption features, are also taken into account in the pricing models. When the spread is determined, it is added to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

the security’s benchmark yield. The security's expected cash flows are discounted using this spread-adjusted yield, and the resulting present value of the discounted cash flows is the evaluated price.

When third-party vendor prices are not available, the Company attempts to obtain valuations from other sources, including but not limited to broker/dealers, broker quotes, and prices on comparable securities.

When valuations have been obtained for all securities in the portfolio, management reviews and analyzes the prices to ensure their reasonableness, taking into account available observable information. When two or more valuations are available for a security and the variance between the prices is 10% or less, the close correlation suggests similar observable inputs were used in deriving the price, and the mean of the prices is used. Securities valued in this manner are classified as Level 2. When the variance between two or more valuations for a security exceeds 10%, additional analysis is performed to determine the most appropriate value for that security, using resources such as broker quotes, prices on comparable securities, recent trades, and any other observable market data. Further review is performed on the available valuations to determine if they can be corroborated within reasonable tolerance to any other observable evidence. If one of the valuations or the mean of the available valuations for a security can be corroborated with other observable evidence, then the corroborated value is used and reported as Level 2. The Company uses information and analytical techniques deemed appropriate for determining the point within the range of reasonable fair value estimates that is most representative of fair value under current market conditions. Valuations that cannot be corroborated within a reasonable tolerance are classified as Level 3. As of December 31, 2015 and 2014 , fair value measurements classified as Level 3 represented 4.4% and 4.0% , respectively, of total fixed maturities and equity securities.

Torchmark invests in a portfolio of private placement bonds which are not actively traded. This portfolio is managed by third parties and was $542 million at amortized cost and $546 million at fair value on December 31, 2015 , compared with $497 million at amortized cost and $513 million at fair value a year earlier. The portfolio managers provide valuations for the bonds based on a pricing matrix utilizing observable inputs, such as the benchmark treasury rate and published sector indices, and unobservable inputs such as an internally-developed credit rating. If the unobservable inputs can be closely corroborated with publicly available information, the fair values are classified as Level 2. If they cannot be corroborated, the fair values are classified as Level 3. As of December 31, 2015 , fair values of $15 million were classified as Level 2, while the remaining balance of $531 million was classified as Level 3. As of December 31, 2014 , all private placements were classified as Level 3.

The fair values for each class of security and by valuation hierarchy level are indicated in Note 4—Investments under the caption Fair value measurements.

Fair Value Measurements, Other Financial Instruments : Fair values for cash, short-term investments, short-term debt, receivables and payables approximate carrying value. Policy loans are an integral part of Torchmark’s subsidiaries’ life insurance policies in force and their fair values cannot be valued separately and apart from the insurance contracts. The fair values of Torchmark’s long-term debt issues are based on the same methodology as investments in fixed maturities. Because observable inputs were available for these debt securities at December 31, 2015 , they were classified as Level 2 in the valuation hierarchy. The fair value for each debt instrument as of December 31, 2015 is disclosed in Note 11—Debt . As described in Note 9—Postretirement Benefits , Torchmark maintains an unqualified supplemental retirement plan. Therefore the assets which support the liability for this plan are considered general assets of the Company. These assets consist of the cash value of corporate-owned life insurance policies and exchange traded funds (ETFs). The fair value of the insurance cash values approximates carrying value. Fair values for the ETFs are derived from direct quotes and are considered Level 1 in the valuation hierarchy.

Impairment of Investments : Torchmark’s portfolio of fixed maturities fluctuates in value due to changes in interest rates in the financial markets as well as other factors. Fluctuations caused by market interest rate changes have little bearing on whether or not the investment will be ultimately recoverable. Therefore, Torchmark considers these declines in value resulting from changes in market interest rates to be temporary. In certain circumstances, however, Torchmark determines that the decline in the value of a security is other-than-temporary and writes the book value of the security down to its fair value, realizing an investment loss. The evaluation of Torchmark’s securities for other-than-temporary

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

impairments is a process that is undertaken at least quarterly and is overseen by a team of Company investment and accounting professionals. Each security which is impaired because the fair value is less than the cost or amortized cost is identified and evaluated. The determination that an impairment is other-than-temporary is highly subjective and involves the careful consideration of many factors. Among the factors considered are:


•	The length of time and extent to which the security has been impaired


•	The reason(s) for the impairment


•	The financial condition of the issuer and the near-term prospects for recovery in fair value of the security


•	The Company’s ability and intent to hold the security until anticipated recovery


•	Expected future cash flows

The relative weight given to each of these factors can change over time as facts and circumstances change. In many cases, management believes it is appropriate to give relatively more weight to prospective factors than to retrospective factors. Prospective factors that are given more weight include prospects for recovery, the Company’s ability and intent to hold the security until anticipated recovery, and expected future cash flows.

Among the facts and information considered in the process are:


•	Default on a required payment


•	Issuer bankruptcy filings


•	Financial statements of the issuer


•	Changes in credit ratings of the issuer


•	The value of underlying collateral


•	News and information included in press releases issued by the issuer


•	News and information reported in the media concerning the issuer


•	News and information published by or otherwise provided by credit analysts


•	The nature and amount of recent and expected future sources and uses of cash

While all available information is taken into account, it is difficult to predict the ultimately recoverable amount of a distressed or impaired security. If a security is determined to be other-than-temporarily impaired, the cost basis of the security is written down to fair value and is treated as a realized loss in the period the determination is made. The written-down security will be amortized and revenue recognized in accordance with estimated future cash flows.

Current accounting guidance is such that if an entity intends to sell or if it is more likely than not that it will be required to sell an impaired security prior to recovery of its cost basis, the security is to be considered other-than-temporarily impaired and the full amount of impairment must be charged to earnings. Otherwise, losses on fixed maturities which are other-than-temporarily impaired are separated into two categories, the portion of loss which is considered credit loss and the portion of loss which is due to other factors. The credit loss portion is charged to earnings while the loss due to other factors is charged to other comprehensive income. The credit loss portion of an impairment is determined as the difference between the security’s amortized cost and the present value of expected future cash flows discounted at the security’s original effective yield rate. The temporary portion is the difference between this present value of expected future cash flows and fair value (as discounted by a market yield). The expected cash flows are determined using judgment and the best information available to the Company. Inputs used to derive expected cash flows include expected default rates, current levels of subordination, and loan-to-collateral value ratios. Management believes that the present value of future cash flows at the original effective yield is a better measure of valuation because fair value determined by a discounted market yield is often based on limited observable market data, and the market for these securities is generally neither active nor orderly.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

Cash : Cash consists of balances on hand and on deposit in banks and financial institutions. Overdrafts arising from the overnight investment of funds offset cash balances on hand and on deposit.

Other Receivables: Other receivables consist primarily of agent debit balances, which represent commissions advanced to insurance agents. These balances are repaid to the Company over time as the premiums are collected by the Company and agents' commissions on such premiums are retained. The balance was $334 million and $313 million at December 31, 2015 and 2014 , respectively. Management believes these balances are recoverable as they are less than the estimated present value of future commissions.

Deferred Acquisition Costs : Certain costs of acquiring new insurance business are deferred and recorded as an asset. These costs are essential for the acquisition of new insurance business and are directly related to the successful issuance of an insurance contract including sales commissions, policy issue costs, and underwriting costs. Additionally, deferred acquisition costs include the value of insurance purchased, which are the costs of acquiring blocks of insurance from other companies or through the acquisition of other companies. These costs represent the difference between the fair value of the contractual insurance assets acquired and liabilities assumed compared against the assets and liabilities for insurance contracts that the Company issues or holds measured in accordance with GAAP. Deferred acquisition costs and the value of insurance purchased are amortized in a systematic manner which matches these costs with the associated revenues. Policies other than universal life-type policies are amortized with interest over the estimated premium-paying period of the policies in a manner which charges each year’s operations in proportion to the receipt of premium income. Universal life-type policies are amortized with interest in proportion to estimated gross profits. The assumptions used to amortize acquisition costs with regard to interest, mortality, morbidity, and persistency are consistent with those used to estimate the liability for future policy benefits. For interest-sensitive and deposit-balance type products, these assumptions are reviewed on a regular basis and are revised if actual experience differs significantly from original expectations. For all other products, amortization assumptions are generally not revised once established. Deferred acquisition costs are subject to periodic recoverability and loss recognition testing to determine if there is a premium deficiency. These tests evaluate whether the present value of future contract-related cash flows will support the capitalized deferred acquisition cost asset. These cash flows consist primarily of premium income, less benefits and expenses taking inflation into account. The present value of these cash flows, less the benefit reserve, is then compared with the unamortized deferred acquisition cost balance. In the event the estimated present value of net cash flows is less, the deficiency would be recognized by a charge to earnings and either a reduction of unamortized acquisition costs or an increase in the liability for future benefits, as described under the caption Future Policy Benefits .

Advertising Costs : Costs related to advertising are generally charged to expense as incurred. However, certain Globe Life Direct Response advertising costs are capitalized when there is a reliable and demonstrated relationship between total costs and future benefits that is a direct result of incurring these costs. Globe Life Direct Response advertising costs consist primarily of the production and distribution costs of direct mail advertising materials, and when capitalized are included as a component of deferred acquisition costs. They are amortized in the same manner as other deferred acquisition costs. Globe Life Direct Response advertising costs charged to earnings and included in other operating expense were $10 million , $8 million , and $6 million in 2015 , 2014 , and 2013 , respectively. Capitalized advertising costs included within deferred acquisition costs were $1.21 billion at December 31, 2015 and $1.15 billion at December 31, 2014 .

Goodwill : The excess cost of business acquired over the fair value of net assets acquired is reported as goodwill. Goodwill is subject to annual impairment testing based on certain procedures outlined by GAAP. These procedures include a qualitative assessment as to whether it is more likely than not that goodwill is impaired, and they also require consideration of a change in relevant events or circumstances that could possibly affect the valuation of a goodwill reporting unit. If it is determined that an impairment is likely, the procedures then involve measuring the carrying value of each reporting unit of Torchmark’s segments, including the goodwill of that unit, against the estimated fair value of the corresponding unit. If the carrying value of a unit including goodwill exceeds its estimated fair value, then the goodwill in that unit could potentially be impaired. In that event, further testing is required under the accounting guidance

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

to determine the amount of impairment, if any. If there is an impairment in the goodwill of any reporting unit, it is written down and charged to earnings in the period of test.

Torchmark tested its goodwill annually in each of the years 2013 through 2015 . These tests, performed in the second quarter each year, involved assigning carrying value by allocating the Company’s net assets to each of the reporting units of Torchmark’s segments, including the portion of goodwill assigned to the unit. In 2015 , the qualitative assessment was employed as permitted by accounting guidance. Based on the analyses as outlined in the guidance, it was determined that an impairment of goodwill was not likely. In both 2014 and 2013, the fair values of the various reporting units were developed. The fair value of each reporting unit was determined using discounted expected cash flows associated with that unit. Judgment and assumptions are used in developing the projected cash flows for the reporting units, and such estimates are subject to change. The Company also exercises judgment in the determination of the discount rate, which management believes to be appropriate for the risk associated with the cash flow expectations. The fair value of each reporting unit is then measured against that reporting unit’s corresponding carrying value. Because the estimated fair value substantially exceeded the carrying value, including goodwill, of each reporting unit in each period, Torchmark’s goodwill was not impaired in any of those periods.

Low-Income Housing Tax Credit Interests : Torchmark invests in limited partnerships that provide low-income housing tax credits and other related federal income tax and state premium tax benefits to Torchmark. The carrying value of Torchmark’s investment in these entities was $306 million and $318 million at December 31, 2015 and 2014 , respectively. At December 31, 2015 , $302 million associated with the federal interests was included in "Other assets" on the Consolidated Balance Sheets with the remaining $4 million state-related interests included in "Other long-term investments". At December 31, 2014 , the comparable amounts were $313 million , and $5 million , respectively. As of December 31, 2015 , Torchmark was obligated under future commitments of $69 million , which is included in the above carrying value. Torchmark accounts for the amortization of these tax benefits in accordance with the new guidance discussed below.

On January 1, 2015, Torchmark adopted new guidance concerning Investments-Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects (ASU 2014-01). The guidance replaces the effective-yield method of amortization with respect to investments in qualified affordable housing acquired after the date of adoption and, if certain conditions are present, provides for a proportional amortization method. Under the proportional amortization method, the investor amortizes the initial cost of the investment in proportion to the tax credits received during the current period to the total expected tax credits to be received over the life of the investment. The guidance further provides that a company which previously used the effective-yield method of amortization may continue to use such method with respect to investments acquired before the date of adoption. Amortization, previously required to be recognized in the Consolidated Statements of Operations as a component of "Net investment income", is now included in "Income tax expense."

Torchmark continues to use the effective-yield method of amortization with respect to its guaranteed investments acquired prior to January 1, 2015, and has retrospectively adopted the new guidance and applied the proportional method of amortization with respect to its non-guaranteed investments. The proportional method of amortization is consistent with Torchmark’s historical method of amortization. As a result, the only impact of the adoption is the reclassification of amortization expense from “Net investment income” to “Income tax expense” with no impact on Torchmark's historical net income, cash flows, or statutory earnings of its insurance subsidiaries.

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Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

The following table reflects a summary of the impact of the retrospectively adjusted balances on the Company's Consolidated Statements of Operations for the twelve months ended December 31, 2014 and 2013 .



Twelve months ended December 31, 2014
Income Statement	As previously reported ⁽¹⁾			Adjustments			As adjusted
Net investment income	$	729,207		$	29,079		$	758,286
Total revenue	3,591,016			29,079			3,620,095
Income before income taxes	755,598			29,079			784,677
Income taxes	(227,524		)	(29,079		)	(256,603		)
Net income	542,939			—			542,939

Twelve months ended December 31, 2013
Income Statement	As previously reported ⁽¹⁾			Adjustments			As adjusted
Net investment income	$	709,743		$	24,907		$	734,650
Total revenue	3,469,346			24,907			3,494,253
Income before income taxes	730,408			24,907			755,315
Income taxes	(223,203		)	(24,907		)	(248,110		)
Net income	528,472			—			528,472

(1) Total revenue, income before income taxes, and income taxes were adjusted for discontinued operations as discussed earlier in this note.

Property and Equipment : Property and equipment, included in “Other assets,” is reported at cost less allowances for depreciation. Depreciation is recorded primarily on the straight line method over the estimated useful lives of these assets which range from three to ten years for equipment and five to forty years for buildings and improvements. Ordinary maintenance and repairs are charged to income as incurred. Impairments, if any, are recorded when certain events and circumstances become evident that the fair value of the asset is less than its carrying amount. Original cost of property and equipment was $175 million at December 31, 2015 and $139 million at December 31, 2014 . Accumulated depreciation was $92 million at year end 2015 and $85 million at the end of 2014 . Depreciation expense was $8.0 million in 2015 , $7.4 million in 2014 , and $6.4 million in 2013 . During 2013, Liberty National Life Insurance Company (Liberty National), a Torchmark subsidiary, sold real estate for a loss of $265 thousand after a previous write-down for other-than-temporary impairment of $2.7 million earlier in the year. The sale of this property eliminated substantially all asbestos-related liability for Torchmark.

Future Policy Benefits : The liability for future policy benefits for universal life-type products is represented by policy account value. The liability for future policy benefits for all other life and health products, approximately 85% of total future policy benefits, is determined on the net level premium method. This method provides for the present value of expected future benefit payments less the present value of expected future net premiums, based on estimated investment yields, mortality, morbidity, persistency and other assumptions which were considered appropriate at the time the policies were issued. For limited-payment contracts, a deferred profit liability is also recorded which causes profits to emerge over the life of the contract in proportion to policies in force. Assumptions used for traditional life and health insurance products are based primarily on Company experience. Assumptions for interest rates range from 2.5% to 7.0% for Torchmark’s insurance companies with an overall weighted average assumed rate of 5.7% . Mortality tables used for individual life insurance include various statutory tables and modifications of a variety of generally accepted actuarial tables. Morbidity assumptions for individual health are based on Company experience and industry data. Withdrawal and termination assumptions are based on Torchmark’s experience. Once established, assumptions for these products are generally not changed. An additional provision is made on most products to allow for possible adverse deviation from the assumptions. These estimates are reviewed annually and compared with actual experience. If it is determined that existing contract liabilities, together with the present value of future gross premiums, will not be

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

sufficient to cover the present value of future benefits and to recover unamortized deferred acquisition costs, then a premium deficiency exists. Such a deficiency would be recognized immediately by a charge to earnings and either a reduction of unamortized deferred acquisition costs or an increase in the liability for future policy benefits. From that point forward, the liability for future policy benefits would be based on revised assumptions.

Policy Claims and Other Benefits Payable : Torchmark establishes a liability for known policy benefits payable and an estimate of claims that have been incurred but not yet reported to the Company. Torchmark makes an estimate of unreported claims after careful evaluation of all information available to the Company. This estimate is based on prior experience and is reviewed quarterly. However, there is no certainty the stated liability for claims and other benefits, including the estimate of unsubmitted claims, will be Torchmark’s ultimate obligation.

Postretirement Benefits : Torchmark accounts for its postretirement defined benefit plans by recognizing the funded status of those plans on its Consolidated Balance Sheets in accordance with accounting guidance. Periodic gains and losses attributable to changes in plan assets and liabilities that are not recognized as components of net periodic benefit costs are recognized as components of other comprehensive income, net of tax. More information concerning the accounting and disclosures for postretirement benefits is found in Note 9—Postretirement Benefits .

Income Taxes : Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement book values and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. More information concerning income taxes is provided in Note 8—Income Taxes .

Treasury Stock : Torchmark accounts for purchases of treasury stock on the cost method. Issuance of treasury stock is accounted for using the weighted-average cost method. More information is found in Note 12—Shareholders' Equity .

Recognition of Premium Revenue and Related Expenses : Premium income for traditional long-duration life and health insurance products is recognized when due from the policyholder. Premiums for short-duration health contracts are recognized as revenue over the contract period in proportion to the insurance protection provided. Profits for limited-payment life insurance contracts are recognized over the contract period. Premiums for universal life-type and annuity contracts are added to the policy account value, and revenues for such products are recognized as charges to the policy account value for mortality, administration, and surrenders (retrospective deposit method). Life premium includes policy charges of $19 million , $21 million , and $22 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. Other premium consists of annuity policy charges in each year. Profits are also earned to the extent that investment income exceeds policy liability interest requirements. The related benefits and expenses are matched with revenues by means of the provision of future policy benefits and the amortization of deferred acquisition costs in a manner which recognizes profits as they are earned over the same period.

Stock-Based Compensation : Torchmark accounts for stock-based compensation by recognizing an expense in the financial statements based on the “fair value method.” The fair value method requires that a fair value be assigned to a stock option or other stock grant on its grant date and that this value be amortized over the grantees’ service period.

The fair value method requires the use of an option valuation model to value employee stock options. Torchmark has elected to use the Black-Scholes valuation model for option expensing. A summary of assumptions for options granted in each of the three years 2013 through 2015 is as follows:



	2015		2014		2013
Volatility factor	23.6	%	30.9	%	38.5	%
Dividend yield	0.9	%	0.9	%	1.1	%
Expected term (in years)	5.66		5.65		5.62
Risk-free rate	1.6	%	1.9	%	1.1	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

The expected term is generally derived from Company experience. However, expected terms are determined based on the simplified method as permitted under the ASC 718 Stock Compensation topic when company experience is insufficient. The Torchmark Corporation 2011 Incentive Plan replaced all previous plans and allows for option grants for employees with a ten -year contractual term which vest over five years in addition to seven -year grants which vest over three years as permitted by the previous plans. Director grants vest over six months. The Company has sufficient experience with seven-year grants that vest in three years, but insufficient historical experience with five-year vesting. Therefore, Torchmark has used the simplified method to determine the expected term for the ten-year grants with five-year vesting and will do so until adequate experience is developed. Volatility and risk-free interest rates are assumed over a period of time consistent with the expected term of the option. Volatility is measured on a historical basis. Monthly data points are utilized to derive volatility for periods greater than three years. Expected dividend yield is based on current dividend yield held constant over the expected term. Once the fair value of an option has been determined, it is amortized on a straight-line basis over the employee’s service period for that grant (from the grant date to the date the grant is fully vested). Expenses for restricted stock and restricted stock units are based on the grant-date fair value allocated on a straight-line basis over the service period. Performance share expense is recognized based on management’s estimate of the probability of meeting the metrics identified in the performance share award agreement, assigned to each service period as these estimates develop.

Torchmark management views all stock-based compensation expense as a corporate or Parent Company expense and, therefore, presents it as such in its segment analysis (See Note 14—Business Segments ). It is included in “Other operating expense” in the Consolidated Statements of Operations .

Earnings Per Share : Torchmark presents basic and diluted earnings per share (EPS) on the face of the Consolidated Statements of Operations for income from continuing operations and income from discontinued operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts, such as stock options, which could be exercised or converted into common shares. For more information on earnings per share, see Note 12—Shareholders’ Equity .

Accounting Pronouncements Not Yet Adopted:

Consolidation: The FASB issued Accounting Standards Update No. 2015-02 Consolidation: Amendments to the Consolidation Analysis (ASU 2015-02), to amend the consolidation requirements in ASC 810 , Consolidation . ASU 2015-02 will be effective for Torchmark beginning in calendar year 2016. This new guidance is not expected to have a material impact on the consolidated financial statements.

Short-Duration Contracts : The FASB issued Accounting Standards Update No. 2015-09 Financial Services-Insurance: Disclosures about Short-Duration Contracts (ASU 2015-09) , requiring companies to disclose additional information with regards to its short-duration insurance contracts. These new disclosures are intended to provide additional insight into an insurance entity’s ability to underwrite claims. Torchmark's disclosures under ASU 2015-09 will be effective for the 2016 annual consolidated financial statements. This guidance consists only of new disclosures and will not impact the accounting for short-duration contracts.

Defined Benefit Pension Plans : The FASB issued Accounting Standards Update No. 2015-12 Plan Accounting: Defined Pension Plans, Defined Contribution Pension Plans, Health and Welfare Benefit Plans: (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (Consensuses of the FASB Emerging Issues Task Force) (ASU 2015-12) which is a three part standard that is expected to 1) change the measurement of fully benefit-responsive investment contracts from fair value to contract value, 2) simplify disclosures related to plan investments, and 3) provide a measurement date practical expedient. ASU 2015-12 will be effective for Torchmark beginning in calendar year 2016. This new guidance will not have a material impact on the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 1—Significant Accounting Policies (continued)

Financial Instruments: The FASB issued Accounting Standards Update No. 2016-01 Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, this guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income rather than other comprehensive income, and changes the presentation of certain fair value changes for financial liabilities. ASU 2016-01 will be effective for Torchmark on January 1, 2018. As Torchmark's equity securities portfolio is insignificant in comparison to its investment portfolio, the Company does not anticipate the guidance to have a material impact on its operating results.

Leases: The FASB issued Accounting Standards Update No. 2016-02 Leases (ASU 2016-02). This new guidance states that leases classified as operating leases under current accounting guidance will be recognized on the balance sheet as lease assets and lease liabilities when the company is the lessee. ASU 2016-02 will be effective for Torchmark on January 1, 2019 and is required to be presented using a modified retrospective approach. Torchmark is currently evaluating the impact that this guidance will have on the consolidated financial statements.

Note 2—Statutory Accounting

Life insurance subsidiaries of Torchmark are required to file statutory financial statements with state insurance regulatory authorities. Accounting principles used to prepare these statutory financial statements differ from GAAP. Consolidated net income and shareholders’ equity (capital and surplus) on a statutory basis for the insurance subsidiaries were as follows:



	Net Income						Shareholders’ Equity
	Year Ended December 31,						At December 31,
	2015		2014		2013		2015		2014
Life insurance subsidiaries	$	393,466	$	446,439	$	572,509	$	1,253,007	$	1,262,624

The excess, if any, of shareholder’s equity of the insurance subsidiaries on a GAAP basis over that determined on a statutory basis is not available for distribution by the insurance subsidiaries to Torchmark without regulatory approval. Insurance subsidiaries’ statutory capital and surplus necessary to satisfy regulatory requirements in the aggregate was $452 million at December 31, 2015 . More information on the restrictions on the payment of dividends can be found in Note 12—Shareholders’ Equity .

Torchmark’s statutory financial statements are presented on the basis of accounting practices prescribed by the insurance department of the state of domicile of each insurance subsidiary. All states have adopted the National Association of Insurance Commissioners’ (NAIC) statutory accounting practices (NAIC SAP) as the basis for statutory accounting. However, certain states have retained the prescribed practices of their respective insurance code or administrative code which can differ from NAIC SAP. There are no significant differences between NAIC SAP and the accounting practices prescribed by the states of domicile for Torchmark’s life insurance companies that affect statutory surplus.

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Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income

An analysis in the change in balance by component of Accumulated Other Comprehensive Income is as follows for each of the years 2013 through 2015 .

Components of Accumulated Other Comprehensive Income



For the 12 months ended December 31, 2013:	Available for Sale Assets			Deferred Acquisition Costs			Foreign Exchange			Pension Adjustments			Total
Balance at January 1, 2013	$	1,024,367		$	(16,417	)	$	26,608		$	(109,283	)	$	925,275
Other comprehensive income (loss) before reclassifications, net of tax	(758,857		)	9,689			(1,742		)	33,992			(716,918		)
Reclassifications, net of tax	(9,314		)	—			—			11,938			2,624
Other comprehensive income (loss)	(768,171		)	9,689			(1,742		)	45,930			(714,294		)
Balance at December 31, 2013	256,196			(6,728		)	24,866			(63,353		)	210,981

For the 12 months ended December 31, 2014:
Other comprehensive income (loss) before reclassifications, net of tax	855,132			(4,030		)	(7,480		)	(42,781		)	800,841
Reclassifications, net of tax	(21,055		)	—			—			6,685			(14,370		)
Other comprehensive income (loss)	834,077			(4,030		)	(7,480		)	(36,096		)	786,471
Balance at December 31, 2014	1,090,273			(10,758		)	17,386			(99,449		)	997,452

For the 12 months ended December 31, 2015:
Other comprehensive income (loss) before reclassifications, net of tax	(759,976		)	5,643			(13,759		)	(8,930		)	(777,022		)
Reclassifications, net of tax	2,036			—			—			9,481			11,517
Other comprehensive income (loss)	(757,940		)	5,643			(13,759		)	551			(765,505		)
Balance at December 31, 2015	$	332,333		$	(5,115	)	$	3,627		$	(98,898	)	$	231,947

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income (continued)

Reclassifications out of Accumulated Other Comprehensive Income are presented below for each of the years 2013 through 2015 .

Reclassification Adjustments



	Year Ended December 31,
Component Line Item	2015			2014			2013			Affected line items in the Statement of Operations
Unrealized gains (losses) on available for sale assets:
Realized (gains) losses	$	9,478		$	(23,771	)	$	(9,606	)	Realized investment gains (losses)
Amortization of (discount) premium	(6,346		)	(8,621		)	(6,569		)	Net investment income
Total before tax	3,132			(32,392		)	(16,175		)
Tax	(1,096		)	11,337			6,861			Income taxes
Total after tax	2,036			(21,055		)	(9,314		)
Pension adjustments:
Amortization of prior service cost	377			2,113			2,276			Other operating expenses
Amortization of actuarial (gain) loss	14,209			8,172			16,090			Other operating expenses
Total before tax	14,586			10,285			18,366
Tax	(5,105		)	(3,600		)	(6,428		)	Income taxes
Total after tax	9,481			6,685			11,938
Total reclassifications (after tax)	$	11,517		$	(14,370	)	$	2,624

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments

Portfolio Composition :

A summary of fixed maturities available for sale and equity securities by cost or amortized cost and estimated fair value at December 31, 2015 and 2014 is as follows:



2015:	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value ⁽¹⁾		% of Total Fixed Maturities ⁽²⁾
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	368,718	$	404	$	(14,078	)	$	355,044	3
States, municipalities, and political subdivisions	1,296,396		131,516		(1,908		)	1,426,004		10
Foreign governments	21,594		1,369		(163		)	22,800		—
Corporates, by sector:
Financial	2,760,552		301,624		(54,881		)	3,007,295		22
Utilities	1,981,241		223,535		(28,267		)	2,176,509		16
Energy	1,568,392		53,776		(219,101		)	1,403,067		10
Other corporate sectors	4,761,192		294,026		(230,911		)	4,824,307		35
Total corporates	11,071,377		872,961		(533,160		)	11,411,178		83
Collateralized debt obligations	63,662		16,158		(9,438		)	70,382		1
Other asset-backed securities	18,963		668		—			19,631		—
Redeemable preferred stocks, by sector:
Financial	382,517		45,926		(4,781		)	423,662		3
Utilities	28,644		731		(52		)	29,323		—
Total redeemable preferred stocks	411,161		46,657		(4,833		)	452,985		3
Total fixed maturities	13,251,871		1,069,733		(563,580		)	13,758,024		100
Equity securities available for sale	776		859		—			1,635
Total fixed maturities and equity securities	$	13,252,647	$	1,070,592	$	(563,580	)	$	13,759,659

(1) Amount reported in the balance sheet.

(2) At fair value

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)



2014:	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value ⁽¹⁾		% of Total Fixed Maturities ⁽²⁾
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	367,463	$	5,561	$	(3,183	)	$	369,841	3
States, municipalities, and political subdivisions	1,278,429		177,052		(718		)	1,454,763		10
Foreign governments	25,824		1,350		(1		)	27,173		—
Corporates, by sector:
Financial	2,659,266		419,303		(12,136		)	3,066,433		21
Utilities	2,154,433		377,962		(2,945		)	2,529,450		17
Energy	1,511,839		173,485		(21,641		)	1,663,683		12
Other corporate sectors	4,240,082		530,462		(24,158		)	4,746,386		33
Total corporates	10,565,620		1,501,212		(60,880		)	12,005,952		83
Collateralized debt obligations	67,876		4,165		(8,809		)	63,232		—
Other asset-backed securities	21,424		1,104		—			22,528		—
Redeemable preferred stocks, by sector:
Financial	468,290		56,845		(5,008		)	520,127		4
Utilities	28,686		781		(23		)	29,444		—
Total redeemable preferred stocks	496,976		57,626		(5,031		)	549,571		4
Total fixed maturities	12,823,612		1,748,070		(78,622		)	14,493,060		100
Equity securities available for sale	776		701		—			1,477
Total fixed maturities and equity securities	$	12,824,388	$	1,748,771	$	(78,622	)	$	14,494,537

(1) Amount reported in the balance sheet.

(2) At fair value

A schedule of fixed maturities by contractual maturity at December 31, 2015 is shown below on an amortized cost basis and on a fair value basis. Actual maturities could differ from contractual maturities due to call or prepayment provisions.



	Amortized Cost		Fair Value
Fixed maturities available for sale:
Due in one year or less	$	66,545	$	67,585
Due from one to five years	535,903		583,237
Due from five to ten years	1,051,912		1,129,107
Due from ten to twenty years	3,877,844		4,201,334
Due after twenty years	7,635,180		7,684,715
Mortgage-backed and asset-backed securities	84,487		92,046
	$	13,251,871	$	13,758,024

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

Analysis of investment operations :

As discussed in Note 1—Significant Accounting Policies , net investment income was retrospectively adjusted to give effect to the adoption of ASU 2014-01 for all periods presented.



	Year Ended December 31,
	2015			2014			2013
Net investment income is summarized as follows:
Fixed maturities	$	747,663		$	732,925		$	709,756
Equity securities	13			8			323
Policy loans	36,763			35,015			33,471
Other long-term investments	2,008			1,508			1,281
Short-term investments	95			75			138
	786,542			769,531			744,969
Less investment expense	(12,591		)	(11,245		)	(10,319		)
Net investment income	$	773,951		$	758,286		$	734,650



An analysis of realized gains (losses) from investments is as follows:
Realized investment gains (losses):
Fixed maturities	$	(9,479	)	$	23,170		$	13,138
Equity securities	—			601			—
Loss on redemption of debt	—			(258		)	—
Other	688			35			(5,148		)
	(8,791		)	23,548			7,990
Applicable tax	3,077			(8,242		)	(4,025		)
Realized gains (losses) from investments, net of tax	$	(5,714	)	$	15,306		$	3,965



An analysis of the net change in unrealized investment gains (losses) is as follows:
Fixed maturities	$	(1,163,295	)	$	1,279,190		$	(1,187,529	)
Equity securities	158			(308		)	317
Net change in unrealized gains (losses) on securities	(1,163,137		)	1,278,882			(1,187,212		)
Other investments	(2,895		)	4,180			3,560
Net change in unrealized gains (losses)	$	(1,166,032	)	$	1,283,062		$	(1,183,652	)

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

Additional information about securities sold is as follows:



	At December 31,
	2015			2014			2013
Fixed maturities:
Proceeds from sales	$	226,792		$	109,024		$	133,463
Gross realized gains	259			17,583			5,948
Gross realized losses	(16,894		)	(1,879		)	(1,310		)

Fair value measurements : The following tables represent the fair value of assets measured on a recurring basis at December 31, 2015 and 2014 :



	Fair Value Measurements at December 31, 2015 Using:
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	355,044		$	—		$	355,044
States, municipalities, and political subdivisions	—			1,426,004			—			1,426,004
Foreign governments	—			22,800			—			22,800
Corporates, by sector:
Financial	—			2,945,048			62,247			3,007,295
Utilities	22,189			2,020,268			134,052			2,176,509
Energy	—			1,377,861			25,206			1,403,067
Other corporate sectors	—			4,515,006			309,301			4,824,307
Total corporates	22,189			10,858,183			530,806			11,411,178
Collateralized debt obligations	—			—			70,382			70,382
Other asset-backed securities	—			19,631			—			19,631
Redeemable preferred stocks, by sector:
Financial	10,124			413,538			—			423,662
Utilities	—			29,323			—			29,323
Total redeemable preferred stocks	10,124			442,861			—			452,985
Total fixed maturities	32,313			13,124,523			601,188			13,758,024
Equity securities available for sale	765			—			870			1,635
Total fixed maturities and equity securities	$	33,078		$	13,124,523		$	602,058		$	13,759,659
Percentage of total	0.2		%	95.4		%	4.4		%	100		%

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)



	Fair Value Measurements at December 31, 2014 Using:
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	369,841		$	—		$	369,841
States, municipalities, and political subdivisions	1,504			1,453,259			—			1,454,763
Foreign governments	—			27,173			—			27,173
Corporates, by sector:
Financial	56,517			2,940,267			69,649			3,066,433
Utilities	30,054			2,366,408			132,988			2,529,450
Energy	—			1,636,653			27,030			1,663,683
Other corporate sectors	—			4,463,339			283,047			4,746,386
Total corporates	86,571			11,406,667			512,714			12,005,952
Collateralized debt obligations	—			—			63,232			63,232
Other asset-backed securities	661			21,867			—			22,528
Redeemable preferred stocks, by sector:
Financial	17,811			502,316			—			520,127
Utilities	5,134			24,310			—			29,444
Total redeemable preferred stocks	22,945			526,626			—			549,571
Total fixed maturities	111,681			13,805,433			575,946			14,493,060
Equity securities available for sale	644			—			833			1,477
Total fixed maturities and equity securities	$	112,325		$	13,805,433		$	576,779		$	14,494,537
Percentage of total	0.8		%	95.2		%	4.0		%	100.0		%

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

The following table represents changes in assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).



	Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Asset- backed securities			Collateralized debt Obligations			Corporates			Equities		Total
Balance at January 1, 2013	$	7,981		$	46,571		$	231,072		$	739	$	286,363
Total gains or losses:
Included in realized gains/losses	—			—			—			—		—
Included in other comprehensive income	426			10,083			(17,243		)	37		(6,697		)
Acquisitions	—			—			129,755			—		129,755
Sales	—			—			—			—		—
Amortization	(57		)	2,838			5			—		2,786
Other ⁽¹⁾	—			(1,287		)	(834		)	—		(2,121		)
Transfers into (out of) Level 3	(8,350		)	—			(42,455		)	—		(50,805		)
Balance at December 31, 2013	—			58,205			300,300			776		359,281
Total gains or losses:
Included in realized gains/losses	—			15,924			1			—		15,925
Included in other comprehensive income	—			3,323			27,864			57		31,244
Acquisitions	—			—			186,366			—		186,366
Sales	—			(16,049		)	(1		)	—		(16,050		)
Amortization	—			5,519			13			—		5,532
Other ⁽¹⁾	—			(3,690		)	(1,829		)	—		(5,519		)
Transfers into (out of) Level 3	—			—			—			—		—
Balance at December 31, 2014	—			63,232			512,714			833		576,779
Total gains or losses:
Included in realized gains/losses	—			—			1,182			—		1,182
Included in other comprehensive income	—			11,365			(11,925		)	37		(523		)
Acquisitions	—			—			38,600			—		38,600
Amortization	—			5,536			17			—		5,553
Other ⁽¹⁾	—			(9,751		)	(9,782		)	—		(19,533		)
Transfers into (out of) Level 3	—			—			—			—		—
Balance at December 31, 2015	$	—		$	70,382		$	530,806		$	870	$	602,058

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

Acquisitions of Level 3 investments in each of the years 2013 through 2015 are comprised of private-placement fixed maturities managed by an unaffiliated third-party. See Note 1—Significant Accounting Policies for more information on private placements.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

Quantitative Information about Level 3

Fair Value Measurements

As of December 31, 2015



	Fair Value		Valuation Techniques	Unobservable Input	Range	Weighted Average
Collateralized debt obligations	$	70,382	Discounted cash flows	Discount rate	8.85 - 9.5%	9.4%
Private placement fixed maturities	530,806		Discounted cash flows	Credit rating	A+ to BB	BBB
Private placement fixed maturities				Discount rate	3.13 - 7.47%	4.31%
Equity securities	870		Third-party pricing without adjustment	N/A	N/A	N/A
	$	602,058

The collateral underlying collateralized debt obligations for which fair values are reported as Level 3 consists primarily of trust preferred securities issued by banks and insurance companies. None of the collateral is subprime or Alt-A mortgages (loans for which the typical documentation was not provided by the borrower). Collateralized debt obligations are valued at the present value of expected future cash flows using an unobservable discount rate. Expected cash flows are determined by scheduling the projected repayment of the collateral assuming no future defaults, deferrals, or recoveries. The discount rate is risk-adjusted to take these items into account. A significant increase (decrease) in the discount rate will produce a significant decrease (increase) in fair value. Additionally, a significant increase (decrease) in the cash flow expectations would result in a significant increase (decrease) in fair value.

The private placement fixed maturities are valued based on the contractual cash flows discounted by a yield determined as a treasury benchmark adjusted for a credit spread. The credit spread is developed from observable indices for similar public fixed maturities and unobservable indices for private fixed maturities for corresponding credit ratings. However, the credit ratings for the private placements are considered unobservable inputs, as they are assigned by the third party investment manager based on a quantitative and qualitative assessment of the credit underwritten. A higher (lower) credit rating would result in a higher (lower) valuation. For more information regarding valuation procedures, please refer to Note 1—Significant Accounting Policies under the caption Fair Value Measurements, Investments in Securities .

The following table presents transfers in and out of each of the valuation levels of fair values.



	2015								2014								2013
	In		Out			Net			In		Out			Net			In		Out			Net
Level 1	$	17,252	$	(49,744	)	$	(32,492	)	$	36,468	$	—		$	36,468		$	19,416	$	—		$	19,416
Level 2	49,744		(17,252		)	32,492			—		(36,468		)	(36,468		)	50,805		(19,416		)	31,389
Level 3	—		—			—			—		—			—			—		(50,805		)	(50,805		)

Transfers into Level 2 from Level 3 result from the availability of observable market data when a security is valued at the end of a period. Transfers into Level 3 occur when there is a lack of observable market information. Transfers into Level 1 from Level 2 occur when direct quotes are available; transfers from Level 1 into Level 2 result when only observable market data and no direct quotes are available. Transfers between levels are recognized as of the end of the period of transfer.

Other-than-temporary impairments (OTTI) : Based on the Company's evaluation of its fixed maturities in an unrealized loss position in accordance with the OTTI policy as described in Note 1—Significant Accounting Policies , the Company concluded that there were no other-than-temporary impairments during the three years ended December 31, 2015 .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

As of year end 2015 , previously written down securities remaining in the portfolio were carried at a fair value of $60 million , or less than 1% of the fair value of the fixed maturity portfolio. Torchmark is continuously monitoring the market conditions impacting its portfolio, especially in the energy and basic materials sectors. While adverse market conditions for an extended duration could lead to some ratings downgrades in these sectors, Torchmark has the ability and intent to hold these investments to recovery, and does not intend to sell nor expects to be required to sell any of its securities.

Unrealized gains/loss analysis : The following tables disclose gross unrealized investment losses by class and major sector of investments at December 31, 2015 and December 31, 2014 for the respective periods of time in a loss position. Torchmark considers these investments to be only temporarily impaired.

ANALYSIS OF GROSS UNREALIZED INVESTMENT LOSSES

At December 31, 2015



	Less than Twelve Months					Twelve Months or Longer					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	310,676	$	(13,196	)	$	14,731	$	(882	)	$	325,407	$	(14,078	)
States, municipalities and political subdivisions	55,351		(1,611		)	671		(42		)	56,022		(1,653		)
Foreign governments	7,302		(163		)	—		—			7,302		(163		)
Corporates, by sector:
Financial	476,469		(18,599		)	—		—			476,469		(18,599		)
Utilities	435,692		(28,267		)	—		—			435,692		(28,267		)
Energy	745,969		(146,157		)	81,681		(41,412		)	827,650		(187,569		)
Metals and mining	225,273		(50,857		)	25,831		(11,552		)	251,104		(62,409		)
Other corporate sectors	1,615,515		(113,185		)	35,684		(6,661		)	1,651,199		(119,846		)
Total corporates	3,498,918		(357,065		)	143,196		(59,625		)	3,642,114		(416,690		)
Redeemable preferred stocks, by sector:
Utilities	7,763		(52		)	—		—			7,763		(52		)
Total redeemable preferred stocks	7,763		(52		)	—		—			7,763		(52		)
Total investment grade securities	3,880,010		(372,087		)	158,598		(60,549		)	4,038,608		(432,636		)

Below investment grade securities:
States, municipalities and political subdivisions	—		—			299		(255		)	299		(255		)
Corporates, by sector:
Financial	—		—			69,506		(36,282		)	69,506		(36,282		)
Energy	7,979		(1,854		)	61,175		(29,678		)	69,154		(31,532		)
Metals and mining	4,551		(5,414		)	17,679		(22,247		)	22,230		(27,661		)
Other corporate sectors	81,368		(12,492		)	63,307		(8,503		)	144,675		(20,995		)
Total corporates	93,898		(19,760		)	211,667		(96,710		)	305,565		(116,470		)
Collateralized debt obligations	—		—			10,562		(9,438		)	10,562		(9,438		)
Redeemable preferred stocks, by sector:
Financial	—		—			22,374		(4,781		)	22,374		(4,781		)
Total redeemable preferred stocks	—		—			22,374		(4,781		)	22,374		(4,781		)
Total below investment grade securities	93,898		(19,760		)	244,902		(111,184		)	338,800		(130,944		)
Total fixed maturities	$	3,973,908	$	(391,847	)	$	403,500	$	(171,733	)	$	4,377,408	$	(563,580	)

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

ANALYSIS OF GROSS UNREALIZED INVESTMENT LOSSES

At December 31, 2014



	Less than Twelve Months					Twelve Months or Longer					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	4,478	$	(7	)	$	149,238	$	(3,176	)	$	153,716	$	(3,183	)
States, municipalities and political subdivisions	5,632		(206		)	20,363		(348		)	25,995		(554		)
Foreign governments	—		—			800		(1		)	800		(1		)
Corporates, by sector:
Financial	7,928		(25		)	28,202		(372		)	36,130		(397		)
Utilities	4,678		(41		)	111,993		(2,904		)	116,671		(2,945		)
Energy	201,509		(12,423		)	101,457		(9,218		)	302,966		(21,641		)
Metals and mining	69,959		(3,592		)	16,078		(943		)	86,037		(4,535		)
Other corporate sectors	117,743		(1,006		)	392,029		(12,255		)	509,772		(13,261		)
Total corporates	401,817		(17,087		)	649,759		(25,692		)	1,051,576		(42,779		)
Redeemable preferred stocks, by sector:
Financial	1,008		(1		)	—		—			1,008		(1		)
Utilities	—		—			1,644		(23		)	1,644		(23		)
Total redeemable preferred stocks	1,008		(1		)	1,644		(23		)	2,652		(24		)
Total investment grade securities	412,935		(17,301		)	821,804		(29,240		)	1,234,739		(46,541		)

Below investment grade securities:
States, municipalities and political subdivisions	—		—			393		(164		)	393		(164		)
Corporates, by sector:
Financial	—		—			94,069		(11,739		)	94,069		(11,739		)
Other corporate sectors	32,940		(404		)	67,117		(5,958		)	100,057		(6,362		)
Total corporates	32,940		(404		)	161,186		(17,697		)	194,126		(18,101		)
Collateralized debt obligations	—		—			11,190		(8,809		)	11,190		(8,809		)
Redeemable preferred stocks, by sector:
Financial	—		—			57,339		(5,007		)	57,339		(5,007		)
Total redeemable preferred stocks	—		—			57,339		(5,007		)	57,339		(5,007		)
Total below investment grade securities	32,940		(404		)	230,108		(31,677		)	263,048		(32,081		)
Total fixed maturities	$	445,875	$	(17,705	)	$	1,051,912	$	(60,917	)	$	1,497,787	$	(78,622	)

Gross unrealized losses rose from $79 million at year end 2014 to $564 million at year end 2015 , an increased gross unrealized loss of $485 million . During 2015 , the increase in gross unrealized losses was partially attributable to rising interest rates in the financial markets, but also resulted from deteriorating conditions in the energy and metals and mining sectors. The energy sector accounted for $197 million of the 2015 increase in gross unrealized losses from 2014, while metals and mining contributed $86 million of additional gross unrealized losses. Financial sector investments, our largest sector holdings at 25% of the portfolio at fair value at year end 2015 , were also affected by the poor economic environment, adding another $43 million of gross unrealized losses during 2015 .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

Additional information about investments in an unrealized loss position is as follows:



	Less than Twelve Months	Twelve Months or Longer	Total
Number of issues (CUSIP numbers) held:
As of December 31, 2015	480	75	555
As of December 31, 2014	80	173	253

Torchmark’s entire fixed-maturity and equity portfolio consisted of 1,568 issues at December 31, 2015 and 1,604 issues at December 31, 2014 . The weighted-average quality rating of all unrealized loss positions was BBB+ for both 2015 and 2014 . The weighted-average quality ratings are based on amortized cost.

Other investment information :

Other long-term investments consist of the following:



	Year Ended December 31,
	2015		2014
Investment in limited partnerships	$	31,409	$	3,236
Low-income housing interests	3,767		5,370
Other	1,627		1,843
Total	$	36,803	$	10,449

Torchmark did not have any invested assets that were non-income producing during the twelve months ended December 31, 2015 .

Concentrations of Credit Risk : Torchmark maintains a diversified investment portfolio with limited concentration in any given issuer. At December 31, 2015 , the investment portfolio, at fair value, consisted of the following:



Investment grade fixed maturities:
Corporate securities	79	%
Securities of state and municipal governments	10
Government-sponsored enterprises	2
Other	1
Below investment grade fixed maturities:
Corporate securities	3
Other	1
Policy loans, which are secured by the underlying insurance policy values	3
Other investments	1
	100	%

As of December 31, 2015 , securities of state and municipal governments represented 10% of invested assets at fair value. Such investments are made throughout the U.S. At year end 2015 , the state and municipal bond portfolio at fair value was invested in securities issued within the following states: Texas ( 30% ), Ohio ( 7% ), Washington ( 7% ), Illinois ( 6% ), and Alabama ( 5% ). Otherwise, there was no significant concentration within any given state greater than 5% .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 4—Investments (continued)

Corporate debt securities and redeemable preferred stocks represent 82% of Torchmark's investment portfolio. These investments are spread across a wide range of industries. Below are the ten largest industry concentrations held in the corporate portfolio of corporate debt securities and redeemable preferred stocks at December 31, 2015 , based on fair value:



Insurance	18	%
Electric utilities	15
Oil and natural gas pipelines	6
Banks	6
Transportation	5
Chemicals	4
Oil and natural gas exploration and production	4
Gas utilities	3
Real estate investment trusts	3
Mining	3

At year end 2015 , 4% of invested assets at fair value were represented by fixed maturities rated below investment grade (BB+ or lower as determined by the weighted average of available ratings from rating services). Par value of these investments was $720 million , amortized cost was $640 million , and fair value was $533 million . While these investments could be subject to additional credit risk, such risk should generally be reflected in their fair value.

Note 5—Deferred Acquisition Costs

An analysis of deferred acquisition costs is as follows:



	Year Ended December 31,
	2015			2014			2013
Balance at beginning of year	$	3,457,397		$	3,325,433		$	3,187,710
Additions:
Deferred during period:
Commissions	401,166			358,969			330,922
Other expenses	211,015			203,276			189,326
Total deferred	612,181			562,245			520,248
Value of insurance purchased during year	—			—			8,489
Adjustment attributable to unrealized investment losses ⁽¹⁾	8,682			—			14,906
Total additions	620,863			562,245			543,643
Deductions:
Amortized during period	(445,625		)	(415,914		)	(400,869		)
Foreign exchange adjustment	(15,500		)	(8,167		)	(5,051		)
Adjustment attributable to unrealized investment gains ⁽¹⁾	—			(6,200		)	—
Total deductions	(461,125		)	(430,281		)	(405,920		)
Balance at end of year	$	3,617,135		$	3,457,397		$	3,325,433

(1) Represents amounts pertaining to investments relating to universal life-type products.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 6—Discontinued Operations

At December 31, 2015 , Torchmark met the criteria to account for its Medicare Part D business as a discontinued operation and expects the business to be sold during 2016. Historically, the business was a reportable segment. However, Torchmark no longer emphasizes its Medicare Part D business due to declining margins, increased risks, higher drug costs, and increased administrative and compliance costs. Management believes this sale will allow the Company to better focus on its core protection life and health insurance businesses as well as provide additional capital to invest.

The net assets held for sale at December 31, 2015 and 2014 were as follows:



	At December 31,
	2015		2014
Assets:
Due premiums ⁽¹⁾	$	8,041	$	5,292
Risk sharing receivable ⁽¹⁾	—		31,373
Other receivables ⁽²⁾	287,765		236,996
Deferred acquisition costs	17,037		14,384
Total assets held for sale	312,843		288,045

Liabilities:
Unearned and advance premiums	806		572
Policy claims and other benefits payable ⁽²⁾	12,309		15,517
Risk sharing payable	23,837		—
Current and deferred income taxes payable	13,604		11,195
Other	479		11,592
Total liabilities held for sale	51,035		38,876

Net assets	$	261,808	$	249,169

(1) Previously included as a component of "Other receivables" on the Consolidated Balance Sheets .

(2) At December 31, 2015 , receivables included $193 million from Centers for Medicare and Medicaid Services (CMS) and $95 million from drug manufacturer rebates. At December 31, 2014 , the comparable amounts were $179 million and $58 million , respectively. In 2014, the receivable for drug manufacturer rebates was previously included as a component of "Policy claims and other benefits payable" on the Consolidated Balance Sheets .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 6—Discontinued Operations (continued)

Income from discontinued operations for the three years ended December 31, 2015 is as follows:



	Year Ended December 31,
	2015			2014			2013
Revenue:
Health premium	$	260,657		$	373,280		$	302,592

Benefits and expenses:
Health policyholder benefits	213,114			315,816			250,080
Amortization of deferred acquisition costs	3,506			2,858			2,520
Commissions, premium taxes, and non-deferred acquisition expenses	20,909			26,613			14,027
Other operating expense	6,502			5,123			3,247
Total benefits and expenses	244,031			350,410			269,874

Income before income taxes for discontinued operations	16,626			22,870			32,718
Income taxes	(5,819		)	(8,005		)	(11,451		)
Income from discontinued operations	$	10,807		$	14,865		$	21,267

Income taxes paid related to discontinued operations for the three years ended December 31, 2015 were as follows:



	Year Ended December 31,
	2015		2014		2013
Income taxes paid	$	3,409	$	12,013	$	10,320

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 7—Liability for Unpaid Health Claims

Activity in the liability for unpaid health claims is summarized as follows:



	Year Ended December 31,
	2015			2014		2013
Balance at beginning of year	$	128,265		$	116,559	$	124,999
Incurred related to:
Current year	502,009			453,014		453,538
Prior years	(7,845		)	804		5,279
Total incurred	494,164			453,818		458,817
Paid related to:
Current year	379,037			343,648		354,358
Prior years	106,272			98,464		112,899
Total paid	485,309			442,112		467,257
Balance at end of year	$	137,120		$	128,265	$	116,559

At the end of each period, the liability for unpaid health claims includes an estimate of claims incurred but not yet reported to the Company. Such estimates are updated regularly based upon the Company’s most recent claims data with recognition of emerging experience trends. Because of the nature of the Company’s health business, the payment lags are relatively short and most claims are fully paid within a year from the time incurred. Fluctuations in claims experience can lead to either over or under estimation of the liability for any given year. The difference between the estimate made at the end of the prior period and the actual experience during the period is reflected above under the caption “Incurred related to: Prior years.”

The liability for unpaid health claims is included with “Policy claims and other benefits payable” on the Consolidated Balance Sheets .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 8—Income Taxes

As discussed in Note 1—Significant Accounting Policies under the caption "Low-Income Housing Tax Credit Interests" the Company adopted ASU 2014-01 as of January 1, 2015. As a result of the adoption, amortization of the cost component for certain investments in low-income affordable housing projects were reclassified from net investment income to income taxes. The reclassification adjustment has been applied retrospectively to all periods presented.

The components of income taxes were as follows:



	Year Ended December 31,
	2015			2014			2013
Income tax expense from continuing operations	$	249,894		$	256,603		$	248,110
Shareholders’ equity:
Other comprehensive income (loss)	(411,646		)	424,089			(386,752		)
Tax basis compensation expense (from the exercise of stock options and vesting of restricted stock awards) in excess of amounts recognized for financial reporting purposes	(17,577		)	(18,524		)	(21,314		)
	$	(179,329	)	$	662,168		$	(159,956	)

Income tax expense from continuing operations consists of:



	Year Ended December 31,
	2015		2014		2013
Current income tax expense	$	174,284	$	169,319	$	190,406
Deferred income tax expense	75,610		87,284		57,704
	$	249,894	$	256,603	$	248,110

In each of the years 2013 through 2015 , deferred income tax expense was incurred because of certain differences between net income before income taxes as reported on the Consolidated Statements of Operations and taxable income as reported on Torchmark’s income tax returns. As explained in Note 1—Significant Accounting Policies , these differences caused the financial statement book values of some assets and liabilities to be different from their respective tax bases.

The effective income tax rate differed from the expected 35% rate as shown below:



	Year Ended December 31,
	2015			%		2014			%		2013			%
Expected income taxes	$	268,165		35.0		$	274,637		35.0		$	264,360		35.0
Increase (reduction) in income taxes resulting from:
Tax-exempt investment income	(3,178		)	(0.4	)	(3,233		)	(0.4	)	(3,107		)	(0.4	)
Low income housing investments	(19,031		)	(2.5	)	(17,541		)	(2.2	)	(16,227		)	(2.1	)
Other	3,938			0.5		2,740			0.4		3,084			0.4
Income tax expense from continuing operations	$	249,894		32.6		$	256,603		32.8		$	248,110		32.9

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 8—Income Taxes (continued)

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:



	December 31,
	2015		2014
Deferred tax assets:
Fixed maturity investments	$	16,098	$	12,925
Carryover of tax losses	2,266		3,036
Total gross deferred tax assets	18,364		15,961
Deferred tax liabilities:
Unrealized gains	128,683		522,219
Employee and agent compensation	83,229		74,088
Deferred acquisition costs	921,799		874,817
Future policy benefits, unearned and advance premiums, and policy claims	340,854		331,408
Other liabilities	17,176		4,732
Total gross deferred tax liabilities	1,491,741		1,807,264
Net deferred tax liability	$	1,473,377	$	1,791,303

Torchmark and its subsidiaries, excluding Family Heritage Life Insurance Company (Family Heritage), file a life-nonlife consolidated federal income tax return. Family Heritage files its federal income tax return on a separate company basis. Torchmark’s consolidated federal income tax returns are routinely audited by the Internal Revenue Service (IRS). The IRS completed its examination of Torchmark’s 2008-2011 consolidated income tax returns during 2014 resulting in no impact on the company’s effective tax rate. The statutes of limitations for the assessment of additional tax are closed for all tax years prior to 2012 with respect to Torchmark’s consolidated and Family Heritage’s federal income tax returns. Management believes that adequate provision has been made in the consolidated financial statements for any potential assessments that may result from current or future tax examinations and other tax-related matters for all open years.

Torchmark has net operating loss carryforwards of approximately $6.3 million at December 31, 2015 which will begin to expire in 2032 if not otherwise used to offset future taxable income. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded relating to Torchmark’s deferred tax assets as management believes Torchmark will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.

Torchmark’s tax liability is adjusted to include a provision for uncertain tax positions taken or expected to be taken in a tax return. However, during the years 2013 through 2015 , Torchmark did not have any uncertain tax positions which resulted in unrecognized tax benefits.

Torchmark’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company recognized interest income of $11 thousand , $465 thousand , and $0 thousand , net of federal income tax benefits, in its Consolidated Statements of Operations for 2015 , 2014 , and 2013 , respectively. The Company had no accrued interest or penalties at December 31, 2015 or 2014 .

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits

Pension Plans : Torchmark has noncontributory retirement benefit plans and contributory savings plans which cover substantially all employees. There are also two nonqualified, noncontributory supplemental benefit pension plans which cover a limited number of employees. The total cost of these retirement plans charged to operations was as follows:



Year Ended December 31,	Defined Contribution Plans		Defined Benefit Pension Plans
2015	$	3,429	$	29,230
2014	3,078		23,463
2013	3,373		33,122

Torchmark accrues expense for the defined contribution plans based on a percentage of the employees’ contributions. The plans are funded by the employee contributions and a Torchmark contribution equal to the amount of accrued expense. Plan contributions are both mandatory and discretionary, depending on the terms of the plan.

Cost for the defined benefit pension plans has been calculated on the projected unit credit actuarial cost method. All plan measurements for the defined benefit plans are as of December 31 of the respective year. The defined benefit pension plans covering the majority of employees are qualified and funded. Contributions are made to funded pension plans subject to minimums required by regulation and maximums allowed for tax purposes. Defined benefit plan contributions were $15.5 million in 2015 , $14.6 million in 2014 , and $10.3 million in 2013 . Torchmark estimates as of December 31, 2015 that it will contribute an amount not to exceed $20 million to these plans in 2016 . The actual amount of contribution may be different from this estimate.

Torchmark has a Supplemental Executive Retirement Plan (SERP), which provides to a limited number of executives an additional supplemental defined pension benefit. The supplemental benefit is based on the participant’s qualified plan benefit without consideration to the regulatory limits on compensation and benefit payments applicable to qualified plans, except that eligible compensation is capped at $1 million . The SERP is unqualified and unfunded. However, a Rabbi Trust has been established to support the liability for this plan. This trust consists of life insurance policies on the lives of plan participants with an unaffiliated insurance carrier as well as an investment account. The premiums paid for the insurance coverage were $10.1 million in 2015 , $2.2 million in 2014 , and $2.9 million in 2013 . The cash value of these policies at December 31, 2015 was $34 million and was $24 million a year earlier. Investments in the investment account consist of ETFs. Deposits of $6 million in 2013 were added to the investment account in this trust. There were no deposits in 2015 or 2014 . As of December 31, 2015 , the combined value of the insurance policies and the trust investments was $79 million , compared with $74 million a year earlier. Because this plan is unqualified, the investments and the policyholder value of the insurance policies in the Rabbi Trust are not included as defined benefit plan assets but as assets of the Company. They are included with “Other Assets” in the Consolidated Balance Sheets . The liability for this SERP at December 31, 2015 was $67 million and was $71 million a year earlier.

The Company has another small supplemental benefit pension plan which is limited to a very select group of employees and was closed as of December 31, 1994. It provides the full benefits that an employee would have otherwise received from a defined benefit plan in the absence of the limitation on benefits payable under a qualified plan. This plan is unfunded. Liability for this closed plan was $3 million at December 31, 2015 and December 31, 2014 . Pension cost for both supplemental defined benefit plans is determined in the same manner as for the qualified defined benefit plans.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

Plan assets in the funded plans consist primarily of investments in marketable fixed maturities and equity securities and are valued at fair value. Torchmark measures the fair value of its financial assets, including the assets in its benefit plans, in accordance with accounting guidance which establishes a hierarchy for asset values and provides a methodology for the measurement of value. Please refer to Note 1—Significant Accounting Policies under the caption Fair Value Measurements , Investments in Securities for a complete discussion of valuation procedures. The following table presents the assets of Torchmark’s defined benefit pension plans for the years ended December 31, 2015 and 2014 .

Pension Assets by Component at December 31, 2015



	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% to Total
Equity securities:
Financial	$	49,391	$		$		$	49,391	16
Consumer, Cyclical	24,264						24,264		8
Technology	19,871						19,871		6
Industrial	15,176						15,176		5
Consumer, Non-Cyclical	12,216						12,216		4
Other	2,502		8				2,510		1
Total equity securities	123,420		8		—		123,428		40
Corporate bonds
Financial			36,266				36,266		12
Utilities			43,229				43,229		14
Energy			25,890				25,890		8
Other corporates			40,996				40,996		13
Total corporate bonds	—		146,381		—		146,381		47
Other bonds			270				270		—
Guaranteed annuity contract ⁽¹⁾			17,082				17,082		6
Short-term investments	15,593						15,593		5
Other	4,842						4,842		2
Grand Total	$	143,855	$	163,741	$	—	$	307,596	100

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

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

Pension Assets by Component at December 31, 2014



	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% to Total
Equity securities:
Financial	$	45,790	$		$		$	45,790	14
Consumer, Cyclical	26,542						26,542		8
Technology	16,965						16,965		5
Consumer, Non-Cyclical	11,665						11,665		4
Energy	10,192						10,192		3
Communications	9,322						9,322		3
Industrial	6,377						6,377		2
Other	715						715		—
Total equity securities	127,568		—		—		127,568		39
Corporate bonds
Financial			40,889				40,889		13
Utilities			48,510				48,510		15
Energy			30,936				30,936		10
Other corporates			46,490				46,490		14
Total corporate bonds	—		166,825		—		166,825		52
Other bonds			284				284		—
Guaranteed annuity contract ⁽¹⁾			15,027				15,027		5
Short-term investments	9,038						9,038		3
Other	4,156						4,156		1
Grand Total	$	140,762	$	182,136	$	—	$	322,898	100

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

Torchmark’s investment objectives for its plan assets include preservation of capital, preservation of purchasing power, and long-term growth. Torchmark seeks to preserve capital through investments made in high quality securities with adequate diversification by issuer and industry sector to minimize risk. The portfolio is monitored continuously for changes in quality and diversification mix. The preservation of purchasing power is intended to be accomplished through asset growth, exclusive of contributions and withdrawals, in excess of the rate of inflation. Torchmark intends to maintain investments that when combined with future plan contributions will produce adequate long-term growth to provide for all plan obligations. It is also Torchmark’s objective that the portfolio’s investment return will meet or exceed the return of a balanced market index.

The majority of the securities in the portfolio are highly marketable so that there will be adequate liquidity to meet projected payments. There are no specific policies calling for asset durations to match those of benefit obligations.

Allowed investments are limited to equities, fixed maturities, and short-term investments (invested cash). The assets are to be invested in a mix of equity and fixed income investments that best serve the objectives of the pension plan. Factors to be considered in determining the asset mix include funded status, annual pension expense, annual pension contributions, and balance sheet liability. Equities include common and preferred stocks, securities convertible into equities, mutual funds that invest in equities, and other equity-related investments. Equities must be listed on major exchanges and adequate market liquidity is required. Fixed maturities consist of marketable debt securities rated investment grade at purchase by a major rating agency. Short-term investments include fixed maturities with maturities

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

less than one year and invested cash. Short-term investments in commercial paper must be rated at least A-2 by Standard & Poor’s with the issuer rated investment grade. Invested cash is limited to banks rated A or higher. Investments outside of the aforementioned list are not permitted, except by prior approval of the Plan’s Trustees. At December 31, 2015 , there were no restricted investments contained in the portfolio. Plan contributions have been invested primarily in fixed maturity and equity securities during the three years ended December 31, 2015.

The investment portfolio is to be well diversified to avoid undue exposure to a single sector, industry, business, or security. The equity and fixed maturity portfolios are not permitted to invest in any single issuer that would exceed 10% of total plan assets at the time of purchase. Torchmark does not employ any other special risk management techniques, such as derivatives, in managing the pension investment portfolio.

The following table discloses the assumptions used to determine Torchmark’s pension liabilities and costs for the appropriate periods. The discount and compensation increase rates are used to determine current year projected benefit obligations and subsequent year pension expense. The long-term rate of return is used to determine current year expense. Differences between assumptions and actual experience are included in actuarial gain or loss.

Weighted Average Pension Plan Assumptions



For Benefit Obligations at December 31:
	2015		2014
Discount Rate	4.64	%	4.23	%
Rate of Compensation Increase	4.33		4.35



For Periodic Benefit Cost for the Year:
	2015		2014		2013
Discount Rate	4.23	%	5.12	%	4.18	%
Expected Long-Term Returns	6.96		6.97		6.96
Rate of Compensation Increase	4.35		4.35		4.40

The discount rate is determined based on the expected duration of plan liabilities. A yield is then derived based on the current market yield of a hypothetical portfolio of higher-quality corporate bonds which match the liability duration. The rate of compensation increase is projected based on Company experience, modified as appropriate for future expectations. The expected long-term rate of return on plan assets is management’s best estimate of the average rate of earnings expected to be received on the assets invested in the plan over the benefit period. In determining this assumption, consideration is given to the historical rate of return earned on the assets, the projected returns over future periods, and the discount rate used to compute benefit obligations.

Net periodic pension cost for the defined benefit plans by expense component was as follows:



	Year Ended December 31,
	2015			2014			2013
Service cost—benefits earned during the period	$	15,902		$	12,925		$	14,984
Interest cost on projected benefit obligation	19,887			19,270			17,043
Expected return on assets	(21,204		)	(19,031		)	(17,429		)
Net amortization	14,465			10,283			18,143
Recognition of actuarial loss	180			16			381
Net periodic pension cost	$	29,230		$	23,463		$	33,122

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

An analysis of the impact on other comprehensive income (loss) concerning pensions and other postretirement benefits is as follows:



	Year Ended December 31,
	2015			2014			2013
Balance at January 1	$	(152,999	)	$	(97,467	)	$	(168,129	)
Amortization of:
Prior service cost	377			2,113			2,276
Net actuarial (gain) loss ⁽¹⁾	14,209			8,172			16,090
Total amortization	14,586			10,285			18,366
Plan amendments	(2,104		)	—			—
Experience gain(loss)	(11,632		)	(65,817		)	52,296
Balance at December 31	$	(152,149	)	$	(152,999	)	$	(97,467	)

(1) Includes amortization of postretirement benefits other than pensions of $120 thousand in 2015 , $2 thousand in 2014 , and $224 thousand in 2013 .

The following table presents a reconciliation from the beginning to the end of the year of the projected benefit obligation and plan assets for pensions. This table also presents the amounts previously recognized as a component of accumulated other comprehensive income.

Pension Benefits



	Year Ended December 31,
	2015			2014
Changes in benefit obligation:
Obligation at beginning of year	$	477,426		$	383,859
Service cost	15,902			12,925
Interest cost	19,887			19,270
Plan amendments	2,104			—
Actuarial loss (gain)	(19,226		)	78,487
Benefits paid	(19,512		)	(17,115		)
Obligation at end of year	476,581			477,426

Changes in plan assets:
Fair value at beginning of year	322,898			291,753
Return on assets	(11,333		)	33,641
Contributions	15,543			14,619
Benefits paid	(19,512		)	(17,115		)
Fair value at end of year	307,596			322,898
Funded status at year end	$	(168,985	)	$	(154,528	)



Amounts recognized in accumulated other comprehensive income consist of:
Net loss (gain)	$	145,623	$	146,571
Prior service cost	5,088		3,362
Net amounts recognized at year end	$	150,711	$	149,933

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

The portion of other comprehensive income that is expected to be reflected in pension expense in 2016 is as follows:



Amortization of prior service cost	$	477
Amortization of net actuarial loss	9,695
Total	$	10,172

The accumulated benefit obligation (ABO) for Torchmark’s funded defined benefit pension plans was $371 million and $374 million at December 31, 2015 and 2014 , respectively. In the unfunded plans, the ABO was $63 million at December 31, 2015 and 2014 .

Torchmark has estimated its expected pension benefits to be paid over the next ten years as of December 31, 2015 . These estimates use the same assumptions that measure the benefit obligation at December 31, 2014, taking estimated future employee service into account. Those estimated benefits are as follows:



For the year(s)
2016	$	18,352
2017	19,832
2018	21,077
2019	21,660
2020	24,048
2021-2025	143,489

Postretirement Benefit Plans Other Than Pensions : Torchmark provides a small postretirement life insurance benefit for most retired employees, and also provides additional postretirement life insurance benefits for certain key employees. The majority of the life insurance benefits are accrued over the working lives of active employees. Otherwise, Torchmark does not provide postretirement benefits other than pensions and the life insurance benefits described above.

Torchmark’s post-retirement defined benefit plans other than pensions are not funded. Liabilities for these plans are measured as of December 31 for the appropriate year.

The components of net periodic postretirement benefit cost for plans other than pensions are as follows:



	Year Ended December 31,
	2015		2014			2013
Service cost	$	—	$	—		$	354
Interest cost on benefit obligation	1,075		646			1,030
Expected return on plan assets	—		—			—
Net amortization	120		2			224
Recognition of net actuarial (gain) loss	367		(256		)	—
Net periodic postretirement benefit cost	$	1,562	$	392		$	1,608

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

The following table presents a reconciliation of the benefit obligation and plan assets from the beginning to the end of the year. As these plans are unfunded, funded status is equivalent to the accrued benefit liability.

Benefits Other Than Pensions



	Year Ended December 31,
	2015			2014
Changes in benefit obligation:
Obligation at beginning of year	$	22,895		$	20,860
Service cost	—			—
Interest cost	1,075			646
Actuarial loss (gain)	(1,133		)	1,700
Benefits paid	(358		)	(311		)
Obligation at end of year	22,479			22,895

Changes in plan assets:
Fair value at beginning of year	—			—
Return on assets	—			—
Contributions	358			311
Benefits paid	(358		)	(311		)
Fair value at end of year	—			—
Funded status at year end	$	(22,479	)	$	(22,895	)



Amounts recognized in accumulated other comprehensive income:
Net loss ⁽¹⁾	$	1,447	$	3,066
Net amounts recognized at year end	$	1,447	$	3,066

(1) The net loss for benefit plans other than pensions reduces other comprehensive income.

The table below presents the assumptions used to determine the liabilities and costs of Torchmark’s postretirement benefit plans other than pensions.

Weighted Average Assumptions for Postretirement

Benefit Plans Other Than Pensions



For Benefit Obligations at December 31:
	2015		2014
Discount Rate	4.66	%	4.23	%



For Periodic Benefit Cost for the Year:
	2015		2014		2013
Discount Rate	4.23	%	5.12	%	4.18	%

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 9—Postretirement Benefits (continued)

Estimated Future Payments for Post-Retirement Benefit Plans Other Than Pensions



For the year(s)
2016	$	921
2017	1,018
2018	1,137
2019	1,252
2020	1,356
2021-2025	8,921

Note 10—Supplemental Disclosures of Cash Flow Information

The following table summarizes Torchmark’s noncash transactions, which are not reflected on the Consolidated Statements of Cash Flows:



	Year Ended December 31,
	2015		2014		2013
Stock-based compensation not involving cash	$	28,664	$	32,203	$	25,642
Commitments for low-income housing interests	68,949		75,706		42,525
Capitalized investment income	—		—		806

The following table summarizes certain amounts paid during the period:



	Year Ended December 31,
	2015		2014		2013
Interest paid	$	74,792	$	77,066	$	81,322
Income taxes paid	110,650		100,922		128,771

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 11—Debt

The following table presents information about the terms and outstanding balances of Torchmark’s debt.

Selected Information about Debt Issues



						As of December 31,
						2015						2014
Description	Annual Interest Rate			Issue Date	Periodic Interest Payments Due	Outstanding Principal (Par Value)		Outstanding Principal (Book Value)		Outstanding Principal (Fair Value)		Outstanding Principal (Book Value)
Notes, due 5/15/23 ^(1,2)	7.875	%		5/93	5/15 & 11/15	$	165,612	$	163,920	$	204,470	$	163,758
Senior Notes, due 6/15/16 ^(1,3,7)	6.375	%		6/06	6/15 & 12/15	250,000		249,753		255,354		249,236
Senior Notes, due 6/15/19 ^(1,3)	9.250	%		6/09	6/15 & 12/15	292,647		291,002		353,978		290,618
Senior Notes, due 9/15/22 ^(1,3)	3.800	%		9/12	3/15 & 9/15	150,000		147,913		148,843		147,648
Junior Subordinated Debentures due 12/15/52 ^(4,8)	5.875	%		9/12	quarterly	125,000		120,898		129,000		120,870
Junior Subordinated Debentures due 3/15/36 ^(4,5)	3.812	%	⁽⁹⁾	⁽⁶⁾	quarterly	20,000		20,000		20,000		20,000
Total funded debt						1,003,259		993,486		1,111,645		992,130
Commercial Paper ⁽⁷⁾						240,544		240,376		240,376		238,398
Total debt						$	1,243,803	$	1,233,862	$	1,352,021	$	1,230,528


(1)	All securities other than the Junior Subordinated Debentures have equal priority with one another.


(2)	Not callable.


(3)	Callable subject to “make-whole” premium.


(4)	Quarterly payments on the 15th of March, June, September, and December.


(5)	Callable anytime.


(6)	Assumed upon November 1, 2012 acquisition of Family Heritage.


(7)	Classified as short-term debt.


(8)	Callable as of December 15, 2017.


(9)	Interest paid at 3 month LIBOR plus 330 basis points, resets each quarter.

Contractual Debt Obligations : The following table presents expected scheduled principal payments under our contractual debt obligations:



	Year Ended December 31,
	2016		2017		2018		2019		2020		Thereafter
Debt obligations	$	490,544	$	—	$	—	$	292,647	$	—	$	460,612

Funded debt : As of January 1, 2013, Torchmark had outstanding 7.375% Notes with a principal balance of $94 million . These notes were repaid with interest on August 1, 2013.

Torchmark's 6.375% Senior Notes, in the principal amount of $250 million , will mature on June 15, 2016. The Company plans to refinance these notes in 2016.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 11—Debt (continued)

Commercial Paper : As of July 16, 2014, Torchmark entered into a new credit facility with a group of lenders allowing for unsecured borrowings and stand-by letters of credit up to $750 million , replacing a previous facility that had a maximum limitation of $600 million . Up to $250 million in letters of credit can be issued against the new facility. The facility is further designated as a back-up credit line for a commercial paper program under which the Company may either borrow from the credit line or issue commercial paper at any time, with total commercial paper outstanding not to exceed the facility maximum, less any letters of credit issued. Interest is charged at variable rates. The facility has no ratings-based acceleration triggers which would require early repayment prior to the termination date of July 16, 2019 . In accordance with the agreement, Torchmark is subject to certain covenants regarding capitalization, as was the case with the previous credit facility. As of December 31, 2015 , and throughout the three-year period ended December 31, 2015 , Torchmark was in full compliance with the appropriate covenants. Borrowings on the credit facilities are reported as short-term debt on the Consolidated Balance Sheets . A table presenting selected information concerning Torchmark’s short-term borrowings is presented below.

Short-Term Borrowings



	At December 31,
	2015			2014
Balance at end of period (at par value)	$	240,544		$	238,450
Annualized interest rate	0.55		%	0.32		%
Letters of credit outstanding	$	177,000		$	198,000
Remaining amount available under credit line	332,456			313,550



	Year Ended December 31,
	2015			2014			2013
Average balance outstanding during period	$	350,851		$	296,246		$	274,435
Daily-weighted average interest rate (annualized)	0.43		%	0.26		%	0.33		%
Maximum daily amount outstanding during period	$	458,110		$	343,000		$	340,140

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 12—Shareholders’ Equity

Share Data: A summary of preferred and common share activity is presented in the following chart.



	Preferred Stock		Common Stock
	Issued	Treasury Stock	Issued		Treasury Stock
2013:
Balance at January 1, 2013	—	—	158,718,183		(17,364,729	)
Grants of restricted stock					76,415
Forfeitures and surrenders of restricted stock					(37,359	)
Issuance of common stock due to exercise of stock options					3,917,757
Issuance of common stock due to settlement of restricted stock units					11,190
Treasury stock acquired					(11,069,076	)
Retirement of treasury stock			(7,500,000	)	7,500,000
Balance at December 31, 2013	—	—	151,218,183		(16,965,802	)
2014:
Grants of restricted stock					19,041
Forfeitures of restricted stock					(2,700	)
Issuance of common stock due to exercise of stock options					2,210,349
Treasury stock acquired					(8,548,795	)
Retirement of treasury stock			(17,000,000	)	17,000,000
Balance at December 31, 2014	—	—	134,218,183		(6,287,907	)
2015:
Grants of restricted stock					6,648
Forfeitures of restricted stock					(13,950	)
Vesting of performance shares					211,287
Issuance of common stock due to exercise of stock options					1,576,485
Treasury stock acquired					(7,340,794	)
Retirement of treasury stock			(4,000,000	)	4,000,000
Balance at December 31, 2015	—	—	130,218,183		(7,848,231	)

Acquisition of Common Shares : Torchmark shares are acquired from time to time through open market purchases under the Torchmark stock repurchase program when it is believed to be the best use of Torchmark’s excess cash flows. Share repurchases under this program were 6.3 million shares at a cost of $359 million in 2015 , 7.2 million shares at a cost of $375 million in 2014 , and 8.3 million shares at a cost of $360 million in 2013 . When stock options are exercised, proceeds from the exercises are generally used to repurchase approximately the number of shares available with those funds in order to reduce dilution. Shares repurchased for dilution purposes were 1.0 million shares at a cost of $60 million in 2015 , 1.4 million shares at a cost of $74 million in 2014 , and 2.8 million shares at a cost of $122 million in 2013 .

Retirement of Treasury Stock : Torchmark retired 4.0 million shares of treasury stock in 2015 , 17.0 million in 2014 , and 7.5 million in 2013 .

Restrictions : Restrictions exist on the flow of funds to Torchmark from its insurance subsidiaries. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. Dividends from insurance

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 12—Shareholders’ Equity (continued)

subsidiaries of Torchmark are limited to the greater of prior year statutory net income excluding realized capital gains on an annual noncumulative basis, or 10% of prior year surplus, in the absence of special regulatory approval. Additionally, insurance company distributions are generally not permitted in excess of statutory surplus. Subsidiaries are also subject to certain minimum capital requirements. Subsidiaries of Torchmark paid cash dividends to the Parent Company in the amount of $466 million in 2015 , $479 million in 2014 , and $488 million in 2013 . As of December 31, 2015 , dividends and transfers from insurance subsidiaries to parent available to be paid in 2016 were limited to the amount of $337 million without regulatory approval, such that $916 million was considered restricted net assets of the subsidiaries. While there are no legal restrictions on the payment of dividends to shareholders from Torchmark’s retained earnings, retained earnings as of December 31, 2015 were restricted by lenders’ covenants which require the Company to maintain and not distribute $2.9 billion from its total consolidated retained earnings of $3.6 billion .

Earnings Per Share : A reconciliation of basic and diluted weighted-average shares outstanding used in the computation of basic and diluted earnings per share is as follows:



	Year Ended December 31,
	2015	2014	2013
Basic weighted average shares outstanding	125,094,628	130,721,738	137,646,885
Weighted average dilutive options outstanding	1,662,607	1,918,506	1,916,900
Diluted weighted average shares outstanding	126,757,235	132,640,244	139,563,785

There were no anti-dilutive shares as of December 31, 2015 , 2014 , or 2013 . Income available to common shareholders for basic earnings per share is equivalent to income available to common shareholders for diluted earnings per share.

Note 13—Stock-Based Compensation

Torchmark’s stock-based compensation consists of stock options, restricted stock, restricted stock units, and performance shares. Certain employees, directors, and consultants have been granted fixed equity options to buy shares of Torchmark stock at the market value of the stock on the date of grant, under the provisions of the Torchmark stock option plans. The options are exercisable during the period commencing from the date they vest until expiring according to the terms of the grant. Options generally expire the earlier of employee termination or option contract term, which ranges from seven to ten years. Options generally vest in accordance with the following schedule:



	Contract period	Vesting period
Grants vest in the following periods under the Torchmark Corporation 2011 Incentive Plan:
Directors	7 years	6 months
Employees:	7 years	1/2 in 2 years	1/2 in 3 years
	10 years	1/4 in 2 years	1/4 in each of the next 3 years

	Contract period	Vesting period
Grants vest in the following periods under previous compensation plans:
Directors	7 years	6 months
Employees	7 years	1/2 in 2 years	1/2 in 3 years

All employee options vest immediately upon retirement on or after the attainment of age 65, upon death, or disability. Torchmark generally issues shares for the exercise of stock options from treasury stock. The Company generally uses the proceeds from option exercises to buy shares of Torchmark common stock in the open market to reduce the dilution from option exercises.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 13—Stock-Based Compensation (continued)

During 2014, shareholders approved an amendment to the 2011 Incentive Plan allowing for an additional 6.3 million shares available for grant.

An analysis of shares available for grant is as follows:



	Available for Grant
	2015		2014		2013
Balance at January 1	8,458,593		4,368,753		6,804,452
2011 Plan amendment	—		6,300,000		—
Options expired and forfeited during year ⁽¹⁾	90,371		3,488		128,109
Restricted stock expired and forfeited during year ⁽²⁾	89,745		31,620		9,625
Options granted during year ⁽¹⁾	(1,334,514	)	(1,523,982	)	(1,626,863	)
Restricted stock, restricted stock units, and performance shares granted under the Torchmark Corporation 2011 Incentive Plan ⁽²⁾	(431,913	)	(721,286	)	(946,570	)
Balance at December 31	6,872,282		8,458,593		4,368,753

(1) Plan allows for grant of options such that each grant reduces shares available for grant in a range from 0.85 share to 1 share.

(2) Plan allows for grant of restricted stock such that each stock grant reduces shares available for grant in a range from 3.1 shares to 3.88 shares.

A summary of stock compensation activity for each of the three years ended December 31, 2015 is presented below:



	2015		2014		2013
Stock-based compensation expense recognized ⁽¹⁾	$	28,664	$	32,203	$	25,642
Tax benefit recognized	10,033		11,271		8,975

(1) No stock-based compensation expense was capitalized in any period.

Additional stock compensation information is as follows at December 31:



	2015		2014
Unrecognized compensation ⁽¹⁾	$	33,977	$	38,809
Weighted average period of expected recognition (in years) ⁽¹⁾	0.85		0.91

(1) Includes restricted stock and performance shares.

Options:

The following table summarizes information about stock options outstanding at December 31, 2015 .



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Number Exercisable	Weighted- Average Exercise Price
$10.44 - $29.59	2,197,238	2.07	$	26.05	2,130,205	$	25.94
30.32 - 32.48	1,145,648	3.66	30.58		986,823	30.62
37.40 - 43.06	1,438,565	4.48	37.61		624,655	37.88
50.69 - 51.62	1,481,681	5.64	50.70		14,044	51.04
53.61 - 54.16	1,471,709	6.68	53.62		18,334	54.16
$10.44 - $54.16	7,734,841	4.32	$	38.84	3,774,061	$	29.37

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 13—Stock-Based Compensation (continued)

No equity awards were cash settled during the three years ended December 31, 2015 .

An analysis of option activity for each of the three years ended December 31, 2015 is as follows:



	2015				2014				2013
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding-beginning of year	7,889,321		$	32.91	8,579,202		$	27.84	10,998,206		$	25.43
Granted:
7-year term	1,220,751		53.62		1,226,270		50.70		1,361,700		37.62
10-year term	296,875		53.61		297,712		50.69		265,162		37.40
Exercised	(1,576,485	)	22.81		(2,210,348	)	25.47		(3,917,757	)	24.97
Expired and forfeited	(95,621	)	48.85		(3,488	)	40.05		(128,109	)	32.33
Adjustment due to 7/1/14 stock split	—		—		(27	)	—		—		—
Outstanding-end of year	7,734,841		$	38.84	7,889,321		$	32.91	8,579,202		$	27.84
Exercisable at end of year	3,774,061		$	29.37	3,809,415		$	24.58	4,395,552		$	22.95

Additional information about Torchmark’s stock option activity as of December 31, 2015 and 2014 is as follows:



	2015		2014
Outstanding options:
Weighted-average remaining contractual term (in years)	4.32		4.34
Aggregate intrinsic value	$	141,728	$	167,713
Exercisable options:
Weighted-average remaining contractual term (in years)	2.74		2.72
Aggregate intrinsic value	$	104,885	$	112,724

Selected stock option activity for the three years ended December 31, 2015 is presented below:



	2015		2014		2013
Weighted-average grant-date fair value of options granted (per share)	$	11.97	$	14.77	$	12.37
Intrinsic value of options exercised	54,854		61,229		72,793
Cash received from options exercised	35,958		56,294		97,815
Actual tax benefit received	24,470		23,232		27,972

Additional information concerning Torchmark’s unvested options is as follows at December 31:



	2015		2014
Number of shares outstanding	3,960,780		4,079,906
Weighted-average exercise price (per share)	$	47.86	$	40.69
Weighted-average remaining contractual term (in years)	5.82		5.85
Aggregate intrinsic value	$	36,843	$	54,989

Torchmark expects that substantially all unvested options will vest.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 13—Stock-Based Compensation (continued)

Restricted Stock:

Restricted stock grants consist of time-vested grants, restricted stock units, and performance shares. Time-vested restricted stock is available to both senior executives and directors. The employee grants generally vest over five years and the director grants vest over six months. Restricted stock units are available only to directors. They vest over six months and are not converted to shares until the directors’ retirement, death, or disability. Director restricted stock and restricted stock units are generally granted on the first work day of the year. Performance shares are granted to a limited number of senior executives. Performance shares have a three year contract life and are not settled in shares until the termination of the three-year contract period. While the grant specifies a stated target number of shares, the determination of the actual settlement in shares will be based on the achievement of certain performance objectives of Torchmark over the respective three-year contract periods. The actual shares could be distributed in a range from 0 to 359 thousand shares for the 2015 grants, 0 to 359 thousand shares for the 2014 grants, and 0 to 295 thousand shares for the 2013 grants. Certain executive restricted stock and performance share grants contain terms related to age that could accelerate vesting.

A summary of restricted stock grants for each of the years in the three-year period ended December 31, 2015 is presented in the table below.



	2015			2014			2013
Executives restricted stock:
Shares	—			12,000			58,695
Price per share	$	—		$	50.69		$	40.09
Aggregate value	$	—		$	608		$	2,353
Percent vested as of 12/31/15	—		%	—		%	—		%
Directors restricted stock:
Shares	6,648			7,041			15,045
Price per share	$	54.16		$	51.62		$	35.45
Aggregate value	$	360		$	363		$	533
Percent vested as of 12/31/15	100		%	100		%	100		%
Directors restricted stock units (including dividend equivalents):
Shares	7,640			12,322			16,998
Price per share	$	54.44		$	51.69		$	35.99
Aggregate value	$	416		$	637		$	612
Percent vested as of 12/31/15	100		%	100		%	100		%
Performance shares:
Target shares	179,500			179,250			147,750
Target price per share	$	53.61		$	51.41		$	37.40
Assumed adjustment for performance objectives	(58,056		)	22,060			94,800
Aggregate value	$	9,623		$	9,215		$	5,526
Percent vested as of 12/31/15	—		%	—		%	—		%

Time-vested restricted stock holders, both employees and directors, are entitled to dividend payments on the unvested stock. Restricted stock unit holders are entitled to dividend equivalents. These equivalents are granted in the form of additional restricted stock units and vest immediately upon grant. Dividend equivalents are applicable only to restricted stock units. Performance shareholders are not entitled to dividend equivalents and are not entitled to dividend payments until the shares are vested and settled.

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 13—Stock-Based Compensation (continued)

An analysis of unvested restricted stock is as follows:



	Executive Restricted Stock		Executive Performance Shares		Directors Restricted Stock		Directors Restricted Stock Units		Total
2013:
Balance at January 1, 2013	467,550		120,000						587,550
Grants	58,695		147,750		15,045		16,998		238,488
Additional performance shares ⁽¹⁾			94,800						94,800
Restriction lapses	(150,750	)			(15,045	)	(16,998	)	(182,793	)
Forfeitures	(31,050	)							(31,050	)
Balance at December 31, 2013	344,445		362,550		—		—		706,995
2014:
Grants	12,000		179,250		7,041		12,322		210,613
Additional performance shares ⁽¹⁾			22,060						22,060
Restriction lapses	(90,315	)			(7,041	)	(12,322	)	(109,678	)
Forfeitures	(2,700	)	(7,500	)					(10,200	)
Balance at December 31, 2014	263,430		556,360		—		—		819,790
2015:
Grants	—		179,500		6,648		7,640		193,788
Additional performance shares ⁽¹⁾			(58,056	)					(58,056	)
Restriction lapses	(61,815	)	(211,287	)	(6,648	)	(7,640	)	(287,390	)
Forfeitures	(13,950	)	(7,500	)					(21,450	)
Balance at December 31, 2015	187,665		459,017		—		—		646,682

(1) Estimated additional share grants expected due to achievement of performance criteria.

Restricted stock units outstanding at each of the year ends 2015 , 2014 , and 2013 were 105,679 , 98,039 , and 85,717 , respectively. All restricted stock units were fully vested at the end of each year of grant.

A final determination for the 2012 performance share grants was made as of December 31, 2014 to be 211 thousand shares, as those shares were settled on January 27, 2015. Likewise, a final settlement was determined for the 2013 grants as of December 31, 2015 to be 159 thousand shares, and the shares were settled on February 24, 2016.

An analysis of the weighted-average grant-date fair values of unvested restricted stock is as follows for the year 2015 :



	Executive Restricted Stock			Executive Performance Shares			Directors Restricted Stock			Directors Restricted Stock Units
Grant-date fair value per share at January 1, 2015	$	31.85		$	40.07
Grants	—			53.61			$	54.16		$	54.16
Estimated additional performance shares				55.49
Restriction lapses	(29.26		)	(32.63		)	(54.16		)	(54.16		)
Forfeitures	28.97			44.66
Grant-date fair value per share at December 31, 2015	32.92			46.77

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments

Torchmark’s reportable segments are based on the insurance product lines it markets and administers: life insurance, health insurance, and annuities. These major product lines are set out as reportable segments because of the common characteristics of products within these categories, comparability of margins, and the similarity in regulatory environment and management techniques. There is also an investment segment which manages the investment portfolio, debt, and cash flow for the insurance segments and the corporate function. Torchmark's chief operating decision makers evaluate the overall performance of the operations of the Company in accordance with these segments.

Life insurance products include traditional and interest-sensitive whole life insurance as well as term life insurance. Health insurance products are generally guaranteed-renewable and include Medicare Supplement, critical illness, accident, long-term care, and limited-benefit supplemental hospital and surgical coverages. Annuities include fixed-benefit contracts.

Torchmark markets its insurance products through a number of distribution channels, each of which sells the products of one or more of Torchmark’s insurance segments. The tables below present segment premium revenue by each of Torchmark’s marketing groups.

Torchmark Corporation

Premium Income by Distribution Channel



	For the Year 2015
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	15,036	1	$	345,330	37	$	135	100	$	360,501	12
Liberty National Exclusive	271,113		13	209,150		23				480,263		16
American Income Exclusive	830,903		40	80,339		9				911,242		30
Family Heritage Exclusive	2,334		—	221,091		24				223,425		8
Globe Life Direct Response	746,693		36	69,610		7				816,303		27
Other	206,986		10							206,986		7
	$	2,073,065	100	$	925,520	100	$	135	100	$	2,998,720	100



	For the Year 2014
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	16,582	1	$	305,368	35	$	400	100	$	322,350	11
Liberty National Exclusive	272,265		14	222,017		25				494,282		18
American Income Exclusive	766,458		39	78,722		9				845,180		30
Family Heritage Exclusive	1,595		—	204,667		24				206,262		7
Globe Life Direct Response	702,023		36	58,666		7				760,689		27
Other	207,377		10							207,377		7
	$	1,966,300	100	$	869,440	100	$	400	100	$	2,836,140	100

Table of Contents

Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)



	For the Year 2013
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	19,742	1	$	298,298	35	$	532	100	$	318,572	11
Liberty National Exclusive	275,980		15	241,264		28				517,244		19
American Income Exclusive	715,366		38	79,435		9				794,801		29
Family Heritage Exclusive	1,006		—	190,923		22				191,929		7
Globe Life Direct Response	663,544		35	53,898		6				717,442		26
Other	209,694		11							209,694		8
	$	1,885,332	100	$	863,818	100	$	532	100	$	2,749,682	100

Due to the nature of the life insurance industry, Torchmark has no individual or group which would be considered a major customer. Substantially all of Torchmark’s business is conducted in the United States.

The measure of profitability established by the chief operating decision makers for insurance segments is underwriting margin before other income and administrative expenses, in accordance with the manner the segments are managed. It essentially represents gross profit margin on insurance products before insurance administrative expenses and consists of premium, less net policy obligations, acquisition expenses, and commissions. Interest credited to net policy liabilities (reserves less deferred acquisition costs) is reflected as a component of the Investment segment in order to match this cost to the investment earnings from the assets supporting the net policy liabilities.

The measure of profitability for the Investment segment is excess investment income, which represents the income earned on the investment portfolio in excess of net policy requirements and financing costs associated with Torchmark’s debt. Other than the above-mentioned interest allocations and an intersegment commission, there are no other intersegment revenues or expenses. Expenses directly attributable to corporate operations are included in the “Corporate” category. Stock-based compensation expense is considered a corporate expense by Torchmark management and is included in this category. All other unallocated revenues and expenses on a pretax basis, including insurance administrative expense, are included in the “Other” segment category.

Torchmark holds a sizeable investment portfolio to support its insurance liabilities, the yield from which is used to offset policy benefit, acquisition, administrative and tax expenses. This yield or investment income is taken into account when establishing premium rates and profitability expectations of its insurance products. In holding such a portfolio, investments are sold, called, or written down from time to time, resulting in a realized gain or loss. These gains or losses generally occur as a result of disposition due to issuer calls, compliance with Company investment policies, or other reasons often beyond management’s control. Unlike investment income, realized gains and losses are incidental to insurance operations, and only overall yields are considered when setting premium rates or insurance product profitability expectations. While these gains and losses are not relevant to segment profitability or core operating results, they can have a material positive or negative result on net income. For these reasons, management removes realized investment gains and losses when it views its segment operations.

In 2015 , Torchmark recorded $1.4 million in administrative settlements ( $906 thousand after tax) related to a post closing adjustment on the sale of a former subsidiary. These administrative settlements were included in "Commissions, premium taxes, and non-deferred acquisition costs" in the Consolidated Statements of Operations in 2015 .

During 2014 , Torchmark accrued for certain litigation matters in the net amount of $3.7 million ( $2.4 million after tax) that were not directly related to its insurance operations. Additionally, Torchmark received $1.3 million ( $853 thousand after tax) in settlement of litigation regarding investments. Also in 2014 , the Company recorded $8.2 million in administrative settlements ( $5.3 million after tax) related to benefits paid for deaths occurring in prior years where claims had not been filed. These administrative settlements were included in “Policyholder benefits” in the Consolidated Statements of Operations in 2014 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)

During 2013 , Torchmark incurred four non-operating charges: (1) a state guaranty fund assessment in the amount of $1.2 million ( $751 thousand after tax), resulting from events in years prior to 2013 , (2) a legal settlement related to a non-insurance matter in the amount of $500 thousand ( $325 thousand after tax), (3) the settlement of a litigation matter related to prior years in the amount of $8.6 million ( $5.6 million after tax) and (4) a one-time adjustment related to the finalization of accounting for the acquisition of the insurance assets and liabilities of Family Heritage. The Family Heritage acquisition closed on November 1, 2012. This adjustment increased 2013 after-tax earnings in the amount of $522 thousand . Management removes items that are related to prior periods when evaluating the operating results of current periods. Management also removes non-operating items unrelated to its core insurance activities when evaluating those results. Therefore, these items are excluded in its presentation of segment results, because accounting guidance requires that operating segment results be presented as management views its business. With the exception of the administrative settlements in the paragraph above, all of these items are included in “Other operating expense” in the Consolidated Statements of Operations for the appropriate year.

The following tables set forth a reconciliation of Torchmark’s revenues and operations by segment to its major income statement line items. See Note 1—Significant Accounting Policies for additional information concerning reconciling items of segment profits to pretax income.



	For the year 2015
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	2,073,065		$	925,520		$	135															$	2,998,720
Net investment income										$	773,951												773,951
Other income													$	2,379					$	(194	)	⁽²⁾	2,185
Total revenue	2,073,065			925,520			135			773,951			2,379						(194		)		3,774,856
Expenses:
Policy benefits	1,374,608			602,610			38,994																2,016,212
Required interest on:
Policy reserves	(552,298		)	(69,057		)	(53,295		)	674,650													—
Deferred acquisition costs	172,947			22,760			1,138			(196,845		)											—
Amortization of acquisition costs	353,595			83,341			8,689																445,625
Commissions, premium taxes, and non-deferred acquisition costs	154,811			81,489			41												1,200			^(2,3)	237,541
Insurance administrative expense ⁽¹⁾													186,191										186,191
Parent expense																$	9,003						9,003
Stock-based compensation expense																28,664							28,664
Interest expense										76,642													76,642
Total expenses	1,503,663			721,143			(4,433		)	554,447			186,191			37,667			1,200				2,999,878
Subtotal	569,402			204,377			4,568			219,504			(183,812		)	(37,667		)	(1,394		)		774,978
Non-operating items																			1,394			⁽³⁾	1,394
Measure of segment profitability (pretax)	$	569,402		$	204,377		$	4,568		$	219,504		$	(183,812	)	$	(37,667	)	$	—			776,372
Deduct applicable income taxes																							(253,459		)
Segment profits after tax																							522,913
Add back income taxes applicable to segment profitability																							253,459
Add (deduct) realized investment gains (losses) and impairments																							(8,791		)
Deduct administrative settlements ⁽³⁾																							(1,394		)
Pretax income per Consolidated Statement of Operations																							$	766,187

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

(2) Elimination of intersegment commission.

(3) Administrative settlements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)



	For the year 2014
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	1,966,300		$	869,440		$	400															$	2,836,140
Net investment income ⁽⁵⁾										$	758,286												758,286
Other income													$	2,354					$	(233	)	⁽²⁾	2,121
Total revenue	1,966,300			869,440			400			758,286			2,354						(233		)		3,596,547
Expenses:
Policy benefits	1,293,384			559,817			42,005												8,178			⁽⁴⁾	1,903,384
Required interest on:
Policy reserves	(530,192		)	(64,401		)	(55,255		)	649,848													—
Deferred acquisition costs	168,100			22,499			1,453			(192,052		)											—
Amortization of acquisition costs	335,345			72,731			7,838																415,914
Commissions, premium taxes, and non-deferred acquisition costs	143,174			79,475			47												(233		)	⁽²⁾	222,463
Insurance administrative expense ⁽¹⁾													174,832						2,422			⁽³⁾	177,254
Parent expense																$	8,159		(85		)	⁽³⁾	8,074
Stock-based compensation expense																32,203							32,203
Interest expense										76,126													76,126
Total expenses	1,409,811			670,121			(3,912		)	533,922			174,832			40,362			10,282				2,835,418
Subtotal	556,489			199,319			4,312			224,364			(172,478		)	(40,362		)	(10,515		)		761,129
Non-operating items																			10,515			^(3,4)	10,515
Measure of segment profitability (pretax)	$	556,489		$	199,319		$	4,312		$	224,364		$	(172,478	)	$	(40,362	)	$	—			771,644
Deduct applicable income taxes																							(252,041		)
Segment profits after tax																							519,603
Add back income taxes applicable to segment profitability																							252,041
Add (deduct) realized investment gains (losses) and impairments																							23,548
Deduct legal settlement expenses ⁽³⁾																							(2,337		)
Deduct administrative settlements ⁽⁴⁾																							(8,178		)
Pretax income per Consolidated Statement of Operations																							$	784,677

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

(2) Elimination of intersegment commission.

(3) Legal settlement expenses.

(4) Administrative settlements.

(5) Retrospectively adjusted to give effect to the adoption of ASU 2014-01 as described in Note 1—Significant Accounting Policies .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)



	For the Year 2013
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	1,885,332		$	863,818		$	532															$	2,749,682
Net investment income ⁽⁶⁾										$	734,650												734,650
Other income													$	2,208					$	(277	)	⁽²⁾	1,931
Total revenue	1,885,332			863,818			532			734,650			2,208						(277		)		3,486,263
Expenses:
Policy benefits	1,227,857			558,982			43,302												8,625			⁽⁴⁾	1,838,766
Required interest on:
Policy reserves	(508,236		)	(59,858		)	(57,294		)	625,388													—
Deferred acquisition costs	164,981			22,568			1,811			(189,360		)											—
Amortization of acquisition costs	323,950			69,724			8,714												(1,519		)	⁽⁵⁾	400,869
Commissions, premium taxes, and non-deferred acquisition costs	131,721			75,895			60												(277		)	⁽²⁾	207,399
Insurance administrative expense ⁽¹⁾													175,651						1,155			⁽³⁾	176,806
Parent expense																$	8,495		500			⁽⁴⁾	8,995
Stock-based compensation expense																25,642							25,642
Interest expense										80,461													80,461
Total expenses	1,340,273			667,311			(3,407		)	516,489			175,651			34,137			8,484				2,738,938
Subtotal	545,059			196,507			3,939			218,161			(173,443		)	(34,137		)	(8,761		)		747,325
Non-operating items																			8,761			^(3,4,5)	8,761
Measure of segment profitability (pretax)	$	545,059		$	196,507		$	3,939		$	218,161		$	(173,443	)	$	(34,137	)	$	—			756,086
Deduct applicable income taxes																							(246,686		)
Segment profits after tax																							509,400
Add back income taxes applicable to segment profitability																							246,686
Add (deduct) realized investment gains (losses) and impairments																							7,990
Deduct Guaranty Fund Assessment ⁽³⁾																							(1,155		)
Deduct legal settlement expenses ⁽⁴⁾																							(9,125		)
Add Family Heritage Life acquisition adjustments ⁽⁵⁾																							1,519
Pretax income per Consolidated Statement of Operations																							$	755,315

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

(2) Elimination of intersegment commission.

(3) Guaranty Fund Assessment.

(4) Legal settlement expenses.

(5) Family Heritage Life acquisition adjustments.

(6) Retrospectively adjusted to give effect to the adoption of ASU 2014-01 as described in Note 1—Significant Accounting Policies .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)

The following table summarizes the measures of segment profitability as determined in the three preceding tables for comparison with prior periods. The table also reconciles segment profits to net income.

Analysis of Profitability by Segment



	2015			2014			2013			2015 Change			%		2014 Change			%
Life insurance underwriting margin	$	569,402		$	556,489		$	545,059		$	12,913		2		$	11,430		2
Health insurance underwriting margin	204,377			199,319			196,507			5,058			3		2,812			1
Annuity underwriting margin	4,568			4,312			3,939			256			6		373			9
Excess investment income	219,504			224,364			218,161			(4,860		)	(2	)	6,203			3
Other insurance:
Other income	2,379			2,354			2,208			25			1		146			7
Administrative expense	(186,191		)	(174,832		)	(175,651		)	(11,359		)	6		819			—
Corporate and adjustments	(37,667		)	(40,362		)	(34,137		)	2,695			(7	)	(6,225		)	18
Pre-tax total	776,372			771,644			756,086			4,728			1		15,558			2
Applicable taxes	(253,459		)	(252,041		)	(246,686		)	(1,418		)	1		(5,355		)	2
After-tax total, before discontinued operations	522,913			519,603			509,400			3,310			1		10,203			2
Discontinued operations (after tax) ⁽¹⁾	10,807			14,865			21,267			(4,058		)	(27	)	(6,402		)	(30	)
Total	533,720			534,468			530,667			(748		)	—		3,801			1
Realized gains (losses)—investments (after tax)	(5,714		)	15,306			3,965			(21,020		)			11,341
Family Heritage acquisition finalization adjustments (after tax)	—			—			522			—					(522		)
Legal settlement expenses (after tax)	—			(1,519		)	(5,931		)	1,519					4,412
Guaranty Fund assessment (after tax)	—			—			(751		)	—					751
Administrative settlements (after tax)	(906		)	(5,316		)	—			4,410					(5,316		)
Net income	$	527,100		$	542,939		$	528,472		$	(15,839	)	(3	)	$	14,467		3

(1) Income from discontinued operations (after tax) is included for purposes of reconciling to net income.

Assets for each segment are reported based on a specific identification basis. The insurance segments’ assets contain deferred acquisition costs (including the value of insurance purchased). The investment segment includes the investment portfolio, cash, and accrued investment income. Goodwill is assigned to the insurance segments at the time of purchase based on the excess of cost over the fair value of assets acquired for the benefit of that segment. All other assets are included in the Other category. The table below reconciles segment assets to total assets as reported in the consolidated financial statements.

Assets by Segment



	At December 31, 2015
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	14,405,073			$	14,405,073
Accrued investment income							209,915				209,915
Deferred acquisition costs	$	3,098,656	$	502,535	$	15,944					3,617,135
Goodwill	309,609		131,982								441,591
Other assets									$	1,179,499	1,179,499
Total assets	$	3,408,265	$	634,517	$	15,944	$	14,614,988	$	1,179,499	$	19,853,213

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(Dollar amounts in thousands except per share data)

Note 14—Business Segments (continued)



	At December 31, 2014
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	15,058,996			$	15,058,996
Accrued investment income							204,879				204,879
Deferred acquisition costs	$	2,946,995	$	493,880	$	16,522					3,457,397
Goodwill	309,609		131,982								441,591
Other assets									$	1,109,396	1,109,396
Total assets	$	3,256,604	$	625,862	$	16,522	$	15,263,875	$	1,109,396	$	20,272,259

Liabilities for each segment are reported also on a specific identification basis similar to the assets. The insurance segments' liabilities contain future policy benefits, unearned and advance premiums, and policy claims and other benefits payable. Other policyholders' funds are included in Other. Debt represents both short and long term. Current and deferred income taxes payable is also included in Other.

Other Balances by Segment



	At December 31, 2015
	Life		Health		Annuity		Investment		Consolidated
Future policy benefits	$	9,327,561	$	1,600,240	$	1,318,010			$	12,245,811
Unearned and advance premiums	17,381		49,640						67,021
Policy claims and other benefits payable	135,778		137,120						272,898
Debt							$	1,233,862	1,233,862
Total	$	9,480,720	$	1,787,000	$	1,318,010	$	1,233,862	$	13,819,592



	At December 31, 2014
	Life		Health		Annuity		Investment		Consolidated
Future policy benefits	$	8,900,344	$	1,489,963	$	1,360,188			$	11,750,495
Unearned and advance premium	17,238		54,465						71,703
Policy claims and other benefits payable	125,884		128,265						254,149
Debt							$	1,230,528	1,230,528
Total	$	9,043,466	$	1,672,693	$	1,360,188	$	1,230,528	$	13,306,875

105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 15—Commitments and Contingencies

Reinsurance : Insurance affiliates of Torchmark reinsure that portion of insurance risk which is in excess of their retention limits. Retention limits for ordinary life insurance range up to $2.0 million per life. Life insurance ceded represented 0.4% of total life insurance in force at December 31, 2015 . Insurance ceded on life and accident and health products represented 0.3% of premium income for 2015 . Torchmark would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.

Insurance affiliates also assume insurance risks of other companies. Life reinsurance assumed represented 2.1% of life insurance in force at December 31, 2015 and reinsurance assumed on life and accident and health products represented 0.8% of premium income for 2015 .

Leases : Torchmark leases office space, office equipment, and aviation equipment under a variety of operating lease arrangements.

Rental expense for operating leases for each of the three years ended December 31, 2015 is as follows:



	Year Ended December 31,
	2015		2014		2013
Rental expense	$	6,722	$	4,200	$	4,100

Future minimum rental commitments required under operating leases having remaining noncancelable lease terms in excess of one year at December 31, 2015 were as follows:



	Year Ended December 31,
	2016		2017		2018		2019		2020		Thereafter
Operating lease commitments	$	8,304	$	7,888	$	4,738	$	4,531	$	4,372	$	11,122

Low-Income Housing Tax Credit Interests : As described in Note 1—Significant Accounting Policies , Torchmark had $306 million invested in entities which provide certain tax benefits at December 31, 2015 . As of December 31, 2015 , Torchmark remained obligated under these commitments as follows:



	Year Ended December 31,
	2016		2017		2018		Thereafter
Low-Income housing commitments	$	36,702	$	26,592	$	4,500	$	1,154

Investments : As of December 31, 2015 , Torchmark had committed to purchase $16 million of private placement fixed maturities managed by a third party.

Guarantees : At December 31, 2015 , Torchmark had in place four guarantee agreements, of which were either parent company guarantees of subsidiary obligations to a third party, or parent company guarantees of obligations between wholly-owned subsidiaries. As of December 31, 2015 , Torchmark had no liability with respect to these guarantees.

Letters of Credit : Torchmark has guaranteed letters of credit in connection with its credit facility with a group of banks as disclosed in Note 11—Debt . The letters of credit were issued by TMK Re, Ltd., a wholly-owned subsidiary, to secure TMK Re, Ltd.’s obligation for claims on certain policies reinsured by TMK Re, Ltd. that were sold by other Torchmark insurance companies. These letters of credit facilitate TMK Re, Ltd.’s ability to reinsure the business of Torchmark’s insurance carriers. The agreement expires in 2019. The maximum amount of letters of credit available is $250 million . The Torchmark parent company would be liable to the extent that TMK Re, Ltd. does not pay the reinsured party. At December 31, 2015 , $177 million of letters of credit were outstanding, compared with $198 million a year earlier.

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(Dollar amounts in thousands except per share data)

Note 15—Commitments and Contingencies (continued)

Equipment leases : Torchmark has guaranteed performance of certain subsidiaries as lessees under three leasing arrangements which include two for aviation equipment and one for computer software, furniture, and equipment. One aviation lease expires in August 2022 and the second expires in September 2024. The office equipment lease expires in December 2017. At December 31, 2015 , total remaining undiscounted payments under the leases were approximately $19 million . The Torchmark parent company would be responsible for any subsidiary obligation in the event the subsidiary did not make payments or otherwise perform under the terms of the lease.

Unclaimed Property Audits : Torchmark subsidiaries are currently the subject of audits regarding the identification, reporting and escheatment of unclaimed property arising from life insurance policies and a limited number of annuity contracts. These audits are being conducted by private entities that have contracted with forty-seven various states through their respective Departments of Revenue, and have not resulted in any financial assessment from any state nor indicated any liability. The audits are wide-ranging and seek large amounts of data regarding claims handling, procedures, and payments of contract benefits arising from unreported death claims. No estimate of range can be made at this time for loss contingencies related to possible administrative penalties or amounts that could be payable to the states for the escheatment of abandoned property.

Sanction : During the third quarter of 2015, Centers for Medicare & Medicaid Services (CMS) placed United American Life Insurance Company (UA) and First United American Life Insurance Company (FUA) on Enrollment Sanction. During this time, Torchmark is not permitted to enroll new individuals or groups into our Medicare Part D program. Torchmark is permitted to re-enroll existing individual members into our 2016 plans, as well as enroll new members of groups that were policyholders at the time the sanction was initiated. Torchmark has submitted a remediation plan that has been accepted by CMS, and Torchmark is proceeding with this plan in an effort to have the sanction lifted as soon as possible. As discussed in Note 6—Discontinued Operations , the Medicare Part D business is held for sale and reflected in discontinued operations.

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

With respect to its current litigation, at this time management believes that the possibility of a material judgment adverse to Torchmark is remote, and no estimate of range can be made for loss contingencies that are at least reasonably possible but not accrued.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands except per share data)

Note 16—Selected Quarterly Data (Unaudited)

The following is an unaudited summary of quarterly results for the two years ended December 31, 2015 . The information includes all adjustments (consisting of normal accruals) which management considers necessary for a fair presentation of the results of operations for these periods.



	Three Months Ended
	March 31,			June 30,			September 30,		December 31,
2015:
Premium income	$	742,056		$	752,484		$	748,109	756,071
Net investment income	191,596			194,823			193,213		194,319
Realized investment gains (losses)	119			2,613			5,140		(16,663	)
Total revenue	934,440			950,611			947,154		933,860
Policyholder benefits	497,775			508,316			501,156		508,965
Amortization of deferred acquisition costs	110,660			111,738			111,643		111,584
Pretax income from continuing operations	194,477			196,723			199,009		175,978
Income from continuing operations	130,778			132,527			133,858		119,130
Income from discontinued operations	(9,130		)	(5,417		)	11,528		13,826
Net income	121,648			127,110			145,386		132,956
Basic net income per common share
Continuing operations	1.03			1.05			1.08		0.97
Discontinued operations	(0.07		)	(0.04		)	0.09		0.11
Total basic net income per share	0.96			1.01			1.17		1.08
Diluted net income per common share
Continuing operations	1.02			1.04			1.06		0.96
Discontinued operations	(0.07		)	(0.04		)	0.09		0.11
Total diluted net income per share	0.95			1.00			1.15		1.07



2014 ⁽¹⁾ :
Premium income	$	708,592		$	707,173	$	702,061		$	718,314
Net investment income	188,051			189,930		189,588			190,717
Realized investment gains (losses)	16,619			577		(1,483		)	7,835
Total revenue	913,743			898,343		890,834			917,175
Policyholder benefits	472,585			473,007		473,098			484,694
Amortization of deferred acquisition costs	104,028			103,889		103,084			104,913
Pretax income from continuing operations	209,037			191,922		184,709			199,009
Income from continuing operations	140,330			129,695		124,390			133,659
Income from discontinued operations	(7,474		)	1,228		8,022			13,089
Net income	132,856			130,923		132,412			146,748
Basic net income per common share
Continuing operations	1.05			0.99		0.96			1.04
Discontinued operations	(0.05		)	0.01		0.06			0.10
Total basic net income per share	1.00			1.00		1.02			1.14
Diluted net income per common share
Continuing operations	1.04			0.97		0.94			1.03
Discontinued operations	(0.06		)	0.01		0.06			0.10
Total diluted net income per share	0.98			0.98		1.00			1.13

(1) Certain balances were adjusted to give effect to discontinued operations and the adoption of new accounting guidance as described in Note 1—Significant Accounting Policies .

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

No disagreements with accountants on any matter of accounting principles or practices or financial statement disclosure have been reported on a Form 8-K within the twenty-four months prior to the date of the most recent financial statements.

Item 9A. Controls and Procedures

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

As of the end of the fiscal year completed December 31, 2015 , an evaluation was performed under the supervision and with the participation of Torchmark management, including the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, of Torchmark’s disclosure controls and procedures (as those terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon their evaluation, the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer have concluded that Torchmark’s disclosure controls and procedures are effective as of the date of this Form 10-K. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), each of these officers executed a Certification included as an exhibit to this Form 10-K.

As of the quarter ended December 31, 2015 , there have not been any changes in Torchmark’s internal control over financial reporting or in other factors that could significantly affect this control over financial reporting subsequent to the date of their evaluation which have materially affected, or are reasonably likely to materially affect, Torchmark’s internal control over financial reporting. No material weaknesses in such internal controls were identified in the evaluation and as a consequence, no corrective action was required to be taken.

Item 9B. Other Information

There were no items required.

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Management’s Report on Internal Control over Financial Reporting

Management at Torchmark Corporation is responsible for establishing and maintaining adequate internal control over financial reporting for the Company and for assessing the effectiveness of internal control on an annual basis. As a framework for assessing internal control over financial reporting, the Company utilizes the criteria for effective internal control over financial reporting described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Management evaluated the Company’s internal control over financial reporting, and based on its assessment, determined that the Company’s internal control over financial reporting was effective as of December 31, 2015 . The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting as stated in their report which is included herein.



/s/ Gary L. Coleman
Gary L. Coleman Co-Chairman and Chief Executive Officer

/s/ Larry M. Hutchison
Larry M. Hutchison Co-Chairman and Chief Executive Officer

/s/ Frank M. Svoboda
Frank M. Svoboda Executive Vice President and Chief Financial Officer

February 26, 2016

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Torchmark Corporation

McKinney, Texas

We have audited the internal control over financial reporting of Torchmark Corporation and subsidiaries (Torchmark) as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Torchmark's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Torchmark's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Torchmark maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2015 of Torchmark and our report dated February 26, 2016 expressed an unqualified opinion on those financial statements and financial statement schedules.

/s/ Deloitte & Touche LLP

Dallas, Texas

February 26, 2016

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this item is incorporated by reference from the sections entitled “Election of Directors,” “Profiles of Director Nominees,” “Executive Officers,” “Audit Committee Report,” “Governance Guidelines and Codes of Ethics,” “Director Qualification Standards,” “Procedures for Director Nominations by Stockholders,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement for the Annual Meeting of Stockholders to be held May 12, 2016 (the Proxy Statement), which is to be filed with the Securities and Exchange Commission (SEC).

Item 11. Executive Compensation

Information required by this item is incorporated by reference from the sections entitled “Compensation Discussion and Analysis”, “Compensation Committee Report”, “Summary Compensation Table”, “ 2015 Grants of Plan-based Awards”, “Outstanding Equity Awards at Fiscal Year End 2015 ”, “Option Exercises and Stock Vested during Fiscal Year Ended December 31, 2015 ”, “Pension Benefits at December 31, 2015 ”, “Potential Payments upon Termination or Change in Control”, “ 2015 Director Compensation”, “Payments to Directors” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement, which is to be filed with the SEC.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


(a)	Equity Compensation Plan Information as of December 31, 2015



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted-average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders	7,734,841	$	38.84	6,872,282
Equity compensation plans not approved by security holders	0	0		0
Total	7,734,841	$	38.84	6,872,282


(b)	Security ownership of certain beneficial owners:

Information required by this item is incorporated by reference from the section entitled “Principal Stockholders” in the Proxy Statement, which is to be filed with the SEC.


(c)	Security ownership of management:

Information required by this item is incorporated by reference from the section entitled “Stock Ownership” in the Proxy Statement, which is to be filed with the SEC.


(d)	Changes in control:

Torchmark knows of no arrangements, including any pledges by any person of its securities, the operation of which may at a subsequent date result in a change of control.

Item 13. Certain Relationships and Related Transactions and Director Independence

Information required by this item is incorporated by reference from the sections entitled “Related Party Transaction Policy and Transactions” and “Director Independence Determinations” in the Proxy Statement, which is to be filed with the SEC.

Item 14. Principal Accountant Fees and Services

Information required by this Item is incorporated by reference from the section entitled “Principal Accounting Firm Fees” and “Pre-approval Policy” in the Proxy Statement, which is to be filed with the SEC.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

Index of documents filed as a part of this report:



	Page of this report
Financial Statements:

Torchmark Corporation and Subsidiaries:
Report of Independent Registered Public Accounting Firm	49
Consolidated Balance Sheets at December 31, 2015 and 2014	50
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2015	51
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2015	52
Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2015	53
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2015	54
Notes to Consolidated Financial Statements	55
Schedules Supporting Financial Statements for each of the three years in the period ended December 31, 2015:
II. Condensed Financial Information of Registrant (Parent Company)	121
IV. Reinsurance (Consolidated)	125
Schedules not referred to have been omitted as inapplicable or not required by Regulation S-X.

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EXHIBITS



		Page of this Report
3.1	Restated Certificate of Incorporation of Torchmark Corporation, filed with the Delaware Secretary of State on April 30, 2010 (incorporated by reference from Exhibit 3.1.2 to Form 8-K dated May 5, 2010)

3.2	Amended and Restated By-Laws of Torchmark Corporation, as amended April 20, 2012 (incorporated by reference from Exhibit 3.2 to Form 8-K dated April 24, 2012)

4.1	Specimen Common Stock Certificate (incorporated by reference from Exhibit 4(a) to Form 10-K for the fiscal year ended December 31, 1989)

4.2	Trust Indenture dated as of February 1, 1987 between Torchmark Corporation and Morgan Guaranty Trust Company of New York, as Trustee (incorporated by reference from Exhibit 4(b) to Form S-3 for $300,000,000 of Torchmark Corporation Debt Securities and Warrants (Registration No. 33-11816))

4.3	Junior Subordinated Indenture, dated November 2, 2001, between Torchmark Corporation and The Bank of New York defining the rights of the 7 ³ / 4 % Junior Subordinated Debentures (incorporated by reference from Exhibit 4.3 to Form 8-K dated November 2, 2001)

4.4	Supplemental Indenture, dated as of December 14, 2001, between Torchmark, BankOne Trust Company, National Association and The Bank of New York, supplementing the Indenture Agreement dated February 1, 1987 (incorporated herein by reference to Exhibit 4(b) to Torchmark’s Registration Statement on Form S-3 (File No. 33-11716), and defining the rights of the 6 ¹ / 4 % Senior Notes (incorporated by reference from Exhibit 4.1 to Form 8-K dated December 14, 2001)

4.5	Second Supplemental Indenture dated as of June 23, 2006 between Torchmark Corporation, J.P. Morgan Trust Company, National Association and The Bank of New York Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K filed June 23, 2006)

4.6	Third Supplemental Indenture dated as of June 30, 2009 between Torchmark Corporation and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4 to Form 10-Q for the quarter ended June 30, 2009)

4.7	Fourth Supplemental Indenture dated as of September 24, 2012 between Torchmark Corporation and The Bank of New York Mellon Trust Company, N. A., as Trustee, supplementing the Indenture dated February 1, 1987 (incorporated by reference from Exhibit 4.2 to Form 8-K dated September 24, 2012)

4.8	First Supplemental Indenture dated as of September 24, 2012, between Torchmark Corporation and The Bank of New York Mellon Trust Company, N. A., as Trustee, supplementing the Junior Subordinated Indenture dated November 2, 2001, (incorporated by reference from Exhibit 4.5 to Form 8-K dated September 24, 2012)

4.9	Certificate and Declaration of Trust of SAFC Statutory Trust I dated February 16, 2006 (incorporated by reference from Exhibit 4.9 to Form 10-K for the fiscal year ended December 31, 2012)

4.10	Amended and Restated Declaration of Trust of SAFC Statutory Trust I dated March 1, 2006 (incorporated by reference from Exhibit 4.10 to Form 10-K for the fiscal year ended December 31, 2012)

4.11	Indenture dated as of March 1, 2006 for Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036 between Southwestern American Financial Corporation and Wilmington Trust Company (incorporated by reference from Exhibit 4.11 to Form 10-K for the fiscal year ended December 31, 2012)

10.1	Torchmark Corporation and Affiliates Retired Lives Reserve Agreement, as amended, and Trust (incorporated by reference from Exhibit 10(b) to Form 10-K for the fiscal year ended December 31, 1991)*

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		Page of this Report
10.2	Capital Accumulation and Bonus Plan of Torchmark Corporation, as amended, (incorporated by reference from Exhibit 10(c) to Form 10-K for the fiscal year ended December 31, 1988)*

10.3	Torchmark Corporation Supplementary Retirement Plan (incorporated by reference from Exhibit 10(c) to Form 10-K for the fiscal year ended December 31, 1992)*

10.4	Amended and Restated Credit Agreement dated as of July 16, 2014 among Torchmark Corporation, as the Borrower, TMK Re, Ltd., as a Loan Party, Wells Fargo Bank, National Association, as Administrative Agent, Swing Line Lender, L/C Issuer and L/C Administrator and the other lenders party thereto (incorporated by reference from Exhibit 10.1 to Form 8-K dated July 21, 2014)

10.5	Certified Copy of Resolution Regarding Director Retirement Benefit Program (incorporated by reference from Exhibit 10(e) to Form 10-K for the fiscal year ended December 31, 1999)*

10.6	Torchmark Corporation Restated Deferred Compensation Plan for Directors, Advisory Directors, Directors Emeritus and Officers, as amended (incorporated by reference from Exhibit 10(e) to Form 10-K for the fiscal year ended December 31, 1992)*

10.7	The Torchmark Corporation 1987 Stock Incentive Plan (incorporated by reference from Exhibit 10(f) to Form 10-K for the fiscal year ended December 31, 1998)*

10.8	General Agency Contract between Liberty National Life Insurance Company and First Command Financial Services, Inc., (formerly known as Independent Research Agency For Life Insurance, Inc.) (incorporated by reference from Exhibit 10(i) to Form 10-K for the fiscal year ended December 31, 1990)

10.9	Amendment to General Agency Contract between First Command Financial Services and Liberty National Life Insurance Company (incorporated by reference from Exhibit 10.1 to Form 10-Q for the First Quarter 2005)

10.10	Form of Deferred Compensation Agreement Between Torchmark Corporation or Subsidiary and Officer at the Level of Vice President or Above Eligible to Participate in the Torchmark Corporation and Affiliates Retired Lives Reserve Agreement and to Retire Prior to December 31, 1986 (incorporated by reference from Exhibit 10(k) to Form 10-K for the fiscal year ended December 31, 1991)*

10.11	Form of Deferred Compensation Agreement between Torchmark Corporation or Subsidiary and Officer at the Level of Vice President or Above Eligible to Participate in the Torchmark Corporation and Affiliates Retired Lives Reserve Agreement and Not Eligible to Retire Prior to December 31, 1986 (incorporated by reference from Exhibit 10(l) to Form 10-K for the fiscal year ended December 31, 1991)*

10.12	Form of Deferred Compensation Agreement Between Torchmark Corporation or Subsidiary and Officer at the Level of Vice President or Above Not Eligible to Participate in Torchmark Corporation and Affiliates Retired Lives Reserve Agreement (incorporated by reference from Exhibit 10(j) to Form 10-K for the fiscal year ended December 31, 1991)*

10.13	Service Agreement, dated as of January 1, 1991, between Torchmark Corporation and Liberty National Life Insurance Company (prototype for agreements between Torchmark Corporation and other principal operating subsidiaries) (incorporated by reference from Exhibit 10(n) to Form 10-K for the fiscal year ended December 31, 1992)

10.14	The Torchmark Corporation Amended and Restated Pension Plan Generally Effective as of January 1, 2014*

10.15	The Torchmark Corporation 1998 Stock Incentive Plan (incorporated by reference from Exhibit 10(n) to Form 10-K for the fiscal year ended December 31, 1998)*

10.16	The Torchmark Corporation Savings and Investment Plan (amended and restated as of January 1, 2014)*

10.17	Torchmark Corporation 2013 Management Incentive Plan effective as of January 1, 2013 (incorporated by reference from Exhibit 10.1 to Form 8-K dated April 30, 2013)*

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		Page of this Report
10.18	Coinsurance and Servicing Agreement between Security Benefit Life Insurance Company and Liberty National Life Insurance Company, effective as of December 31, 1995 (incorporated by reference from Exhibit 10(u) to Form 10-K for the fiscal year ended December 31, 1995)

10.19	Torchmark Corporation 1996 Non-Employee Director Stock Option Plan (incorporated by reference from Exhibit 10(w) to Form 10-K for the fiscal year ended December 31, 1996)*

10.20	Torchmark Corporation 1996 Executive Deferred Compensation Stock Option Plan (incorporated by reference from Exhibit 10(x) to Form 10-K for the fiscal year ended December 31, 1996)*

10.21	Form of Retirement Life Insurance Benefit Agreement ($1,995,000 face amount limit) (incorporated by reference from Exhibit 10(z) to Form 10-K for the fiscal year ended December 31, 2001)*

10.22	Form of Retirement Life Insurance Benefit Agreement ($495,000 face amount limit) (incorporated by reference from Exhibit 10(aa) to Form 10-K for the fiscal year ended December 31, 2001)*

10.23	Payments to Directors*

10.24	Form of Non-Formula Based Director Stock Option Agreement pursuant to Torchmark Corporation 2005 Non-Employee Director Incentive Plan (incorporated by reference from Exhibit 10.2 to Form 10-Q for the First Quarter 2005)*

10.25	Form of Stock Option Agreement pursuant to Torchmark Corporation 2005 Incentive Plan (Section 16(a) (restoration)) (incorporated by reference from Exhibit 10.3 to Form 10-Q for the First Quarter 2005)*

10.26	Form of Stock Option Agreement pursuant to Torchmark Corporation 2005 Incentive Plan (restoration general) (incorporated by reference from Exhibit 10.4 to Form 10-Q for the First Quarter 2005)*

10.27	Form of Stock Option Agreement pursuant to Torchmark Corporation 2005 Incentive Plan (bonus) (incorporated by reference from Exhibit 10.36 to Form 10-K for the fiscal year ended December 31, 2005)*

10.28	Form of Stock Option Agreement pursuant to Torchmark Corporation 2005 Incentive Plan (regular vesting) (incorporated by reference from Exhibit 10.37 to Form 10-K for the fiscal year ended December 31, 2005)*

10.29	Torchmark Corporation 2005 Non-Employee Director Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated May 4, 2005)*

10.30	Torchmark Corporation 2005 Stock Incentive Plan (incorporated by reference from Exhibit 10.2 to Form 8-K dated May 4, 2005)*

10.31	Form of Deferred Compensation Stock Option Grant Agreement pursuant to the Torchmark Corporation 2005 Non-Employee Director Incentive Plan (incorporated by reference from Exhibit 10.3 to Form 8-K dated May 4, 2005)*

10.32	Torchmark Corporation Amended and Restated 2005 Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 10-Q for quarter ended March 31, 2006)*

10.33	Torchmark Corporation Amended and Restated 2005 Non-Employee Director Incentive Plan (incorporated by reference from Exhibit 10.2 to Form 10-Q for quarter ended March 31, 2006)*

10.34	Form of Director Stock Option Issued under Torchmark Corporation Amended and Restated 2005 Non-Employee Director Incentive Plan (incorporated by reference from Exhibit 10.3 to Form 10-Q for quarter ended March 31, 2006)*

10.35	Amendment One to Torchmark Corporation Supplementary Retirement Plan (incorporated by reference from Exhibit 10.4 to Form 10-Q for quarter ended March 31, 2006)*

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		Page of this Report
10.36	Torchmark Corporation Supplemental Executive Retirement Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated January 25, 2007)*

10.37	Torchmark Corporation 2007 Long-Term Compensation Plan (incorporated by reference from Exhibit 99.1 to Form 8-K dated May 2, 2007)*

10.38	Form of Stock Option Award Agreement under Torchmark Corporation 2007 Long-Term Compensation Plan (incorporated by reference from Exhibit 99.2 to Form 8-K dated May 2, 2007)*

10.39	Form of Restricted Stock Award (Board grant) under Torchmark Corporation 2007 Long-Term Compensation Plan (incorporated by reference from Exhibit 99.3 to Form 8-K dated May 2, 2007)*

10.40	Torchmark Corporation Non-Employee Director Compensation Plan, as amended and restated (incorporated by reference from Exhibit 10.1 to Form 8-K dated April 29, 2008)*

10.41	Amendment No. 1 to the Torchmark Corporation Supplemental Executive Retirement Plan (incorporated by reference from Exhibit 10.53 to Form 10-K for the fiscal year ended December 31, 2007)*

10.42	Amendment No. 2 to the Torchmark Corporation Supplemental Executive Retirement Plan (incorporated by reference from Exhibit 10.54 to Form 10-K for the fiscal year ended December 31, 2007)*

10.43	Amendment No. 2 to the Torchmark Corporation Supplementary Retirement Plan (incorporated by reference from Exhibit 10.55 to Form 10-K for the fiscal year ended December 31, 2007)*

10.44	Amendment No. 3 to the Torchmark Corporation Supplementary Retirement Plan (incorporated by reference from Exhibit 10.56 to Form 10-K for the fiscal year ended December 31, 2007)*

10.45	Form of Restricted Stock Award Notice under Torchmark Corporation Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.57 to Form 10-K for the fiscal year ended December 31, 2007)*

10.46	Form of Restricted Stock Unit Award Notice under Torchmark Corporation Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.58 to Form 10-K for the fiscal year ended December 31, 2007)*

10.47	Form of Restricted Stock Award (Compensation Committee grant) under Torchmark Corporation 2007 Long-Term Compensation Plan (incorporated by reference from Exhibit 10.59 to Form 10-K for the fiscal year ended December 31, 2007)*

10.48	Amendment Four to the Torchmark Corporation Supplementary Retirement Plan (incorporated by reference from Exhibit 10.52 to Form 10-K for the fiscal year ended December 31, 2008)*

10.49	Amendment Three to the Torchmark Corporation Supplemental Executive Retirement Plan (incorporated by reference from Exhibit 10.53 to Form 10-K for the fiscal year ended December 31, 2008)*

10.50	Amendment One to the Torchmark Corporation Restated Deferred Compensation Plan for Directors, Advisory Directors, Directors Emeritus and Officers (incorporated by reference from Exhibit 10.54 to Form 10-K for the fiscal year ended December 31, 2008)*

10.51	Amendment Two to the Torchmark Corporation Restated Deferred Compensation Plan (incorporated by reference from Exhibit 10.55 to Form 10-K for the fiscal year ended December 31, 2008)*

10.52	Amendment to the Torchmark Corporation 2007 Long-Term Compensation Plan (incorporated by reference from Exhibit 10.56 to Form 10-K for the fiscal year ended December 31, 2008)*

10.53	Receivables Purchase Agreement dated as of December 31, 2008 among AILIC Receivables Corporation, American Income Life Insurance Company and TMK Re, Ltd. (incorporated by reference from Exhibit 10.1 to Form 8-K dated January 6, 2009)

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		Page of this Report
10.54	Amendment No.1 to Receivables Purchase Agreement dated as of December 31, 2008 among AILIC Receivables Corporation, American Income Life Insurance Company, and TMK Re, Ltd. (incorporated by reference to Exhibit 10.58 to Form 10-K for the fiscal year ended December 31, 2013)

10.55	Torchmark Corporation Amended 2011 Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2014)*

10.56	Form of Stock Option under Torchmark Corporation 2011 Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.57 to Form 10-K for fiscal year ended December 31,2010)*

10.57	Form of Restricted Stock Award Notice under Torchmark Corporation 2011 Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.58 to Form 10-K for fiscal year ended December 31, 2010)*

10.58	Form of Restricted Stock Unit Award Notice under Torchmark Corporation 2011 Non-Employee Director Compensation Plan (incorporated by reference from Exhibit 10.59 to Form 10-K for fiscal year ended December 31, 2010)*

10.59	Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated May 4, 2011)*

10.60	Form of Restricted Stock Award (Executive) under Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.2 to Form 8-K dated May 4, 2011)*

10.61	Form of Restricted Stock Award (Special) under Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.3 to Form 8-K dated May 4, 2011)*

10.62	Form of Ten year Stock Option under Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.4 to Form 8-K dated May 4, 2011)*

10.63	Form of Seven year Stock Option under Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.5 to Form 8-K dated May 4, 2011)*

10.64	Form of Performance Share Award under Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated February 27, 2012)*

10.65	First Amendment to Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated April 29, 2014)*

10.66	Form of Stock Option Grant Agreement (Special) pursuant to Torchmark Corporation 2011 Incentive Plan (incorporated by reference from Exhibit 10.1 to Form 8-K dated May 31, 2013)*

10.67	Amendment to Restricted Stock Award Agreement of February 26, 2009 between Torchmark Corporation and Mark S. McAndrew (incorporated by reference from Exhibit 10.2 to Form 8-K dated May 31, 2013)*

10.68	Amendment to Restricted Stock Award Agreement of February 25, 2010 between Torchmark Corporation and Mark S. McAndrew (incorporated by reference from Exhibit 10.3 to Form 8-K dated May 31, 2013)*

10.71	Amendment to Restricted Stock Award Agreement of April 28, 2011 between Torchmark Corporation and Mark S. McAndrew (incorporated by reference from Exhibit 10.4 to Form 8-K dated May 31, 2013)*

10.72	Consent and Acknowledgement of Amendment to Non-Qualified Stock Option Grant Agreement dated April 8, 2013 (incorporated by reference from Exhibit 10.1 to Form 8-K dated April 8, 2013)*

10.73	First Amendment to Amended and Restated Credit Agreement dated as of June 30, 2015 among Torchmark Corporation, TMK Re, Ltd., the Lenders listed therein and Wells Fargo Bank, National Association ( incorporated by reference from Exhibit 10.1 to Form 8-K dated July 2, 2015)

118

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		Page of this Report
10.74	Amendment Five to the Torchmark Corporation Supplemental Executive Retirement Plan ( incorporated by reference to Exhibit 10.1 to Form 8-K dated May 5, 2015)

10.75	Form of Seven Year Stock Option Grant Agreement under Torchmark Corporation 2011 Incentive Plan, as amended with Non-Compete, Non-Solicit and Confidentiality Provisions (incorporated by reference from Exhibit 10.1 to Form 8-K dated March 3, 2015)*

10.76	Form of Ten Year Stock Option Grant Agreement under Torchmark Corporation 2011 Incentive Plan, as amended with Non-Compete, Non-Solicit and Confidentiality Provisions (incorporated by reference from Exhibit 10.2 to Form 8-K dated March 3, 2015)*
10.77	Form of Performance Share Award Certificate torchmark Corporation 2011 Incentive Plan, as amended with Non-Compete, Non-Solicit and Confidentiality Provisions (incorporated by reference from Exhibit 10.3 to Form 8-K dated March 3, 2015)*

12	Statement re computation of ratios

20	Proxy Statement for Annual Meeting of Stockholders to be held May 12, 2016**

21	Subsidiaries of the registrant	120

23	Consent of Deloitte & Touche LLP

24	Powers of attorney

31.1	Rule 13a-14(a)/15d-14(a) Certification by Gary L. Coleman

31.2	Rule 13a-14(a)/15d-14(a) Certification by Larry M. Hutchison

31.3	Rule 13a-14(a)/15d-14(a) Certification by Frank M. Svoboda

32.1	Section 1350 Certification by Gary L. Coleman, Larry M. Hutchison and Frank M. Svoboda

101	Interactive Data File

* Compensatory plan or arrangement.

** To be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2015 .

119

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Index to Financial Statements

Exhibit 21. Subsidiaries of the Registrant

The following table lists subsidiaries of the registrant which meet the definition of “significant subsidiary” according to Regulation S-X:



Company	State of Incorporation	Name Under Which Company Does Business
American Income Life Insurance Company	Indiana	American Income Life Insurance Company
Globe Life And Accident Insurance Company	Nebraska	Globe Life And Accident Insurance Company
Liberty National Life Insurance Company	Nebraska	Liberty National Life Insurance Company
United American Insurance Company	Nebraska	United American Insurance Company

All other exhibits required by Regulation S-K are listed as to location in the “Index of documents filed as a part of this report” in this report. Exhibits not referred to have been omitted as inapplicable or not required.

120

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Index to Financial Statements

TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

(Amounts in thousands)



	December 31,
	2015			2014
Assets:
Investments:
Long-term investments	$	35,498		$	38,910
Short-term investments	—			5,686
Total investments	35,498			44,596
Cash	—			—
Investment in affiliates	5,438,749			6,023,666
Due from affiliates	50,765			50,766
Taxes receivable from affiliates	79,599			76,050
Other assets	93,936			64,092
Total assets	$	5,698,547		$	6,259,170

Liabilities and shareholders’ equity:
Liabilities:
Short-term debt	$	490,129		$	238,398
Long-term debt	893,417			1,141,773
Due to affiliates	57,157			652
Other liabilities	202,292			180,881
Total liabilities	1,642,995			1,561,704

Shareholders’ equity:
Preferred stock	351			351
Common stock	130,218			134,218
Additional paid-in capital	832,795			808,124
Accumulated other comprehensive income	231,947			997,452
Retained earnings	3,614,369			3,376,846
Treasury stock	(754,128		)	(619,525		)
Total shareholders’ equity	4,055,552			4,697,466
Total liabilities and shareholders’ equity	$	5,698,547		$	6,259,170

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

Public Accounting Firm.

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TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

CONDENSED STATEMENTS OF OPERATIONS

(Amounts in thousands)



	Year Ended December 31,
	2015			2014			2013
Net investment income	$	23,715		$	22,259		$	24,268
Realized investment gains (losses)	8			4,767			—
Total revenue	23,723			27,026			24,268

General operating expenses	54,100			53,235			53,255
Reimbursements from affiliates	(53,436		)	(53,040		)	(46,855		)
Interest expense	79,677			79,366			84,273
Total expenses	80,341			79,561			90,673

Operating income (loss) before income taxes and equity in earnings of affiliates	(56,618		)	(52,535		)	(66,405		)
Income taxes	15,542			13,335			17,390
Net operating loss before equity in earnings of affiliates	(41,076		)	(39,200		)	(49,015		)
Equity in earnings of affiliates	568,176			582,139			577,487
Net income	527,100			542,939			528,472

Other comprehensive income (loss):
Attributable to Parent Company	(3,539		)	(28,680		)	38,557
Attributable to affiliates	(761,966		)	815,151			(752,851		)
Comprehensive income (loss)	$	(238,405	)	$	1,329,410		$	(185,822	)

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

Public Accounting Firm.

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Index to Financial Statements

TORCHMARK CORPORATION

(PARENT COMPANY)

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

CONDENSED STATEMENTS OF CASH FLOWS

(Amounts in thousands)



	Year Ended December 31,
	2015			2014			2013
Cash provided from (used for) operations before dividends from subsidiaries	$	(20,705	)	$	(21,358	)	$	(54,213	)
Cash dividends from subsidiaries	466,416			478,840			488,376
Cash provided from operations	445,711			457,482			434,163

Cash provided from (used for) investing activities:
Disposition of investments	—			5,064			514
Net decrease (increase) in short-term investments	17,338			2,729			(6,805		)
Investment in other subsidiaries	(2		)	—			—
Additions to properties	(468		)	—			—
Loaned money to affiliates	(282,508		)	(81,000		)	—
Repayments from affiliates	282,508			81,000			—
Cash provided from (used for) investing activities	16,868			7,793			(6,291		)

Cash provided from (used for) financing activities:
Repayment of 7.375% Notes	—			—			(94,050		)
Net issuance (repayment) of commercial paper	1,978			9,328			3,983
Issuance of stock	35,958			56,294			97,677
Acquisitions of treasury stock	(418,526		)	(449,309		)	(482,264		)
Borrowed money from affiliate	15,000			168,000			—
Repayments to affiliates	(15,000		)	(168,000		)	—
Net borrowings (to)/from affiliates	—			—			120,000
Excess tax benefit on stock option exercises	8,180			6,688			10,963
Payment of dividends	(90,169		)	(88,276		)	(84,181		)
Cash provided from (used for) financing activities	(462,579		)	(465,275		)	(427,872		)

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

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

Public Accounting Firm.

123

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Index to Financial Statements

TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Amounts in thousands)

Note A—Dividends from Subsidiaries

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



	Year Ended December 31,
	2015		2014		2013
Dividends from subsidiaries	$	466,416	$	478,840	$	488,376

Note B—Supplemental Disclosures of Cash Flow Information

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



	Year Ended December 31,
	2015		2014		2013
Stock-based compensation not involving cash	$	28,664	$	32,203	$	25,642
Dividend of subsidiary to Parent	—		—		1,246,557
Dividend of subsidiary applied to loan balance	—		—		72,000
Borrowed money from affiliate ⁽¹⁾	56,503		—		—
Investment in subsidiaries	39,206		—		—
Purchase of agent debit balances	17,297		—		—

(1) Balance was repaid on January 8, 2016.

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



	Year Ended December 31,
	2015			2014			2013
Interest paid	$	77,920		$	77,663		$	85,443
Income taxes received	(22,009		)	(25,581		)	(27,820		)

Note C—Preferred Stock

As of December 31, 2015 , Torchmark had 351 thousand shares of Cumulative Preferred Stock, Series A, issued and outstanding, of which 280 thousand shares were 6.50% Cumulative Preferred Stock, Series A, and 71 thousand shares were 7.15% Cumulative Preferred Stock, Series A (collectively, the “Series A Preferred Stock”). All issued and outstanding shares of Series A Preferred Stock were held by wholly-owned insurance subsidiaries. In the event of liquidation, the holders of the Series A Preferred Stock at the time outstanding would be entitled to receive a liquidating distribution out of the assets legally available to stockholders in the amount of $1 thousand per share or $351 million in the aggregate, plus any accrued and unpaid dividends, before any distribution is made to holders of Torchmark common stock. Holders of Series A Preferred Stock do not have any voting rights nor have rights to convert such shares into shares of any other class of Torchmark capital stock.

See accompanying Report of Independent Registered Public Accounting Firm.

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TORCHMARK CORPORATION

SCHEDULE IV. REINSURANCE (CONSOLIDATED)

(Amounts in thousands)



	Gross Amount		Ceded to Other Companies ⁽¹⁾		Assumed from Other Companies		Net Amount		Percentage of Amount Assumed to Net
For the Year Ended December 31, 2015
Life insurance in force	$	167,677,206	$	729,739	$	3,498,826	$	170,446,293	2.1
Premiums: ⁽²⁾
Life insurance	$	2,034,373	$	4,484	$	24,007	$	2,053,896	1.2
Health insurance	928,659		3,139		—		925,520		—
Total premium	$	2,963,032	$	7,623	$	24,007	$	2,979,416	0.8
For the Year Ended December 31, 2014
Life insurance in force	$	160,455,963	$	795,192	$	3,658,511	$	163,319,282	2.2
Premiums: ⁽²⁾
Life insurance	$	1,924,605	$	4,614	$	25,774	$	1,945,765	1.3
Health insurance ⁽³⁾	872,391		2,951		—		869,440		—
Total premium	$	2,796,996	$	7,565	$	25,774	$	2,815,205	0.9
For the Year Ended December 31, 2013
Life insurance in force	$	154,488,511	$	782,125	$	3,882,237	$	157,588,623	2.5
Premiums: ⁽²⁾
Life insurance	$	1,841,425	$	4,645	$	26,960	$	1,863,740	1.4
Health insurance ⁽³⁾	866,942		3,124		—		863,818		—
Total premium	$	2,708,367	$	7,769	$	26,960	$	2,727,558	1.0

(1) No amounts have been netted against ceded premium.

(2) Excludes policy charges of $19.3 million , $20.9 million , and $22.1 million in each of the years 2015 , 2014 , and 2013 , respectively.

(3) Certain balances were adjusted to give effect to discontinued operations as described in Note 1—Significant Accounting Policies in the Notes to the Consolidated Financial Statements .

See accompanying Report of Independent Registered Public Accounting Firm.

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SIGNATURES

Pursuant to the requirements of Section 12 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	T ORCHMARK C ORPORATION

	By:	/s/ G ARY L. C OLEMAN
		Gary L. Coleman
		Co-Chairman and Chief Executive Officer and Director

	By:	/s/ L ARRY M. H UTCHISON
		Larry M. Hutchison
		Co-Chairman and Chief Executive Officer and Director

	By:	/s/ F RANK M. S VOBODA
		Frank M. Svoboda, Executive Vice President and Chief Financial Officer (Principal Accounting Officer)

Date: February 26, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



By:	/s/ C HARLES E. A DAIR *	By:	/s/ L LOYD W. N EWTON *
	Charles E. Adair		Lloyd W. Newton
	Director		Director

By:	/ S / M ARILYN A. A LEXANDER *	By:	/s/ D ARREN M. R EBELEZ *
	Marilyn A. Alexander		Darren M. Rebelez
	Director		Director

By:	/ S / D AVID L. B OREN *	By:	/s/ L AMAR C. S MITH *
	David L. Boren		Lamar C. Smith
	Director		Director

By:	/s/ J ANE M. B UCHAN *	By:	/s/ P AUL J. Z UCCONI *
	Jane M. Buchan		Paul J. Zucconi
	Director		Director

By:	/s/ R OBERT W. I NGRAM *
	Robert W. Ingram
	Director



Date: February 26, 2016

*By:	/s/ F RANK M. S VOBODA
	Frank M. Svoboda
	Attorney-in-fact

126

Exhibit 10.14

THE

TORCHMARK CORPORATION

AMENDED AND RESTATED PENSION PLAN

GENERALLY EFFECTIVE AS OF JANUARY 1, 2014

22672380 v1

Exhibit 10.14

BACKGROUND

Effective as of January 1, 1983, Torchmark Corporation (the "Company") established a defined benefit pension plan ("Plan"), which is intended to be qualified pursuant to the provisions of the Internal Revenue Code of 1986, as amended. The Plan also is intended to provide eligible non-commissioned employees of the Company, and those of any affiliate which adopts the Plan, with a supplemental source of retirement income.

Effective as of January 1, 1989, the Plan was amended and restated to comply with the Tax Reform Act of 1986. The Plan was further amended effective January 1, 1992 and January 1, 1993.

Effective as of January 1, 1993, the Employer adopted Amendments Two and Three to the Plan.

Effective as of January 1, 1989, the Employer adopted Amendment Four to the Plan.

Effective as of January 1, 1997, The Employer adopted Amendment Five to the Plan.

Effective as of January 1, 1998, the Employer adopted Amendment Six to the Plan.

Effective as of January 1, 2001, the Employer adopted Amendment Seven to the Plan.

Effective as of January 1, 1997, the Plan was amended and restated to comply with a number of tax law changes generally described by the acronym "GUST," as the second amendment and restatement of the Plan, which constitutes Amendment Eight to the Plan.

Effective as of January 1, 2002, the Employer adopted Amendment Nine to the Plan.

Effective as of January 1, 2001, the Employer adopted Amendment Ten to the Plan.

Effective as of January 1, 2004, the Employer adopted Amendment Eleven to the Plan.

Effective as of March 28, 2005, the Employer adopted Amendment Twelve to the Plan.

Effective as of January 1, 2008, the Employer adopted Amendment Thirteen to the Plan.

Effective as of the various dates specified therein, the Employer adopted Amendment Fourteen to the Plan.

Effective as of January 1, 2009, the Plan was amended and restated to comply with a number of tax law changes generally described by the acronym "EGTRRA," as the third amendment and restatement of the Plan, which constitutes Amendment Fifteen to the Plan.

Effective as of January 1, 2012, the Employer adopted Amendment Sixteen to the Plan.

Effective as of the various dates specified therein, the Employer adopted Amendment Seventeen to the Plan.

22672380 v1

Exhibit 10.14

This fourth amendment and restatement of the Plan is adopted to comply with a number of tax law changes generally described by the acronym "PPA." This fourth amendment and restatement of the Plan is generally effective as of January 1, 2014 and constitutes Amendment Eighteen to the Plan.

The benefit under the Plan of any Participant who terminates employment or becomes disabled shall be determined in accordance with the provisions of the Plan as in effect on the date of such termination of employment or Disability.

22672380 v1 ii

Exhibit 10.14

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS I-1

1.1 Accrued Retirement Benefit I-1

1.2 Actuarial Equivalent I-1

1.3 Administrative Committee I-2

1.4 Administrator I-2

1.5 Affiliate I-2

1.6 Beneficiary I-2

1.7 Benefit Commencement Date I-2

1.8 Board of Directors or Board I-2

1.9 Code I-2

1.10 Company I-2

1.11 Comparable Plan I-2

1.12 Compensation I-3

1.13 Covered Compensation I-4

1.14 Credited Service I-4

1.15 Deferred Retirement I-4

1.16 Defined Benefit Plan I-4

1.17 Defined Contribution Plan I-4

1.18 Disability I-5

1.19 Early Retirement I-5

1.20 Effective Date I-5

1.21 Eligible Employee I-5

1.22 Employee I-6

1.23 Employer I-6

1.24 Employment I-6

1.25 Entry Date I-6

1.26 ERISA I-6

1.27 Final Average Compensation I-6

1.28 Hour of Service: I-7

1.29 Investment Manager I-8

1.30 Leased Employee I-8

iii

22672380 v1

Exhibit 10.14

1.31 Liberty National Commissioned Participant I-9

1.32 Liberty National Non-Commissioned Participant I-9

1.33 Liberty National Non-Commissioned Pension Plan I-9

1.34 Liberty National Pension Plan I-9

1.35 Non-Vested Separation I-9

1.36 Normal Retirement I-9

1.37 Normal Retirement Age I-9

1.38 Normal Retirement Date I-9

1.39 One Year Break in Service I-9

1.40 Participant I-9

1.41 Participating Affiliates I-9

1.42 Plan I-10

1.43 Plan Year I-10

1.44 Qualified Joint and Survivor Annuity I-10

1.45 Qualified Plan I-10

1.46 Qualified Pre-Retirement Survivor Annuity I-10

1.47 Retirement Benefit I-10

1.48 Schroder Plan I-10

1.49 Social Security Offset Percentage I-10

1.50 Social Security Retirement Age I-11

1.51 Special Average Earnings I-11

1.52 Spouse I-11

1.53 Surviving Spouse I-11

1.54 Trust or Trust Fund I-11

1.55 Trust Agreement I-11

1.56 Trustee I-11

1.57 Vested Separation I-11

1.58 Vesting Service I-11

1.59 Year of Service I-11

ARTICLE II PARTICIPATION II-1

2.1 Admission as a Participant II-1

2.2 Reemployment II-1

2.3 Termination of Participation II-1

22672380 v1 iv

Exhibit 10.14

ARTICLE III RETIREMENT BENEFIT III-1

3.1 Retirement Benefit Formula III-1

3.2 Rules for Determining Years of Credited Service III-2

3.3 Retirement Benefit Formula with respect to a Liberty National Non-Commissioned Participant or a Liberty National Commissioned Participant III-3

3.4 Limitation on Benefits III-5

ARTICLE IV VESTING PROVISIONS IV-1

4.1 Determination of Vesting IV-1

4.2 Rules for Crediting Vesting Service IV-1

4.3 Retirement Benefit Forfeitures IV-1

4.4 TMK Hogan IV-2

4.5 Vesta Insurance Group, Inc. IV-2

ARTICLE V AMOUNT AND COMMENCEMENT OF RETIREMENT BENEFITS V-1

5.1 Determination of Amount of Retirement Benefits V-1

5.2 Suspension of Payments on Resumption of Employment V-2

5.3 Limitation on Commencement of Benefits V-3

5.4 Minimum Distribution Requirements V-4

ARTICLE VI FORMS OF PAYMENT OF RETIREMENT BENEFIT VI-1

6.1 Methods of Distribution VI-1

6.2 Election of Optional Forms VI-2

6.3 Direct Rollovers VI-3

6.4 Notices VI-4

ARTICLE VII DEATH BENEFITS VII-1

7.1 Eligibility for Pre-Retirement Death Benefit VII-1

7.2 Form of Pre-Retirement Death Benefit VII-1

7.3 Election to Waive VII-2

7.4 Beneficiaries VII-2

7.5 After-Death Distribution Rules VII-3

ARTICLE VIII CONTRIBUTIONS AND FORFEITURES VIII-1

8.1 Contribution by the Company VIII-1

8.2 Contributions by Employees VIII-1

8.3 Forfeitures VIII-1

8.4 Return of Employer Contributions under Special Circumstances VIII-1

ARTICLE IX FIDUCIARIES IX-1

22672380 v1 v

Exhibit 10.14

9.1 Named Fiduciaries IX-1

9.2 Employment of Advisers IX-1

9.3 Multiple Fiduciary Capacities IX-1

9.4 Reliance IX-1

9.5 Scope of Authority and Responsibility IX-1

9.6 Trustee Subject to Directions of Named Fiduciary IX-2

ARTICLE X TRUSTEE X-1

10.1 Trust Agreement X-1

10.2 Assets in Trust X-1

ARTICLE XI ADMINISTRATIVE COMMITTEE XI-1

11.1 Appointment and Removal of Administrative Committee XI-1

11.2 Officers of Administrative Committee XI-1

11.3 Action by Administrative Committee XI-1

11.4 Rules and Regulations XI-1

11.5 Powers XI-1

11.6 Information from Participants XI-2

11.7 Reports XI-2

11.8 Authority to Act XI-2

11.9 Liability for Acts XI-2

11.10 Compensation and Expenses XI-3

11.11 Indemnity XI-3

11.12 Denied Claims XI-3

ARTICLE XII PLAN AMENDMENT OR TERMINATION XII-1

12.1 Plan Amendment XII-1

12.2 Limitations on Plan Amendment XII-1

12.3 Right of the Employer to Terminate Plan XII-2

12.4 Effect of Partial or Complete Termination XII-2

12.5 Allocation of Assets XII-2

12.6 Residual Assets XII-3

12.7 Limitations Applicable to Certain Highly Paid Participants XII-3

ARTICLE XIII MISCELLANEOUS PROVISIONS XIII-1

13.1 Exclusive Benefit of Participants XIII-1

13.2 Plan Not a Contract of Employment XIII-1

22672380 v1 vi

Exhibit 10.14

13.3 Source of Benefits XIII-1

13.4 Benefits Not Assignable XIII-1

13.5 Domestic Relations Orders XIII-1

13.6 Benefits Payable to Minors, Incompetents and Others XIII-2

13.7 Merger or Transfer of Assets XIII-2

13.8 Participation in the Plan by an Affiliate XIII-2

13.9 Action by Employer XIII-3

13.10 Provision of Information XIII-3

13.11 Controlling Law XIII-3

13.12 Conditional Restatement XIII-3

13.13 Rules of Construction XIII-3

13.14 USERRA XIII-3

ARTICLE XIV MINIMUM RETIREMENT INCOME XIV-1

14.1 Prior Plans XIV-1

ARTICLE XV TOP-HEAVY PROVISIONS XV-1

15.1 Definitions XV-1

15.2 Top Heavy Rules XV-4

15.3 Compensation XV-4

15.4 Benefit XV-4

15.5 Vesting XV-5

15.6 Miscellaneous XV-5

ARTICLE XVI BENEFIT RESTRICTIONS XVI-1


16.1	Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent or If the Plan Sponsor Is In Bankruptcy XVI-1

16.2 Provisions Applicable After Limitations Cease to Apply XVI-3

16.3 Notice Requirement XVI-4

16.4 Methods to Avoid or Terminate Benefit Limitations XVI-4

16.5 Special Rules: XVI-5

16.6 Definitions XVI-7

16.7 Effective Date XVI-7

22672380 v1 vii

Exhibit 10.14

22672380 v1 viii

Exhibit 10.14

ARTICLE I
DEFINITIONS

Each of the following terms shall have the meaning set forth in this Article I for purposes of this Plan:

1.1 Accrued Retirement Benefit : As of any date, the Retirement Benefit of a Participant calculated pursuant to the provisions of Article III (assuming he were to continue accruing Credited Service until Normal Retirement Age) times a fraction, the numerator of which is the number of years of Credited Service the Participant has then completed and the denominator of which is the total years of Credited Service he would have completed if he had continued in covered Employment until his Normal Retirement Age. In no event shall a Participant's Accrued Retirement Benefit be less than the Accrued Retirement Benefit to which the Participant would have been entitled had he terminated Employment on December 31, 1988 under the provisions of the Plan as then in effect.

1.2 Actuarial Equivalent : An amount or a benefit of equivalent current value to the Retirement Benefit which would otherwise be provided a Participant, determined on the basis of the following actuarial assumptions for all forms of benefit in determining the amount payable to a Participant having an annuity starting date in a Plan Year beginning on or after January 1, 2008 (unless a different assumption is mandated for a specific purpose by the Pension Benefit Guaranty Corporation (PBGC) or IRS in which case such mandated assumption shall be substituted):

(a) Applicable mortality assumption. The applicable mortality table within the meaning of Code § 417(e)(3)(B), as initially described in Revenue Ruling 2007-67 (the "2008 Applicable Mortality Table") and any subsequent mortality table promulgated by the IRS for this purpose in place of the 2008 Applicable Mortality Table.

(b) Applicable interest rate. The rate of interest determined by the applicable interest rate described by Code § 417(e) after its amendment by the Pension Protection Act of 2006. Specifically, the applicable interest rate shall be the adjusted first, second, and third segment rates applied under the rules similar to the rules of Code § 430(h)(2)(C) for the second full calendar month (lookback month) preceding the calendar quarter in which the annuity starting date occurs (calendar quarter stability period). For this purpose, the adjusted first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code § 430(h)(2)(C) if:

(i) Code § 430(h)(2)(D) were applied by substituting the average yields for the month described in the preceding Section 1.2(b) for the average yields for the 24-month period described in such Code Section; and

(ii) Code § 430(h)(2)(G)(i)(II) were applied by substituting "Code § 417(e)(3)(A)(ii)(II) for "Code § 412(b)(5)(B)(ii)(II)."

1.3 Administrative Committee : The committee appointed by the Board pursuant to, and having the responsibilities specified in, Article XI of the Plan.

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Exhibit 10.14

1.4 Administrator : The Company or Administrative Committee appointed by the Board of Directors pursuant to, and having the responsibilities specified in, Article XI of the Plan.

1.5 Affiliate : Any corporation or unincorporated trade or business (other than the Company) while it is:

(a) A member of a "controlled group of corporations" (within the meaning of Code § 414(b)) of which the Company is a member;

(b) A trade or business under "common control" (within the meaning of Code § 414(c)) with the Company;

(d) Any other entity required to be aggregated with the Company under Code § 414(o).

1.6 Beneficiary : A person other than a Participant entitled to receive any payment of benefits pursuant to the terms of this Plan.

1.7 Benefit Commencement Date : The date, determined under Article V, as of which a Participant or a Beneficiary receives or begins to receive, as the case may be, payment of his benefits under the Plan.

1.8 Board of Directors or Board : The Board of Directors of the Company.

1.9 Code : The Internal Revenue Code of 1986, as now in effect or as amended from time to time. A reference to a specific provision of the Code shall include such provision and any applicable Regulation pertaining thereto.

1.10 Company : Torchmark Corporation, or any successor thereto by consolidation, merger, transfer of assets or otherwise.

1.11 Comparable Plan : A plan of the same type as described in Regulation § 1.381(c)(11)-1(d)(4).

1.12 Compensation : The total cash compensation paid to an Employee during a calendar year by his Employer, including salary, wages, bonuses, any amounts not paid directly and currently in cash to an Employee but paid for the benefit of an Employee through a "salary reduction" agreement in conjunction with one or more welfare plans, any qualified transportation fringes of the Employer and the total amount deferred pursuant to an Employee's election under a "cash or deferred arrangement" in conjunction with one or more qualified retirement plans of the Employer, but excluding:

(a) Any reimbursement of or allowances for expenses;

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Exhibit 10.14

(b) Employer contributions to any form of employee retirement, pension, profit sharing or thrift plan;

(d) Annual service awards;

(e) Deferred compensation accrued under any nonqualified deferred compensation agreement or contract or any amendment or replacement thereof;

(f) Commissions, other than commissions payable with respect to or on account of the sale or lease of real property; and

(g) Payments made to any Employee after such Employee's separation from service, in the form of severance benefits.

The definition of Compensation shall apply as set forth in this Section 1.12 with respect to a Liberty National Non-Commissioned Participant by replacing Section 1.12(f) in the list of excluded forms of compensation above, as follows:

(h) Commissions; and

The definition of Compensation shall apply as set forth in this Section 1.12 with respect to a Liberty National Commissioned Participant by replacing Sections 1.12(f) and (g) in the list of excluded forms of compensation above and by adding Section 1.12(h) as follows:

(i) Renewal commissions, other than renewal commissions paid to agents authorized to solicit applications for both ordinary and home service policies of insurance;

(j) Any amounts due to or paid to a Participant as a result of the settlement of his or her commission account balance upon the termination of his or her Employment for any reason; and

(k) Payments made to any Employee after such Employee's separation from service, in the form of severance benefits.

The determination of Compensation will be in accordance with records maintained by the Employer and shall be conclusive. Anything in this definition to the contrary notwithstanding, the Compensation taken into account for a Participant for Plan purposes for any Plan Year commencing on or after January 1, 1989 and prior to January 1, 1994 shall not exceed $200,000 (or such adjusted amount as may be prescribed for such Plan Year pursuant to Code § 401(a)(17)) and for any Plan Year commencing after December 31, 1993 shall not exceed $150,000 (or such adjusted amount as may be prescribed for such Plan Year pursuant to Code § 401(a)(17)).

The annual Compensation of each Participant taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000. Annual Compensation means compensation during the Plan Year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the determination period). For

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Exhibit 10.14

purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, the annual Compensation limit for determination periods beginning before January 1, 2002, shall be $150.000 for any determination period beginning in 1996 or earlier; $160,000 for any determination period beginning in 1997, 1998, or 1999; and $170,000 for any determination period beginning in 2000 or 2001. The $200,000 limit on annual Compensation shall be adjusted for cost-of-living increases in accordance with Code § 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year.

Compensation paid after "Severance from Employment" for purposes of benefits shall be adjusted in the same manner as 415 Compensation pursuant to Section 3.4.3(a) if those amounts would have been included in earnings if they were paid prior to the Participant's "Severance from Employment," except in applying Section 3.4.4, the term "Limitation Year" shall be replaced with the term "Plan Year" and the term "415 Compensation" shall be replaced with the term "Compensation." Compensation for purposes of benefits does not include any termination or severance pay or final vacation pay, regardless of when paid. The provisions of this paragraph shall apply for Plan Years beginning on and after January 1, 2008.

1.13 Covered Compensation : The average of the annual contribution and benefits base under § 230 of the Social Security Act for each year for the 35 year period ending in the year the Participant reaches Social Security Retirement Age (SSRA), except for a Participant who separates before attainment of SSRA the base for the year of separation will be assumed to be the base for all future years to SSRA without increases or adjustments.

1.14 Credited Service : The Years of Service for computation of the amount of a Participant's Retirement Benefit as defined in Article III.

1.15 Deferred Retirement : Termination of Employment of a Participant after his Normal Retirement Date.

1.16 Defined Benefit Plan : A plan of the type defined in Code § 414(j) maintained by the Company or an Affiliate, as applicable.

1.17 Defined Contribution Plan : A plan of the type defined in Code § 414(i) maintained by the Company or an Affiliate, as applicable.

1.18 Disability : Total and permanent disability for a period of at least six months as defined by either (i) the group disability benefit plan maintained by the Participant's Employer, or (ii) the United States Social Security Administration.

1.19 Early Retirement : Termination of Employment, other than by reason of Disability or death, of a Participant prior to Normal Retirement Age who has completed at least 10 full years of Vesting Service and has attained the age of 55.

With respect to a Liberty National Commissioned Participant or a Liberty National Non-Commissioned Participant, Early Retirement shall mean termination of Employment, other than by

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Exhibit 10.14

reason of Disability or death, of a Participant prior to Normal Retirement Age who has completed at least 15 full years of Vesting Service and has attained the age of 55.

1.20 Effective Date : The original effective date of the Plan is January 1, 1983, while the terms and conditions of this restated and amended Plan as herein set forth shall be effective, except as may otherwise be specified herein, on or after January 1, 2014.

1.21 Eligible Employee : Section 1.21 was amended effective January 1, 2013 to read as follows:

Except as provided in the second paragraph of this Section 1.21, (a) all Employees of the Company; (b) all Employees of each Affiliate (other than Liberty National Life Insurance Company) participating in the Plan pursuant to Section 13.8; and (c) all Employees of Liberty National Life Insurance Company who have an initial date of hire after December 31, 2011 on the employment records of Liberty National Life Insurance Company (whether as a new hire or a transfer of employment from an Affiliate).

The foregoing paragraph notwithstanding, the following Employees of the Company and of each Affiliate (including Liberty National Life Insurance Company) are not included in the term "Eligible Employee:" (d) Employees who are classified, treated or otherwise characterized by the Employer as general agents, trainers, agents, branch managers, regional managers, district managers, brokers, solicitors, unit managers, assistant unit managers or any other individual whose primary duty involves the direct sale of insurance, regardless of the mode of compensation; (e) Employees included in a unit of employees covered by a collective bargaining agreement between the Employer and the employee representatives in the negotiation of which retirement benefits were the subject of good faith bargaining, unless such bargaining agreement provides for participation in the Plan; (f) Leased Employees; and (g) an Employee of a former "Employer," including, without limitation, a "Participating Employer," as those terms were defined in the Liberty National Pension Plan or the Liberty National Non-Commissioned Pension Plan if such Employee was first credited with an Hour of Service on or after January 1, 1995 and before January 1, 2012. The term "Eligible Employee" shall not include, prior to January 1, 2004, Employees of a Participating Employer in the Plan if the Participating Employer was identified as an "Employer," including, without limitation, a "Participating Employer," in the Liberty National Pension Plan or the Liberty National Non-Commissioned Pension Plan prior to January 1, 2004.

For historical purposes only, Eligible Employees under the Liberty National Non-Commissioned Pension Plan did not include: any individual whose duties include selling products of Liberty National Life Insurance Company or an Affiliate on a commissioned basis and any Employee of Liberty National Life Insurance Company who were first credited with an Hour of Service on or after January 1, 1995; and Eligible Employees under the Liberty National Pension Plan included all Employees of Liberty National Life Insurance Company who were compensated in whole or in part by commissions or under contract with an Employer as a District Manager or a Career Agent performing services for remuneration for the Employer as a full-time life insurance salesman, and did not include Employees who were first credited with an Hour of Service on or after January 1, 1995. For purposes of this paragraph, the meaning of the terms used herein shall have the same meaning they had under the respective former plan.

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Exhibit 10.14

1.22 Employee : Section 1.22 was amended effective January 1, 2012 to read as follows:

Any individual who is classified, treated or otherwise characterized by an Employer as a common law employee of an Employer, and Leased Employees within the meaning of Code § 414(n)(2). Notwithstanding the foregoing, if such Leased Employees do not constitute more than 20% of the Employer's nonhighly compensated work force within the meaning of Code § 414(n)(5)(C)(ii), the term "Employee" shall not include those Leased Employees covered by a plan described in Code § 414(n)(5) unless otherwise provided by the terms of this Plan. Any individual who is classified, treated or otherwise characterized by an Employer as an independent contractor is not included in the term "Employee." The foregoing determination of whether an individual is an "Employee" for purposes of this Plan shall be made by an Employer subject to the approval and consent of the Administrator in its sole discretion. Said determination shall apply for all purposes of this Plan and regardless of whether such individual is later classified by any governmental agency, court, tribunal, governing body or any other person or entity as a common law employee of an Employer. It is the intent hereof that an Employer subject to the approval and consent of the Administrator shall decide in its sole discretion which individuals are classified as an Employee for purposes of this Plan.

1.23 Employer : The Company and each Affiliate participating in the Plan pursuant to Section 13.8.

1.24 Employment : An Employee's employment with the Company or an Affiliate or, to the extent determined by the Administrator, any predecessor of any of them.

1.25 Entry Date : The first day of the payroll period following the date the Eligible Employee has satisfied the requirements of Section 2.1.1.

1.26 ERISA : The Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA shall include such provision and any applicable regulation pertaining thereto.

1.27 Final Average Compensation : The highest average of the Participant's annual Compensation for any five consecutive full calendar years of Employment during the 10 consecutive calendar years of Employment immediately preceding the Participant's termination of Employment, provided that any service credited for a period of Disability shall be disregarded in determining such 10 consecutive years. In the event the Participant does not have at least five full calendar years of Employment, Final Average Compensation shall mean the average annual Compensation for the Participant's total number of full years of Employment. A Participant's annual Compensation, without annualization, during the part of the calendar year immediately preceding his termination of Employment will be treated as his annual Compensation for a full calendar year for the purpose of this Section 1.27 if that produces a higher average. If a Participant is rehired and is entitled to the reinstatement of prior Credited Service and Vesting Service and does not have at least five full consecutive years of annual Compensation after he is rehired, then his Final Average Compensation shall mean the average of the annual Compensation for the Participant's last five complete calendar years of Employment.

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Exhibit 10.14

1.28 Hour of Service:

(a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Employer (or (i) for an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate, and (ii) with respect to a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by Schroder Energy Advisors, for Schroder Energy Advisors or any other participating employers in the Schroder Plan) during the applicable computation period.

(b) Each hour for which an Employee is paid, or entitled to payment, by an Employer (or (i) by an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate, and (ii) with respect to a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by Schroder Energy Advisors, for Schroder Energy Advisors or any other participating employers in the Schroder Plan) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), lay-off, jury duty, military duty or leave of absence. An hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which no duties are performed is not credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of providing severance benefits or complying with the applicable unemployment compensation laws. Hours of Service are not credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer (or (i) by an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate, and (ii) with respect to a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by Schroder Energy Advisors, for Schroder Energy Advisors or any other participating employers in the Schroder Plan). The same Hours of Service shall not be credited both under Section 1.28(a) or Section 1.28(b), as the case may be, and under this Section 1.28(c).

(d) If, in accordance with standard personnel policies applied in a non-discriminatory manner to all Employees similarly situated, an Employer determines in writing that an Employee's approved, unpaid leave of absence furthers the interest of the Employer, each hour for which the Employee on the approved unpaid leave of absence would normally have received credit under this Plan if he had been working in his regular Employment for the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate).

(e) An Employee of the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) who is regularly employed by such Employer (or Affiliate) for at least 35 hours a week shall be credited with 45 Hours of Service if under this Plan he would be credited with at least one Hour of Service during the week.

(f) An Employee of the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) who is not regularly employed

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Exhibit 10.14

by such Employer (or Affiliate) for at least 35 hours a week shall be credited with the actual Hours of Service for which he is paid or entitled to credit under this Plan.

(g) Hours of Service shall be calculated and credited pursuant to § 2530-200b-2 of the Department of Labor Regulations which are incorporated herein by this reference.

(h) With respect to a Liberty National Commissioned Participant, Sections 1.28(e) and (f) shall not apply, and the following shall apply in determining Hours of Service: (i) all references to Schroder Energy Advisors shall not apply; (ii) for years prior to January 1, 1986, an Employee whose compensation from an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) with respect to a week consists in part of commissions, or who is regularly employed by such Employer (or Affiliate) for at least 37 ½ hours a week shall be credited with 45 Hours of Service if under the Plan he would be credited with at least one Hour of Service during the week. Effective January 1, 1986, an Employee of the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) shall be credited with 45 Hours of Service if under this Plan he would be credited with at least one Hour of Service during the week; (iii) for years prior to January 1, 1986, an Employee whose compensation from the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) with respect to a week does not consist in part of commissions and who is not regularly employed by such Employer (or Affiliate) for at least 37 ½ hours a week shall be credited with the actual Hours of Service for which he is paid or entitled to credit under this Plan.

(i) With respect to a Liberty National Non-Commissioned Participant, all references to Schroder Energy Advisors shall not apply.

1.29 Investment Manager : Any person appointed pursuant to Section 9.1 having the power to direct the investment of assets in accordance with that Section.

1.30 Leased Employee : Any individual (who otherwise is not an Employee of the Employer) who, pursuant to a leasing agreement between the Employer and any other person, has performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Code §144(a)(3)) on a substantially full time basis for at least one year and who performs services under the primary direction and control of the Employer.

1.31 Liberty National Commissioned Participant : A Former Participant in the Liberty National Pension Plan who came into the Plan effective January 1, 2004 pursuant to the merger of the Liberty National Pension Plan with and into the Plan.

1.32 Liberty National Non-Commissioned Participant : A Former Participant in the Liberty National Non-Commissioned Pension Plan who came into the Plan effective January 1, 2004 pursuant to the merger of the Liberty National Non-Commissioned Pension Plan with and into the Plan. This shall specifically include Liberty National Non-Commissioned Participants who are employees of United Investors Life Insurance Company.

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Exhibit 10.14

1.33 Liberty National Non-Commissioned Pension Plan : The Liberty National Life Insurance Company Pension Plan for Non-Commissioned Employees, which merged with and into the Plan on January 1, 2004.

1.34 Liberty National Pension Plan : The Liberty National Life Insurance Company Pension Plan, which merged with and into the Plan on January 1, 2004.

1.35 Non-Vested Separation : Termination of Employment (other than by reason of death or Disability) of a Participant whose vested percentage in his Retirement Benefit is zero percent.

1.36 Normal Retirement : Termination of Employment of a Participant at Normal Retirement Age.

1.37 Normal Retirement Age : Age 65.

1.38 Normal Retirement Date : The last day of the payroll period of the Employer coinciding with or next following the date on which the Participant attains age 65.

1.39 One Year Break in Service : Any period of twelve consecutive months, beginning with the date of an Employee's Employment or any anniversary of the date of such Employment, during which the Employee has not completed more than 500 Hours of Service; except that effective January 1, 1985, for absences beginning on or after January 1, 1985, a Participant who is absent from work due to such Participant's pregnancy, the birth of the Participant's child or by reason of the adoption of a minor child by the Participant for the purpose of caring for such child immediately following its birth or adoption and who provides timely information establishing to the satisfaction of the Administrator the reasons for the absence and the number of days of such absence will be treated as performing a normal schedule (or eight hours per day) up to a maximum of 501 Hours of Service in either the year in which the absence begins or the year immediately following the year in which the absence begins as necessary to prevent such Participant from incurring a One Year Break in Service in either (but not both) the year in which the absence begins or the year immediately following the year in which the absence begins.

1.40 Participant : An Employee who has commenced, but not terminated, participation in the Plan as provided in Article II.

1.41 Participating Affiliates : Any Affiliate which in accordance with Section 13.8 by duly authorized action has adopted the Plan and not withdrawn therefrom.

1.42 Plan : The Torchmark Corporation Pension Plan.

1.43 Plan Year : Each twelve consecutive month period ending on December 31, during any part of which the Plan is in effect.

1.44 Qualified Joint and Survivor Annuity : An annuity for the life of the Participant with a survivor annuity continuing after the Participant's death to the Participant's Surviving Spouse for the Surviving Spouse's life in an amount which is equal to 50% of the amount payable during the

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Exhibit 10.14

joint lives of the Participant and such Surviving Spouse and which is the Actuarial Equivalent of the Participant's Retirement Benefit.

1.45 Qualified Plan : A Defined Contribution Plan or a Defined Benefit Plan which is qualified under Code § 401(a).

1.46 Qualified Pre-Retirement Survivor Annuity : The pre-retirement death benefit provided for in Section 7.1.1(2).

1.47 Retirement Benefit : The retirement benefit of a Participant calculated under Article III in the form of a single life annuity payable monthly commencing on Normal Retirement Date for the life of the Participant.

1.48 Schroder Plan : The Employee's Retirement Plan of Schroder Incorporated and Associated Companies.

1.49 Social Security Offset Percentage : The percentage factor utilized in determining the social security offset for a Participant. This offset percentage is based on the Participant's Social Security Retirement Age and the age at which the Participant's benefits commence. The appropriate offset percentages are as follows:

Benefit

Commencement Age Social Security Retirement Age

Age 65 Age 66 Age 67

(Interpolate for months)

55 0.750% 0.688% 0.632%

56 0.750% 0.703% 0.645%

57 0.750% 0.706% 0.662%

58 0.750% 0.708% 0.667%

59 0.750% 0.711% 0.671%

60 0.750% 0.712% 0.675%

61 0.750% 0.682% 0.648%

62 0.750% 0.688% 0.625%

63 0.750% 0.692% 0.635%

64 0.750% 0.696% 0.643%

65 0.750% 0.700% 0.650%

66 0.750% 0.750% 0.700%

67 0.750% 0.750% 0.750%

1.50 Social Security Retirement Age : The earliest age at which a Participant is entitled to receive his full benefit under the Social Security Act. The appropriate Social Security Retirement Ages are as follows:

Calendar Year of Birth Age of Social Security Retirement Age

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Exhibit 10.14

1937 and Before Age 65

1938 to 1954 Age 66

1955 and after Age 67

1.51 Special Average Earnings : The average of the Participant's annual Compensation for the three completed consecutive calendar year periods during his last five complete consecutive calendar years of Employment which yields the highest average, or if employed less than three complete consecutive calendar years the amount obtained by converting his Compensation for the most recent period of Employment to an annual rate, where Compensation considered for any year cannot exceed the Social Security contribution and benefits base under § 230 of the Social Security Act for that year. Notwithstanding the above, Special Average Earnings will not exceed the Participant's Covered Compensation.

1.52 Spouse : The person lawfully married to a Participant. "Lawfully married" means the marriage occurred in a jurisdiction that recognized the marriage as legal.

1.53 Surviving Spouse : The Spouse of a Participant on the earlier of:

(a) The date of the Participant's death; or

(b) The Participant's Benefit Commencement Date.

1.54 Trust or Trust Fund : The trust established under the Plan in which Plan assets are held.

1.55 Trust Agreement : The agreement between the Company and the Trustee with respect to the Trust fund.

1.56 Trustee : The trustee appointed pursuant to Article X, and any successor trustee.

1.57 Vested Separation : Termination of Employment of a Participant for any reason other than Disability before he is eligible for Early Retirement, with a vested percentage in his Retirement Benefit.

1.58 Vesting Service : The Years of Service credited to a Participant under Section 4.2 for purposes of determining the Participant's vested percentage in his Retirement Benefit.

1.59 Year of Service :

(a) For purposes of determining eligibility to participate under Article II and for purposes of determining Vesting Service, for Employment, or return to Employment after a One Year Break in Service, beginning in 1975 or later years, a period of 12 consecutive months beginning with the date of Employment or return to Employment during which an Employee has not less than 1,000 Hours of Service for an Employer (or (i) for an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate, and (ii) with respect to a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by

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Exhibit 10.14

Schroder Energy Advisors, for Schroder Energy Advisors or any other participating employer in the Schroder Plan in employment covered by the Schroder Plan).

(b) For purposes of determining Credited Service, for Employment, or return to Employment after a One Year Break in Service, beginning in 1975 or later years, a period of 12 consecutive months beginning with the date of Employment or return to Employment during which an Employee has not less than 2,000 Hours of Service for an Employer in Employment covered by the Plan (or (i) for an Affiliate in employment covered by such Affiliate's Comparable Plan in the case of an Employee who has transferred his Employment to the Employer from such Affiliate, and (ii) with respect to a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by Schroder Energy Advisors, for Schroder Energy Advisors or any other participating employer in the Schroder Plan in employment covered by the Schroder Plan). An Employee who completes at least 1,000 Hours of Service but less than 2,000 Hours of Service in a computation period shall be credited with a fraction of a Year of Service for such period, determined by dividing his Hours of Service in such period by 2,000.

(c) With respect to a Liberty National Commissioned Participant or a Liberty National Non-Commissioned Participant, the following shall also apply for purposes of determining eligibility to participate under Article II and for purposes of determining Vesting Service:

(i) All references to Schroder Energy Advisors shall not apply;

(ii) For Employment which began before 1975, with respect to periods before the 1975 anniversary of such Employment, an aggregate of 52 weeks during each of which an Employee was employed on a permanent basis for at least 35 hours a week by an Employer (or by an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate);

(iii) For Employment which began before 1975, with respect to periods after the 1975 anniversary of such Employment, a period of 12 consecutive months beginning with the date of such anniversary in 1975 or later years during which an Employee has not less than 1,000 Hours of Service for an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate); and

(iv) For Employees who are former employees of Peninsular Life Insurance Company and whose employment with Liberty National Life Insurance Company began on May 20, 1985 as a result of the acquisition by Liberty National Life Insurance Company of the Home Service Division of Peninsular Life Insurance Company, a period of twelve consecutive months beginning with the date of employment or return to employment with Peninsular Life Insurance Company during which such individuals had not less than 1,000 Hours of Service with either or both Peninsular Life Insurance Company and Liberty National Life Insurance Company.

(d) With respect to a Liberty National Commissioned Participant or a Liberty National Non-Commissioned Participant, the following shall also apply for purposes of determining Credited Service:

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Exhibit 10.14

(i) All references to Schroder Energy Advisors shall not apply;

(ii) For Employment which began before 1975, with respect to periods before the 1975 anniversary of such Employment, an aggregate of 52 weeks during each of which an Employee was employed in Employment covered by the Plan on a permanent basis for at least 35 hours a week by an Employer (or by an Affiliate in employment covered by such Affiliate's Comparable Plan in the case of an Employee who has transferred his Employment to the Employer from such Affiliate);

(iii) For Employment which began before 1975 with respect to periods after the 1975 anniversary of such Employment, a period of 12 consecutive months beginning with the date of such anniversary in 1975 or later years during which an Employee has not less than 2,000 Hours of Service in Employment covered by the Plan for an Employer (or for an Affiliate in employment covered by such Affiliate's Comparable Plan in the case of an Employee who has transferred his Employment to the Employer from such Affiliate);

(iv) For Employees who are former employees of Peninsular Life Insurance Company and whose Employment with Liberty National Life Insurance Company began on May 20, 1985 as a result of the acquisition by Liberty National Life Insurance Company of the Home Service Division of Peninsular Life Insurance Company and who are employed by Liberty National Life Insurance Company for the period beginning on May 20, 1985 and ending on a date which is no earlier than May 20, 1988, a period of 12 consecutive months beginning with the date of employment or return to employment with Peninsular Life Insurance Company during which such individuals had not less than 2,000 Hours of Service with either or both Peninsular Life Insurance Company and Liberty National Life Insurance Company; and

(v) For purposes of Section 1.59(d)(iii), an Employee who completes at least 1,000 Hours of Service but less than 2,000 Hours of Service in a computation period shall be credited with a fraction of a Year of Service for such period, determined by dividing his Hours of Service in such period by 2,000.

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Exhibit 10.14

ARTICLE II
PARTICIPATION

2.1 Admission as a Participant

2.1.2 An Eligible Employee shall become a Participant on the first day of the payroll period next following the later of his completion of one Year of Service or his attainment of age 21.

2.1.3 An Employee who did not become a Participant on the Entry Date next following the date on which he met the eligibility requirements of Section 2.1.1 because he was not then an Eligible Employee shall become a Participant as of the first day on which he becomes an Eligible Employee.

2.1.4 If an Employee has not completed 1,000 Hours of Service for the Employer by the anniversary of his Employment, the next 12-month period for determining a Year of Service shall begin on the January 1 next following his date of Employment and thereafter any subsequent 12-month period shall begin on the anniversary of his Employment.

2.1.5 Notwithstanding any other provision of this Article II, an Employee who was an employee of an "Employer" or a "Participating Employer" in the Liberty National Pension Plan or the Liberty National Non-Commissioned Pension Plan (as those terms were therein defined) prior to January 1, 2004 and who was excluded from participation in those plans shall not be eligible to participate in the Plan.

2.2 Reemployment

An individual who has ceased to be a Participant and who again becomes an Eligible Employee shall become a Participant as of the first date on which he again becomes an Eligible Employee, unless he has had a One Year Break in Service. If an individual again becomes an Eligible Employee after a One Year Break in Service, he shall become a Participant upon completion of one Year of Service retroactive to a date which is not later than the date he again became an Eligible Employee.

2.3 Termination of Participation

A Participant shall cease to be such:

(a) Upon the payment to him of all nonforfeitable benefits due to him under the Plan at a time when he is no longer eligible for any future benefit accrual;

(b) Upon his Non-Vested Separation;

(d) Upon the transfer of his Accrued Benefit to another Qualified Plan.

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ARTICLE III
RETIREMENT BENEFIT

3.1 Retirement Benefit Formula

3.1.1 A Participant's monthly Retirement Benefit shall be an amount equal to 1/12 of the excess of (a) over the sum of (b) and (c) below, where:

(a) Is 1% of the Participant's Final Average Compensation for each year of Credited Service up to 40 years plus 2% of the Participant's Final Average Compensation (not to exceed 40%) for each year of Credited Service after the Participant's attainment of age 45;

(b) Is the social security offset which is equal to the smaller of:

(i) 50% of the basic benefit calculated above in paragraph (a), but substituting Special Average Earnings for Final Average Compensation in the formula; or

(ii) The Social Security Offset Percentage times the Participant's Special Average Earnings times each year of Credited Service not to exceed 35 years;

(c) Is the Participant's annual retirement income (expressed in the form of a single life annuity commencing at Normal Retirement Date) under (i) the Comparable Plan of an Affiliate of the Employer or any corporation merged into the Employer or whose assets were acquired by the Employer, (ii) any non-comparable plan of such Affiliate to the extent that such benefit is an offset under any Comparable Plan of such Affiliate and (iii) for a person who became a Participant on January 1, 1985 and who on December 31, 1984 was employed by Schroder Energy Advisors, the Schroder Plan; provided, however, that if (iv) the assets and liabilities from any plan referred to in this paragraph (c) have been transferred to the Plan pursuant to a trustee-to-trustee transfer of assets and liabilities, and (v), such transfer of assets and liabilities was made for the benefit of the Participant, the reduction in the monthly Retirement Benefit otherwise required by this paragraph (c) shall not apply.

3.1.2 However, in no case shall the monthly Retirement Benefit for any Participant described in Article XIV be less than the monthly normal retirement benefit set forth in Article XIV.

3.1.3 The amount of Retirement Benefit calculated under this Section 3.1 shall be subject to actuarial adjustment if it is payable in any other form of payment authorized by this Plan.

3.1.4 The Retirement Benefit of a Participant who terminated Employment or incurred a Disability prior to the Effective Date shall be determined in accordance with the provisions of the Plan as in effect on the date of termination of Employment or Disability.

3.1.5 The provisions of this Section 3.1 shall not apply with respect to a Liberty National Commissioned Participant or a Liberty National Non-Commissioned Participant.

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3.2 Rules for Determining Years of Credited Service

3.2.2 Subject to Sections 3.2.2 through 3.2.7 below, Credited Service shall mean the sum of a Participant's Years of Service, expressed in full years and fractions thereof, except for the following:

(e) Any period of Employment prior to the first anniversary of the Participant's Employment following his 20th birthday (or 24th birthday for years prior to January 1, 1985); and

(f) Any period of Employment in a classification in which the Participant does not qualify as an Eligible Employee.

3.2.3 If an Employee is on an authorized unpaid leave of absence granted by his Employer, his period of absence shall be counted as Credited Service upon his return to active Employment only if his Employer determines in writing, in accordance with standard personnel policies applied in a non-discriminatory manner to all Employees similarly situated, that such absence furthers the interest of the Employer.

3.2.4 If an Employee is on an authorized military leave while his reemployment rights are protected by law and provided that he directly entered military service from his Employer's service and shall not have voluntarily reenlisted after the date of first entering active military service, his period of absence shall be counted as Credited Service upon his return to active Employment.

3.2.5 If an Employee is on an authorized leave of absence on account of Disability, he shall continue to receive Credited Service from the date of Disability until the earlier of: (i) his Early Retirement Date; (ii) his Normal Retirement Date; or (iii) his recovery from Disability.

3.2.6 An Employee who terminates Employment with no vested percentage in his Retirement Benefit shall, if he returns to Employment, have no credit for Credited Service prior to such termination of Employment if (i) for years prior to January 1, 1985, the total of his consecutive One Year Breaks in Service immediately preceding his reemployment exceed his aggregate years of Vesting Service (whether or not consecutive, but excluding Vesting Service previously disregarded under Section 4.2.4) prior to the termination; or (ii) for years on or after January 1, 1985, the total of his consecutive One Year Breaks in Service immediately preceding his reemployment exceed the greater of five years or his aggregate years of Vesting Service (whether or not consecutive, but excluding Vesting Service previously disregarded under Section 4.2.4) prior to the termination. A Participant who had a Vested Separation and returns to Employment will retain credit for his prior years of Credited Service unless he received a distribution of his Accrued Retirement Benefit at the time of such Vested Separation.

3.2.7 No Participant shall receive Credited Service during a period when such Participant is accruing benefits under another Defined Benefit Plan of the Employer or an Affiliate unless the Retirement Benefit under this Plan is reduced or offset by the full amount of benefits accrued by such Participant under such other Defined Benefit Plan; provided, however, that if (i) the assets and liabilities from such other Defined Benefit Plan have been transferred to the Plan pursuant to a

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trustee-to-trustee transfer of assets and liabilities, and (ii), such transfer of assets and liabilities was made for the benefit of the Participant, the reduction in the monthly Retirement Benefit otherwise required by this Section 3.2.6 shall not apply.

3.2.8 By appropriate corporate action exercised in a uniform and nondiscriminatory manner and, where applicable consented to by the Company, each Employer may grant Credited Service for any Employment with such Employer prior to the time it became an Employer.

3.3 Retirement Benefit Formula with respect to a Liberty National Non-Commissioned Participant or a Liberty National Commissioned Participant

3.3.2 Section 3.3.1 was amended effective January 1, 2012 to read as follows:

A Participant's monthly Retirement Benefit shall be an amount equal to 1/12 of the excess of (a) over the sum of (b), (c) and (d) below, where:

(a) Is 2% of the Participant's Final Average Compensation for each year of Credited Service up to 30 years plus 1% of the Participant's Final Average Compensation for each year of Credited Service in excess of 30 years (not exceeding 10%);

(b) Is the social security offset which is equal to the smaller of:

(i) 50% of the basic benefit calculated above in paragraph (a), but substituting Special Average Earnings for Final Average Compensation in the formula; or

(ii) The Social Security Offset Percentage times the Participant's Special Average Earnings times each year of Credited Service not to exceed 35 years;

(d) Is the Participant's annual retirement income (expressed in the form of a single life annuity commencing at Normal Retirement Date) under the Comparable Plan or Plans of the Company or any affiliate of the Company or any other corporation merged into the Company, or whose assets were acquired by the Company.

A "Profit Sharing and Retirement Plan Annuity" shall mean the annual single life annuity, without death benefit, which can be provided by that portion of the Participant's account under the Profit Sharing and Retirement Plan attributable to the Company contributions and earnings thereon. Effective March 28, 2011, the Profit Sharing and Retirement Plan was merged into the Torchmark Corporation Savings and Investment Plan and thereafter the Profit Sharing and Retirement Plan account is maintained under the Torchmark Corporation Savings and Investment Plan. In determining the amount attributable to the Company contributions and earnings thereon for this purpose no deduction shall be made for the amount of any loans outstanding. There shall be added to the amount attributable to Company contributions and earnings thereon:

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(1) The amount of any withdrawal(s) by, and prior distribution(s) to, the Participant to the extent such withdrawals and prior distributions exceed the amount of the Participant's contributions and earnings thereon; and

(2) The amount of the earnings of the Plan which would have been allocated to the amount(s) described in the preceding paragraph (1) from the date of such withdrawals or distributions.

A Participant's Profit Sharing and Retirement Plan Annuity shall be calculated as of his termination of Employment, based upon the Participant's attained age and the Company's rate basis for annuities purchasable under the Profit Sharing and Retirement Plan on such date. A Participant's Profit Sharing and Retirement Plan Annuity may be calculated on either an immediate or deferred basis as indicated in the context of this Plan, but, in any case, one shall be the Actuarial Equivalent of the other.

3.3.3 Notwithstanding Section 3.3.1, for Participants who were participating in the Liberty National Pension Plan on April 5, 1982, the monthly Retirement Benefit of any such Participant retiring after April 5, 1982, shall not be less than 1/12 of (a) or (b) below, whichever is greater, where:

(a) Is (i) plus (ii) less (iii), where:

(iii) Applies only to Participants with less than 30 years of Credited Service on the anniversary of emplyoment preceding April 5, 1982, and is 1/12 of 2% times the Final Average Compensation times the number of complete months of service for benefit accrual purposes from March 6, 1982, through the earlier of the 30th year of Credited Service or the date of termination of Employment;

(iv) Is 1/12 of 1% times the Final Average Compensation times the number of complete months of service for benefit accrual purposes from March 6, 1982, or from the 30th year of Credited Service, if later, through the earlier of the date of termination of Employment or the 40th year of Credited Service for benefit accrual purposes;

(v) Applies only to Participants with less than 35 years of Credited Service on the anniversary of Employment immediately preceding April 5, 1982, and is the lesser of (x) 1/12 of the Social Security Offset Percentage times the Participant's Special Average Earnings times the number of complete months of service for benefit accrual purposes from March 6, 1982, through the earlier of the 35th year of Credited Service for benefit accrual purposes, or the date of termination of Employment or (y) 50% of the sum in the amounts in (a)(i) plus (a)(ii) but substituting Special Average Earnings for Final Average Compensation in those formulas.

(b) Is (i) plus (ii) less (iii), where:

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Exhibit 10.14

(i) Is 1/12 of 2% times the Final Average Compensation times the number of complete months of service for benefit accrual purposes from April 5, 1982, through the earlier of April 4, 1987 or the date of termination of Employment;

(ii) Is 1/12 of 1.5% times the Final Average Compensation times the number of complete months of service for benefit accrual purposes from April 5, 1987, through the earlier of April 4, 1992 or the date of termination of Employment;

(iii) Is the amount calculated above in paragraph (a)(iii).

Any benefit provided under this Section shall be based solely on Credited Service for benefit accrual purposes for an Employer participating in the Liberty National Pension Plan or the Liberty National Non-Commissioned Plan prior to January 1, 2004.

3.3.4 The amount of Retirement Benefit calculated under this Section shall be subject to actuarial adjustment if it is payable in any other form of payment authorized by this Plan.

3.3.5 The Retirement Benefit of a Liberty National Commissioned Participant or a Liberty National Non-Commissioned Participant who terminated Employment or incurred a Disability prior to January 1, 2004 shall be determined in accordance with the provisions of, respectively, the Liberty National Pension Plan or the Liberty National Non-Commissioned Pension Plan as in effect on the date of termination of Employment or Disability.

3.4 Limitation on Benefits

3.4.1 Notwithstanding any other provisions of the Plan, a Participant's Accrued Retirement Benefit shall not exceed the limitations of Code § 415 which are hereby incorporated by reference, except to the extent the limitations are specifically addressed below.

3.4.2 Effect on Participants. Benefit increases resulting from the increase in the limitations of Code § 415 will be provided to all Employees participating in the Plan who have one Hour of Service on or after the first day of the first limitation year ending after December 31, 2001.

3.4.3 415 Compensation paid after "Severance from Employment." 415 Compensation shall be adjusted, as set forth herein, for the following types of compensation paid after a Participant's "Severance from Employment" with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Code § § 414(b), (c), (m) or (o)). However, amounts described in Sections 3.4.3(a), (b) and (c) below may only be included in 415 Compensation to the extent such amounts are paid by the later of 2 ½ months after "Severance from Employment" or by the end of the "Limitation Year" that includes the date of such "Severance from Employment." Any other payment of compensation paid after "Severance from Employment" that is not described in the following types of compensation is not considered 415 Compensation within the meaning of Code § 415(c)(3), even if payment is made within the time period specified above.

(a) Regular pay. 415 Compensation shall include regular pay after "Severance from Employment" if:

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(1) The payment is regular compensation for services during the Participant's regular working hours, or compensation for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(2) The payment would have been paid to the Participant prior to a "Severance from Employment" if the Participant had continued in employment with the Employer.

(b) Leave cashouts. Leave cashouts shall not be included in 415 Compensation. Leave cashouts are amounts in payment for unused accrued bona fide sick, vacation, or other leave.

(c) Deferred Compensation. 415 Compensation will not include deferred compensation received pursuant to a nonqualified unfunded deferred compensation plan.

(d) Salary continuation payments for military service Participants. 415 Compensation does not include payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Code § 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

(e) Salary continuation payments for disabled Participants. 415 Compensation does not include compensation paid to a Participant who is permanently and totally disabled (as defined in Code § 22(e)(3)).

3.4.4 Administrative delay ("the first few weeks") rule. 415 Compensation for a "Limitation Year" shall not include amounts earned but not paid during the "Limitation Year" solely because of the timing of pay periods and pay dates."

3.4.5 Inclusion of certain nonqualified deferred compensation amounts. If the Plan's definition of Compensation for purposes of Code § 415 is the definition in Regulation § 1.415(c)-2(b) and the simplified compensation definition of Regulation § 1.415(c) 2(d)(2) is not used, then 415 Compensation shall include amounts that are includible in the gross income of a Participant under the rules of Code § 409A or Code § 457(f)(1)(A) or because the amounts are constructively received by the Participant.

3.4.6 Back Pay. Payments awarded by an administrative agency or court or pursuant to a bona fide agreement by an Employer to compensate an Employee for lost wages are 415 Compensation for the "Limitation Year" to which the back pay relates, but only to the extent such payments represent wages and compensation that would otherwise be included in 415 Compensation under this Section 3.4.

3.4.7 "Annual Benefit." The "Annual Benefit" otherwise payable to a Participant under the Plan at any time shall not exceed the "Maximum Permissible Benefit." If the benefit the

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Exhibit 10.14

Participant would otherwise accrue in a "Limitation Year" would produce an "Annual Benefit" in excess of the "Maximum Permissible Benefit," then the benefit shall be limited (or the rate of accrual reduced) to a benefit that does not exceed the "Maximum Permissible Benefit."

3.4.8 Adjustment if in two Defined Benefit Plans. If the Participant is, or has ever been, a Participant in another qualified Defined Benefit Plan (without regard to whether the plan has been terminated) maintained by the Employer or a "Predecessor Employer," the sum of the Participant's "Annual Benefits" from all such plans may not exceed the "Maximum Permissible Benefit." Where the Participant's employer-provided benefits under all such defined benefit plans (determined as of the same age) would exceed the "Maximum Permissible Benefit" applicable at that age, the Employer shall limit a Participant's benefit in accordance with the terms of the Plans.

3.4.9 Grandfather of limits prior to January 1, 2008. The application of the provisions of this Section 3.4 shall not cause the "Maximum Permissible Benefit" for any Participant to be less than the Participant's accrued benefit under all the Defined Benefit Plans of the Employer or a "Predecessor Employer" as of December 31, 2007 under provisions of the plans that were both adopted and in effect before April 5, 2007. The preceding sentence applies only if the provisions of such Defined Benefit Plans that were both adopted and in effect before April 5, 2007, satisfied the applicable requirements of statutory provisions, Regulations, and other published guidance relating to Code § 415 in effect as of December 31, 2007, as described in Regulations § 1.415(a)-1(g)(4).

3.4.10 Other rules applicable. The limitations of Section 3.4.7 through 3.4.9 shall be determined and applied taking into account the rules in Section 3.4.12 hereof.

3.4.11 Definitions. For purposes of Sections 3.4.3 through 3.4.12, the following definitions apply.

(a) Annual Benefit. "Annual Benefit" means a benefit that is payable annually in the form of a "Straight Life Annuity." Except as provided below, where a benefit is payable in a form other than a "Straight Life Annuity," the benefit shall be adjusted to an actuarially equivalent "Straight Life Annuity" that begins at the same time as such other form of benefit and is payable on the first day of each month, before applying the limitations of Section 3.4. For a Participant who has or will have distributions commencing at more than one annuity starting date, the "Annual Benefit" shall be determined as of each such annuity starting date (and shall satisfy the limitations of Section 3.4 as of each such date), actuarially adjusting for past and future distributions of benefits commencing at the other annuity starting dates. For this purpose, the determination of whether a new annuity starting date has occurred shall be made without regard to Regulations § 1.401(a)-20, Q&A 10(d), and with regard to Regulations § 1.415(b)1(b)(1)(iii)(B) and (C).

No actuarial adjustment to the benefit shall be made for (i) survivor benefits payable to a Surviving Spouse under a Qualified Joint and Survivor Annuity to the extent such benefits would not be payable if the Participant's benefit were paid in another form; (ii) benefits that are not directly related to retirement benefits (such as a qualified Disability benefit, preretirement incidental death benefits, and postretirement medical benefits); or

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Exhibit 10.14

(iii) the inclusion in the form of benefit of an automatic benefit increase feature, provided the form of benefit is not subject to Code § 417(e)(3) and would otherwise satisfy the limitations of Section 3.4, and the Plan provides that the amount payable under the form of benefit in any "Limitation Year" shall not exceed the limits of Section 3.4 applicable at the annuity starting date, as increased in subsequent years pursuant to Code § 415(d). For this purpose, an automatic benefit increase feature is included in a form of benefit if the form of benefit provides for automatic, periodic increases to the benefits paid in that form.

The determination of the "Annual Benefit" shall take into account Social Security supplements described in Code § 411(a)(9) and benefits transferred from another defined benefit plan, other than transfers of distributable benefits pursuant Regulations § 1.411(d)-4, Q&A-3(c), but shall disregard benefits attributable to Employee contributions or rollover contributions.

The determination of actuarial equivalence of forms of benefit other than a "Straight Life Annuity" shall be made in accordance with (1) or (2) below.

(1) Benefit forms not subject to Code § 417(e)(3). The "Straight Life Annuity" that is actuarially equivalent to the Participant's form of benefit shall be determined under this Section 3.4.11(a)(1) if the form of the Participant's benefit is either (I) a nondecreasing annuity (other than a "Straight Life Annuity") payable for a period of not less than the life of the Participant (or, in the case of a Qualified Pre-Retirement Survivor Annuity, the life of the Surviving Spouse), or (II) an annuity that decreases during the life of the Participant merely because of (A) the death of the survivor annuitant (but only if the reduction is not below 50% of the benefit payable before the death of the survivor annuitant), or (B) the cessation or reduction of Social Security supplements or qualified disability payments (as defined in Code § 401(a)(11)). The actuarially equivalent "Straight Life Annuity" is equal to the greater of (C) the annual amount of the "Straight Life Annuity" (if any) payable to the Participant under the Plan commencing at the same annuity starting date as the Participant's form of benefit; and (D) the annual amount of the "Straight Life Annuity" commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using a 5% interest rate assumption and the applicable mortality table defined in the Plan for that annuity starting date.

(2) Benefit Forms Subject to Code § 417(e)(3). The "Straight Life Annuity" that is actuarially equivalent to the Participant's form of benefit shall be determined under this Section 3.4.11(a)(2) if the form of the Participant's benefit is other than a benefit form described in Section 3.4.11(a)(1) above. In this case, the actuarially equivalent "Straight Life Annuity" is equal to the greatest of (I) the annual amount of the "Straight Life Annuity" commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using the interest rate and mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form; (II) the annual amount of the "Straight

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Exhibit 10.14

Life Annuity" commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using a 5.5 percent interest rate assumption and the applicable mortality table defined in the Plan; and (III) the annual amount of the "Straight Life Annuity" commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using the applicable interest rate and applicable mortality table defined in the Plan, divided by 1.05.

(b) Defined Benefit Compensation Limitation. "Defined Benefit Compensation Limitation" means 100% of a Participant's "High Three-Year Average Compensation," payable in the form of a "Straight Life Annuity." In the case of a Participant who has had a "Severance from Employment" with the Employer, the "Defined Benefit Compensation Limitation" applicable to the Participant in any "Limitation Year" beginning after the date of severance shall be automatically adjusted by multiplying the limitation applicable to the Participant in the prior "Limitation Year" by the annual adjustment factor under Code § 415(d) that is published in the Internal Revenue Bulletin. The adjusted compensation limit shall apply to "Limitation Years" ending with or within the calendar year of the date of the adjustment, but a Participant's benefits shall not reflect the adjusted limit prior to January 1 of that calendar year.

In the case of a Participant who is rehired after a "Severance from Employment," the "Defined Benefit Compensation Limitation" is the greater of 100% of the Participant's "High Three-Year Average Compensation," as determined prior to the "Severance from Employment," as adjusted pursuant to the preceding paragraph, if applicable; or 100% of the Participant's "High Three-Year Average Compensation," as determined after the "Severance from Employment."

(c) Defined Benefit Dollar Limitation. "Defined Benefit Dollar Limitation" means $160,000, automatically adjusted under Code § 415(d), effective January 1 of each year, as published in the Internal Revenue Bulletin, and payable in the form of a "Straight Life Annuity." The new limitation shall apply to "Limitation Years" ending with or within the calendar year of the date of the adjustment, but a Participant's benefits shall not reflect the adjusted limit prior to January 1 of that calendar year. The automatic annual adjustment of the "Defined Benefit Dollar Limitation" under Code 415(d) shall not apply to Participants who have had a "Severance from Employment."

(d) Employer. "Employer" means, for purposes of this Section 3.4, the Employer that has adopted the Plan, and all members of a controlled group of corporations (as defined in Code § 414(b), as modified by Code § 415(h)), all commonly controlled trades or businesses (as defined in Code § 414(c), as modified, except in the case of a brother-sister group of trades or businesses under common control, by Code § 415(h)), or affiliated service groups (as defined in Code § 414(m)) of which the adopting Employer is a part, and any other entity required to be aggregated with the Employer pursuant to Code § 414(o).

(e) Formerly Affiliated Plan of the Employer. "Formerly Affiliated Plan of the Employer" means a plan that, immediately prior to the cessation of affiliation, was actually

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maintained by the Employer and, immediately after the cessation of affiliation, is not actually maintained by the Employer. For this purpose, "cessation of affiliation" means the event that (i) causes an entity to no longer be considered the Employer, such as the sale of a member of a controlled group of corporations, as defined in Code § 414(b), as modified by Code § 415(h), to an unrelated corporation, or (ii) causes a plan to not actually be maintained by the Employer, such as transfer of plan sponsorship outside a controlled group.

(f) High Three-Year Average Compensation. "High Three-Year Average Compensation" means the average 415 Compensation for the three consecutive Years of Service (or, if the Participant has less than three consecutive Years of Service, the Participant's longest consecutive period of service, including fractions of years, but not less than one year) with the Employer that produces the highest average. A Participant's 415 Compensation for a Year of Service shall not include 415 Compensation in excess of the limitation under Code § 401(a)(17) that is in effect for the calendar year in which such Year of Service begins. For purposes of this definition, a Year of Service with the Employer is the 12-consecutive month period defined in the Plan which is used to determine 415 Compensation under the Plan.

In the case of a Participant who is rehired by the Employer after a "Severance from Employment," the Participant's "High Three-Year Average Compensation" shall be calculated by excluding all years for which the Participant performs no services for and receives no 415 Compensation from the Employer (the break period) and by treating the years immediately preceding and following the break period as consecutive.

(g) Limitation Year. "Limitation Year" means the Plan Year. The "Limitation Year" may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan's "Limitation Year," then the Plan is treated as if the Plan had been amended to change its "Limitation Year."

(h) Maximum Permissible Benefit. "Maximum Permissible Benefit" means the lesser of the "Defined Benefit Dollar Limitation" or the "Defined Benefit Compensation Limitation" (both adjusted where required, as provided below).

(i) Adjustment for Less Than 10 Years of Participation or Service. If the Participant has less than 10 years of participation in the Plan, the "Defined Benefit Dollar Limitation" shall be multiplied by a fraction ─ (1) the numerator of which is the number of "Years of Participation" in the Plan (or part thereof, but not less than one year), and (2) the denominator of which is 10. In the case of a Participant who has less than ten Years of Service with the Employer, the "Defined Benefit Compensation Limitation" shall be multiplied by a fraction ─ (3) the numerator of which is the number of "Years of Service" with the Employer (or part thereof, but not less than one year), and (4) the denominator of which is 10.

(ii) Adjustment of "Defined Benefit Dollar Limitation" for Benefit Commencement Before Age 62 or after Age 65. The "Defined Benefit Dollar Limitation" shall be adjusted if the annuity starting date of the Participant's benefit

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is before age 62 or after age 65. If the annuity starting date is before age 62, the "Defined Benefit Dollar Limitation" shall be adjusted under Section 3.4.11(h)(ii)(1), as modified by Section 3.4.11(h)(ii)(3). If the annuity starting date is after age 65, the "Defined Benefit Dollar Limitation" shall be adjusted under Section 3.4.11(h)(ii)(2), as modified by Section 3.4.11(h)(ii)(3).

(1) Adjustment of "Defined Benefit Dollar Limitation" for Benefit Commencement Before Age 62:

(I) Plan Does Not Have Immediately Commencing "Straight Life Annuity" Payable at both Age 62 and the Age of Benefit Commencement. If the annuity starting date for the Participant's benefit is prior to age 62 and occurs in a "Limitation Year" beginning on or after January 1, 2008, and the Plan does not have an immediately commencing "Straight Life Annuity" payable at both age 62 and the age of benefit commencement, the "Defined Benefit Dollar Limitation" for the Participant's annuity starting date is the annual amount of a benefit payable in the form of a "Straight Life Annuity" commencing at the Participant's annuity starting date that is the actuarial equivalent of the "Defined Benefit Dollar Limitation" (adjusted under Section 3.4.11(h)(i) for years of participation less than 10, if required) with actuarial equivalence computed using a 5% interest rate assumption and the applicable mortality table for the annuity starting date as defined in the Plan (and expressing the Participant's age based on completed calendar months as of the annuity starting date).

(II) Plan Has Immediately Commencing "Straight Life Annuity" Payable at both Age 62 and the Age of Benefit Commencement. If the annuity starting date for the Participant's benefit is prior to age 62 and the Plan has an immediately commencing "Straight Life Annuity" payable at both age 62 and the age of benefit commencement, the "Defined Benefit Dollar Limitation" for the Participant's annuity starting date is the lesser of the limitation determined under Section 3.4.11(h)(ii)(1)(I) and the "Defined Benefit Dollar Limitation" (adjusted under Section 3.4.11(h)(i) for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the immediately commencing "Straight Life Annuity" under the Plan at the Participant's Annuity Starting Date to the annual amount of the immediately commencing "Straight Life Annuity" under the Plan at age 62, both determined without applying the limitations of Section 3.4.

(2) Adjustment of "Defined Benefit Dollar Limitation" for Benefit Commencement After Age 65:

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Exhibit 10.14

(I) Plan Does Not Have Immediately Commencing "Straight Life Annuity" Payable at both Age 65 and the Age of Benefit Commencement. If the annuity starting date for the Participant's benefit is after age 65 and the Plan does not have an immediately commencing "Straight Life Annuity" payable at both age 65 and the age of benefit commencement, the "Defined Benefit Dollar Limitation" at the Participant's annuity starting date is the annual amount of a benefit payable in the form of a "Straight Life Annuity" commencing at the Participant's annuity starting date that is the actuarial equivalent of the "Defined Benefit Dollar Limitation" (adjusted under Section 3.4.11(h)(i) for years of participation less than 10, if required), with actuarial equivalence computed using a 5% interest rate assumption and the applicable mortality table for that annuity starting date as defined in the Plan (and expressing the Participant's age based on completed calendar months as of the annuity starting date).

(II) Plan Has Immediately Commencing "Straight Life Annuity" Payable at both Age 65 and the Age of Benefit Commencement. If the annuity starting date for the Participant's benefit is after age 65 and the Plan has an immediately commencing "Straight Life Annuity" payable at both age 65 and the age of benefit commencement, the "Defined Benefit Dollar Limitation" at the Participant's annuity starting date is the lesser of the limitation determined under Section 3.4.11(h)(ii)(2)(I) and the "Defined Benefit Dollar Limitation" (adjusted under Section 3.4.11(h)(i) for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the adjusted immediately commencing "Straight Life Annuity" under the Plan at the Participant's annuity starting date to the annual amount of the adjusted immediately commencing "Straight Life Annuity" under the Plan at age 65, both determined without applying the limitations of this Section 3.4. For this purpose, the adjusted immediately commencing "Straight Life Annuity" under the Plan at the Participant's annuity starting date is the annual amount of such annuity payable to the Participant, computed disregarding the Participant's accruals after age 65 but including actuarial adjustments even if those actuarial adjustments are used to offset accruals; and the adjusted immediately commencing "Straight Life Annuity" under the Plan at age 65 is the annual amount of such annuity that would be payable under the Plan to a hypothetical Participant who is age 65 and has the same accrued benefit as the Participant.

(3) Notwithstanding the other requirements of this Section 3.4.11(h)(ii), in adjusting the "Defined Benefit Dollar Limitation" for the Participant's annuity starting date except for Sections 3.4.11(h)(ii)(1)(I) or

22672380 v1 12

Exhibit 10.14

3.4.11(h)(ii)(3)(I), no adjustment shall be made to reflect the probability of a Participant's death between the annuity starting fate and age 62, or between age 65 and the annuity starting date, as applicable, if benefits are not forfeited upon the death of the Participant prior to the annuity starting date. To the extent benefits are forfeited upon death before the annuity starting date, such an adjustment shall be made. For this purpose, no forfeiture shall be treated as occurring upon the Participant's death if the Plan does not charge Participants for providing a qualified pre-retirement survivor annuity, as defined in Code § 417(c), upon the Participant's death.

(iii) Minimum benefit permitted. Notwithstanding anything else in this Section to the contrary, the benefit otherwise accrued or payable to a Participant under this Plan shall be deemed not to exceed the "Maximum Permissible Benefit" if:

(1) The retirement benefits payable for a "Limitation Year" under any form of benefit with respect to such Participant under this Plan and under all other defined benefit plans (without regard to whether a plan has been terminated) ever maintained by the Employer do not exceed $10,000 multiplied by a fraction – (I) the numerator of which is the Participant's number of Years (or part thereof, but not less than one year) of Service (not to exceed 10) with the Employer, and (II) the denominator of which is 10; and

(2) The Employer (or a "Predecessor Employer") has not at any time maintained a defined contribution plan in which the Participant participated (for this purpose, mandatory Employee contributions under a Defined Benefit Plan, individual medical accounts under Code § 401(h), and accounts for post-retirement medical benefits established under Code § 419A(d)(1) are not considered a separate defined contribution plan).

(i) Predecessor Employer. "Predecessor Employer" means, with respect to a Participant, a former employer of such Participant if the Employer maintains a Plan that provides a benefit which the Participant accrued while performing services for the former employer. A former entity that antedates the Employer is also a "Predecessor Employer" with respect to a Participant if, under the facts and circumstances, the Employer constitutes a continuation of all or a portion of the trade or business of the former entity. For this purpose, the formerly affiliated plan rules in Regulations § 1.415(f) 1(b)(2) apply as if the Employer and "Predecessor Employer" constituted a single employer under the rules described in Regulations § 1.415(a) 1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in Regulations § 1.415(a) 1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the "Predecessor Employer" relationship, such as a transfer of benefits or plan sponsorship.

22672380 v1 13

Exhibit 10.14

(j) Severance from Employment. "Severance from Employment" means, with respect to any individual, cessation from being an Employee of the Employer maintaining the Plan. An Employee does not have a "Severance from Employment" if, in connection with a change of employment, the Employee's new employer maintains the Plan with respect to the Employee.

(k) Straight Life Annuity. "Straight Life Annuity" means an annuity payable in equal installments for the life of a Participant that terminates upon the Participant's death.

(l) Year of Participation. "Year of Participation" means, with respect to a Participant, each accrual computation period (computed to fractional parts of a year) for which the following conditions are met: (i) the Participant is credited with at least the number of Hours of Service for benefit accrual purposes, required under the terms of the Plan in order to accrue a benefit for the accrual computation period, and (ii) the Participant is included as a Participant under the eligibility provisions of the Plan for at least one day of the accrual computation period. If these two conditions are met, the portion of a "Year of Participation" credited to the Participant shall equal the amount of benefit accrual service credited to the Participant for such accrual computation period. A Participant who is permanently and totally disabled within the meaning of Code § 415(c)(3)(C)(i) for an accrual computation period shall receive a "Year of Participation" with respect to that period.

In addition, for a Participant to receive a "Year of Participation" (or part thereof) for an accrual computation period, the Plan must be established no later than the last day of such accrual computation period. In no event shall more than one "Year of Participation" be credited for any 12-month period.

(m) Year of Service. "Year of Service" means, for purposes of Section 3.4.11(f), each accrual computation period (computed to fractional parts of a year) for which a Participant is credited with at least the number of Hours of Service for benefit accrual purposes, required under the terms of the Plan in order to accrue a benefit for the accrual computation period, taking into account only service with the Employer or a "Predecessor Employer."

3.4.12 Other rules.

(a) Benefits under terminated plans. If a defined benefit plan maintained by the Employer has terminated with sufficient assets for the payment of benefit liabilities of all Participants and a Participant in the Plan has not yet commenced benefits under the Plan, the benefits provided pursuant to the annuities purchased to provide the Participant's benefits under the terminated Plan at each possible annuity starting date shall be taken into account in applying the limitations of Section 3.4. If there are not sufficient assets for the payment of all Participants' benefit liabilities, the benefits taken into account shall be the benefits that are actually provided to the Participant under the terminated Plan.

(b) Benefits transferred from the Plan. If a Participant's benefits under a Defined Benefit Plan maintained by the Employer are transferred to another Defined Benefit Plan

22672380 v1 14

Exhibit 10.14

maintained by the Employer and the transfer is not a transfer of distributable benefits pursuant Regulations § 1.411(d)-4, Q&A-3(c), then the transferred benefits are not treated as being provided under the transferor plan (but are taken into account as benefits provided under the transferee plan). If a Participant's benefits under a Defined Benefit Plan maintained by the Employer are transferred to another defined benefit plan that is not maintained by the Employer and the transfer is not a transfer of distributable benefits pursuant to Regulations § 1.411(d)-4, Q&A-3(c), then the transferred benefits are treated by the Employer's Plan as if such benefits were provided under annuities purchased to provide benefits under a plan maintained by the Employer that terminated immediately prior to the transfer with sufficient assets to pay all Participants' benefit liabilities under the plan. If a Participant's benefits under a Defined Benefit Plan maintained by the Employer are transferred to another defined benefit plan in a transfer of distributable benefits pursuant to Regulations § 1.411(d)-4, Q&A-3(c), the amount transferred is treated as a benefit paid from the transferor plan.

(c) Formerly affiliated plans of the Employer. A "Formerly Affiliated Plan of an Employer" shall be treated as a plan maintained by the Employer, but the formerly affiliated plan shall be treated as if it had terminated immediately prior to the cessation of affiliation with sufficient assets to pay Participants' benefit liabilities under the Plan and had purchased annuities to provide benefits.

(d) Plans of a "Predecessor Employer." If the Employer maintains a Defined Benefit Plan that provides benefits accrued by a Participant while performing services for a "Predecessor Employer," then the Participant's benefits under a plan maintained by the "Predecessor Employer" shall be treated as provided under a plan maintained by the Employer. However, for this purpose, the plan of the "Predecessor Employer" shall be treated as if it had terminated immediately prior to the event giving rise to the "Predecessor Employer" relationship with sufficient assets to pay Participants' benefit liabilities under the plan, and had purchased annuities to provide benefits; the Employer and the "Predecessor Employer" shall be treated as if they were a single employer immediately prior to such event and as unrelated employers immediately after the event; and if the event giving rise to the predecessor relationship is a benefit transfer, the transferred benefits shall be excluded in determining the benefits provided under the plan of the "Predecessor Employer."

(e) Special rules. The limitations of Section 3.4 shall be determined and applied taking into account the rules in Regulations § 1.415(f)-1(d), (e) and (h).

(f) Aggregation with Multiemployer Plans.

(i) If the Employer maintains a multiemployer plan, as defined in Code § 414(f), and the multiemployer plan so provides, only the benefits under the multiemployer plan that are provided by the Employer shall be treated as benefits provided under a plan maintained by the Employer for purposes of Section 3.4.

(ii) A multiemployer plan shall be disregarded for purposes of applying the compensation limitation of Sections 3.4.11(b) and 3.4.11(h)(i) to a plan which is not a multiemployer plan.

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Exhibit 10.14

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Exhibit 10.14

ARTICLE IV
VESTING PROVISIONS

4.1 Determination of Vesting

In the case of a Participant who performs at least one Hour of Service on or after January 1, 1989, he shall have a vested percentage of 100% in his Retirement Benefit upon: (i) termination of Employment due to death or Disability or upon or after attaining Normal Retirement Age; or (ii) completion of five years of Vesting Service.

4.2 Rules for Crediting Vesting Service

4.2.6 Subject to Sections 4.2.2 through 4.2.4 below, a Participant's Vesting Service shall mean the sum of a Participant's Years of Service under the Plan, except for Years of Service before the Participant attained age 18 (or age 22 in the case of Participants who do not complete at least one Hour of Service on or after January 1, 1985).

4.2.7 If an Employee is on an authorized unpaid leave of absence granted by his Employer in accordance with standard personnel policies of such Employer applied in a non-discriminatory manner to all Employees similarly situated, his period of absence shall not be considered a Break in Service and shall be counted as Vesting Service upon his return to active Employment.

4.2.8 If an Employee is on an authorized military leave while his reemployment rights are protected by law and provided that he directly entered military service from his Employer's service and shall not have voluntarily reenlisted after the date of first entering active military service, his period of absence shall not be considered a Break in Service and shall be counted as Vesting Service upon his return to active Employment.

4.2.9 An Employee who terminates Employment with no vested percentage in his Retirement Benefit shall, if he returns to Employment, have no credit for Vesting Service prior to such termination of Employment if (i) for years prior to January 1, 1985, the total of his consecutive One Year Breaks in Service immediately preceding his reemployment exceed his aggregate years of Vesting Service (whether or not consecutive, but excluding Vesting Service previously disregarded under this rule) prior to such termination; or (ii) for years on or after January 1, 1985, the total of his consecutive One Year Breaks in Service immediately preceding his reemployment exceed the greater of five years or his aggregate years of Vesting Service (whether or not consecutive, but excluding Vesting Service previously disregarded under this rule) prior to the termination. A Participant who had a Vested Separation and returns to Employment will retain credit for his prior years of Vesting Service.

4.3 Retirement Benefit Forfeitures

The unvested portion of the Retirement Benefit of a Participant who has terminated Employment shall be forfeited as of the earliest date on which such Participant's Vesting Service may be disregarded pursuant to Section 4.2.4. Any forfeitures shall be applied to reduce the Employer actuarial liability under the Plan.

22672380 v1

Exhibit 10.14

4.4 TMK Hogan

A Participant who terminated employment with the Company on December 31, 1996, and who became as of January 1, 1997, an employee of TMK Hogan, became fully vested in his or her Retirement Benefit as of such date.

4.5 Vesta Insurance Group, Inc.

A Liberty National Non-Commissioned Participant who terminated Employment with Liberty National Life Insurance Company on November 12, 1993, and who became as of that same date an employee of Vesta Insurance Group, Inc., became fully vested in his Retirement Benefit as of such date.

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Exhibit 10.14

ARTICLE V
AMOUNT AND COMMENCEMENT OF RETIREMENT BENEFITS

5.1 Determination of Amount of Retirement Benefits

5.1.10 Normal Retirement Benefits . A Participant's benefits upon Normal Retirement shall be equal to his Retirement Benefit as of his Normal Retirement Date. The Participant's Benefit Commencement Date shall be the last day of the payroll period coincident with or next following his termination of Employment. The Participant shall not be entitled to any benefits under Section 5.1.1 unless he shall survive until his Benefit Commencement Date.

5.1.11 Deferred Retirement Benefits . A Participant's benefits upon Deferred Retirement shall be equal to his Retirement Benefit determined as of the date of Deferred Retirement (without actuarial increase for deferred commencement). The Participant's Benefit Commencement Date shall be the last day of the payroll period coincident with or next following his termination of Employment. The Participant shall not be entitled to any benefits under this Paragraph unless he shall survive until his Benefit Commencement Date.

5.1.12 Early Retirement Benefits . A Participant's benefits upon Early Retirement shall be equal to his Retirement Benefit calculated as of the date of Early Retirement. The Participant's Benefit Commencement Date shall be his Normal Retirement Date; however if he so elects, the Benefit Commencement Date shall be the last day of the payroll period coincident with or next following his Early Retirement, or the last day of any payroll period thereafter which is prior to his Normal Retirement Date. If the Participant elects a Benefit Commencement Date preceding his Normal Retirement Date, his benefit shall equal his Accrued Retirement Benefit multiplied by the early retirement factor shown below:

Years by Which the Date of

the Participant's First Benefit Early Retirement Factor to

Payment Precedes His Normal Be Applied to Accrued

Retirement Dat e Retirement Benefit

(Interpolate for Months)

10 .500

9 .533

8 .567

7 .600

6 .633

5 .667

4 .733

3 .800

2 .867

1 .933

0 1.000

22672380 v1

Exhibit 10.14

A Participant shall not be entitled to any benefits under this Section 5.13 unless he shall survive until his Benefit Commencement Date.

5.1.13 Vested Separation Benefits . A Participant's benefits upon Vested Separation shall be equal to his Retirement Benefit calculated as of the date of Vested Separation multiplied by his vesting percentage. The Participant's Benefit Commencement Date shall be his Normal Retirement Date; provided, however, that, such a Participant may elect to commence receiving his benefits on or after the earliest date that he could have been eligible for Early Retirement. If the Participant elects a Benefit Commencement Date preceding his Normal Retirement Date, his benefit shall equal his Accrued Retirement Benefit multiplied by the appropriate early retirement factor shown in Section 5.1.3. A Participant shall not be entitled to any benefits under this Section 5.1.4 unless he shall survive until his Benefit Commencement Date.

5.1.14 Non-Vested Separation . A Participant shall not be entitled to any Retirement Benefit upon his Non-Vested Separation. In addition, if a Participant who is zero percent vested in his Accrued Retirement Benefit terminates Employment, he shall be deemed to have received a distribution of his Accrued Retirement Benefit.

5.2 Suspension of Payments on Resumption of Employment

5.2.13 If an Employee continues in Employment after his Normal Retirement Date or if a former Employee is receiving monthly payment of his Retirement Benefit, payment of his Retirement Benefit shall be suspended for each calendar month during which such Employee or former Employee continues in (or resumes) Employment and performs more than 40 Hours of Service per calendar month considered as service under ERISA § 203(a)(3)(B).

5.2.14 No payment shall be withheld by the Plan pursuant to Section 5.2 unless the Plan notifies the Employee by personal delivery or first class mail during the first calendar month or payroll period in which the Plan withholds payments that his benefits are suspended. Such notifications shall contain a description of the specific reasons why benefit payments are being suspended, a description of the Plan provision relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in Title 29 of the Code of Federal Regulations § 2530.203-3. In addition, the notice shall inform the Employee of the Plan's procedures for affording a review of the suspension of benefits. Requests for such reviews shall be considered in accordance with the claims procedure adopted by the Administrator.

5.2.15 If benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in ERISA § 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of ERISA § 203(a)(3)(B) service and the resumption of payments.

5.2.16 The Retirement Benefit payable upon resumption of benefit payment shall be equal to the Participant's Retirement Benefit as of the date of his subsequent termination of Employment

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Exhibit 10.14

reduced by the Actuarial Equivalent of payments previously made to him; provided, however, that such Retirement Benefit may not be less than the Retirement Benefit previously payable.

5.3 Limitation on Commencement of Benefits

5.3.1 Unless otherwise elected by a Participant, the Participant's Benefit Commencement Date shall in no event be later than the 60th day after the close of the Plan Year in which the latest of the following events occurs:

(d) The tenth anniversary of the year in which the Participant commenced participation in the Plan; or

(e) The Participant's termination of Employment.

5.3.2 If the amount of benefits payable cannot be determined within such 60-day period, or if it is not possible to pay such benefits within such period because the Administrator has been unable to locate the Participant after making reasonable efforts to do so, then a payment, retroactive to such 60th day, shall be made no later than 60 days after the earliest date on which the amount of such benefits can be determined or the Participant can be located, as the case may be.

5.3.3 Any other provision of this Article V to the contrary notwithstanding, the Benefit Commencement Date of a Participant must be no later than the first day of April following the calendar year in which the Participant attains age 70½ even if he continues in Employment after that date. Notwithstanding the foregoing, if a Participant who is not a "five % owner" (as defined in Code § 401(a)(9)) attained age 70½ before January 1, 1988, the Benefit Commencement Date must be no later than the first day of April following the calendar year in which the Participant terminates Employment. Effective as of January 1, 1997, in the case of a Participant who is not a five % owner (as defined above) with respect to the Plan Year ending in the calendar year in which the Participant attains age 70½, the Benefit Commencement Date must be no later than the later of (i) the calendar year during which the Participant attained age 70 ½, or (ii) the calendar year in which the Participant retired.

Transitional rule for the 1997, 1998, 1999, 2000 and 2001 Plan Years: If a Participant attains age 70 ½ during the 1997, 1998 or 1999 Plan Years and wishes to receive (or begin receiving) the required minimum distribution that would have been payable to him but for the Small Business Job Protection Act of 1996 changes to the immediately preceding paragraph, the Participant may elect, pursuant to a procedure established by the Administrator, to begin receiving his required minimum distributions prior to his retirement. If a Participant who has not retired (other than a five % owner) attains age 70½ on or after January 1, 2002, the Participant may not begin to receive in-service distributions on account of his attainment of age 70½.

If a Participant retires in a calendar year after the calendar year in which the Participant attains age 70 ½, his or her benefits under the Plan shall be actuarially increased (with any permitted

22672380 v1 3

Exhibit 10.14

offsets or reductions) as provided for in Internal Revenue Service Notice 97-75 or such other written guidance published by the Internal Revenue Service.

5.3.4 If the Actuarial Equivalent value of a Participant's Retirement Benefit exceeds $1,000, the Participant (and, if applicable, his Spouse) must consent, in writing filed with the Administrator, to any distribution from the Plan before the Participant's attainment of Normal Retirement Age.

5.4 Minimum Distribution Requirements

5.4.1 Precedence. The requirements of Section 5.4 will take precedence over any inconsistent provisions of the Plan.

5.4.2 Requirements of Treasury Regulations Incorporated. All distributions under this Section 5.4 will be determined and made in accordance with the Treasury Regulations under Code § 401(a)(9).

5.4.3 TEFRA § 242(b)(2) Elections. Notwithstanding the other provisions of this Section 5.4, other than Section 5.4.2, distributions may be made under a designation made before January 1, 1984, in accordance with § 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to § 242(b)(2) of TEFRA.

5.4.4 Required Beginning Date. The Participant's entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant's required beginning date.

5.4.5 Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant's entire interest will be distributed, or begin to be distributed, no later than as follows:

(l) If the Participant's Surviving Spouse is the Participant's sole designated Beneficiary, then, except as provided in Section 5.4.5(e) below, distributions to the Surviving Spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 ½, if later.

(m) If the Participant's Surviving Spouse is not the Participant's sole designated Beneficiary, then, except as provided in Section 5.4.5(e) below, distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(n) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant's death, the Participant's entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

(o) If the Participant's Surviving Spouse is the Participant's sole designated Beneficiary and the Surviving Spouse dies after the Participant but before distributions to

22672380 v1 4

Exhibit 10.14

the Surviving Spouse begin, this Section 5.4.5, other than Section 5.4.5(a), will apply as if the Surviving Spouse were the Participant.

(p) If the Participant dies before distributions begin and there is a designated Beneficiary, distribution to the designated Beneficiary is not required to begin by the date covered by this Section 5.4.5, but the Participant's entire interest will be distributed to the designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant's death. If the Participant's Surviving Spouse is the Participant's sole designated Beneficiary and the Surviving Spouse dies after the Participant but before distributions to either the Participant or the Surviving Spouse begin, this election will apply as if the Surviving Spouse were the Participant. This Section 5.4.5(e) shall apply to all distributions.

For purposes of this Section 5.4.5 and Sections 5.4.12, 5.4.13 and 5.4.14, distributions are considered to begin on the Participant's required beginning date (or, if Section 5.4.5(d) applies, the date distributions are required to begin to the Surviving Spouse under Section 5.4.5(a)). If annuity payments irrevocably commence to the Participant before the Participant's required beginning date (or to the Participant's Surviving Spouse before the date distributions are required to begin to the Surviving Spouse under Section 5.4.5(a)), the date distributions are considered to begin is the date distributions actually commence.

5.4.6 Form of Distribution. Unless the Participant's interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Sections 5.4.7 through 5.4.14. If the Participant's interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code § 401(a)(9) and the Regulations. Any part of the Participant's interest which is in the form of an individual account described in Code § 414(k) will be distributed in a manner satisfying the requirements of Code § 401(a)(9) and the Regulations that apply to individual accounts.

5.4.7 General Annuity Requirements. If the Participant's interest is paid in the form of annuity distributions under the Plan, payments under the annuity will satisfy the following requirements:

(a) The annuity distributions will be paid in periodic payments made at intervals not longer than one year;

(b) The distribution period will be over a life (or lives) or over a period certain not longer than the period described in Sections 5.4.10 and 5.4.11 or Sections 5.4.12 through 5.4.14.

(c) Once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted;

(d) Payments will either be nonincreasing or increase only as follows:

22672380 v1 5

Exhibit 10.14

(i) By an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics;

(ii) To the extent of the reduction in the amount of the Participant's payments to provide for a survivor benefit upon death, but only if the Beneficiary whose life was being used to determine the distribution period described in Section 5.4.10 or 5.4.11 dies or is no longer the Participant's Beneficiary pursuant to a qualified domestic relations order within the meaning of Code § 414(p);

(iii) To provide cash refunds of employee contributions upon the Participant's death; or

(iv) To pay increased benefits that result from a Plan amendment.

5.4.8 Amount Required to be Distributed by Required Beginning Date. The amount that must be distributed on or before the Participant's required beginning date (or, if the Participant dies before distributions begin, the date distributions are required to begin under Section 5.4.5(a) or 5.4.5(b)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Participant's benefit accruals as of the last day of the first distribution calendar year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant's required beginning date.

5.4.9 Additional Accruals After First Distribution Calendar Year. Any additional benefits accruing to the Participant in a calendar year after the first distribution calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

5.4.10 Joint Life Annuities Where the Beneficiary Is Not the Participant's Spouse. If the Participant's interest is being distributed in the form of a joint and survivor annuity for the joint lives of the Participant and a non-Spouse Beneficiary, annuity payments to be made on or after the Participant's required beginning date to the designated Beneficiary after the Participant's death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Participant using the table set forth in Q&A-2 of § 1.401(a)(9)-6T of the Treasury Regulations. If the form of distribution combines a joint and survivor annuity for the joint lives of the Participant and a non-Spouse Beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the designated Beneficiary after the expiration of the period certain.

5.4.11 Period Certain Annuities. Unless the Participant's spouse is the sole designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the Participant's lifetime may not exceed the applicable distribution period for the Participant under the Uniform Lifetime Table set forth in Regulation § 1.401(a)(9)-9 for the calendar year that contains the annuity starting date. If the annuity

22672380 v1 6

Exhibit 10.14

starting date precedes the year in which the Participant reaches age 70, the applicable distribution period for the Participant is the distribution period for age 70 under the Uniform Lifetime Table set forth in Regulation § 1.401(a)(9)-9 plus the excess of 70 over the age of the Participant as of the Participant's birthday in the year that contains the annuity starting date. If the Participant's Spouse is the Participant's sole designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Participant's applicable distribution period, as determined under this Section 5.4.11, or the joint life and last survivor expectancy of the Participant and the Participant's Spouse as determined under the Joint and Last Survivor Table set forth in Regulation § 1.401(a)(9)-9, using the Participant's and Spouse's attained ages as of the Participant's and Spouse's birthdays in the calendar year that contains the annuity starting date.

5.4.12 Participant Survived by Designated Beneficiary. If the Participant dies before the date distribution of his or her interest begins and there is a designated Beneficiary, the Participant's entire interest will be distributed, beginning no later than the time described in Section 5.4.5(a) or 5.4.5(b), over the life of the designated Beneficiary or over a period certain not exceeding:

(a) Unless the annuity starting date is before the first distribution calendar year, the life expectancy of the designated Beneficiary determined using the Beneficiary's age as of the Beneficiary's birthday in the calendar year immediately following the calendar year of the Participant's death; or

(b) If the annuity starting date is before the first distribution calendar year, the life expectancy of the designated Beneficiary determined using the Beneficiary's age as of the Beneficiary's birthday in the calendar year that contains the annuity starting date.

5.4.13 No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant's death, distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

5.4.14 Death of Surviving Spouse Before Distributions to Surviving Spouse Begin. If the Participant dies before the date distribution of his or her interest begins, the Participant's Surviving Spouse is the Participant's sole designated Beneficiary, and the Surviving Spouse dies before distributions to the Surviving Spouse begin, Sections 5.4.12 through 5.4.14 will apply as if the Surviving Spouse were the Participant, except that the time by which distributions must begin will be determined without regard to Section 5.4.5(a).

5.4.15 Designated Beneficiary. The individual who is designated as the Beneficiary under Section 7.4 of the Plan and is the "designated beneficiary" under Code § 401(a)(9) and Regulation § 1.401(a)(9)-1, Q&A-4.

5.4.16 Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first

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Exhibit 10.14

distribution calendar year is the calendar year in which distributions are required to begin pursuant to Section 5.4.5.

5.4.17 Life expectancy. Life expectancy as computed by use of the Single Life Table in Regulation § 1.401(a)(9)-9.

5.4.18 Required beginning date. The date specified in Section 5.3.3 of the Plan.

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Exhibit 10.14

ARTICLE VI
FORMS OF PAYMENT OF RETIREMENT BENEFIT

6.1 Methods of Distribution

6.1.17 A Participant's benefits shall be payable in the normal form of a Qualified Joint and Survivor Annuity if the Participant is married on his Benefit Commencement Date and in the normal form of an annuity for the life of the Participant with Actuarially Equivalent payments guaranteed for 120 months if the Participant is not married on that date, provided that, and subject to Sections 6.1.2, 6.1.3 and 6.1.4, a Participant may within the 90-day period prior to the Benefit Commencement Date elect, in accordance with Section 6.2, any of the following optional forms of benefit payment instead of the normal form:

(a) A Single Life Annuity, under which monthly payments calculated in accordance with Section 3.1.1 are made to the Participant during his lifetime with no further payments from the Plan on his behalf after his death.

(b) A Joint and 50%, 66 ⅔%, 75% or 100% Survivor Annuity, under which Actuarially Equivalent monthly payments are made to the Participant for the joint lives of the Participant and his Beneficiary with payments continuing for the life of the survivor in an amount equal to 50%, 66 ⅔%, 75% or 100% of the joint life payments (whichever is elected by the Participant). A Participant may elect to add a period certain of 10 years in which event no reduction in payments will be made for the longer of the 10 year period or the period during which both the Participant and Beneficiary remain alive.

(c) A 120 Months Certain and Life Income Annuity, an optional form of payment for a married Participant, under which reduced Actuarially Equivalent payments are made to the Participant during the Participant's lifetime, with the provision that if the Participant's death occurs before he had received 120 monthly payments the value of the remaining number of such payments shall be paid to his Beneficiary.

(d) Lump Sum, under which the Actuarially Equivalent value of the Participant's Accrued Retirement Benefit as of December 31, 2003 is paid in one single sum. This optional form of benefit shall be eliminated with respect to benefits accruing under the Plan after December 31, 2003 and a lump sum option shall not be available to an Employee who becomes a Participant on or after January 1, 2004. Notwithstanding the preceding sentence, if the implementation of an election of a single sum distribution of a pre-2004 Retirement Benefit would result in monthly payments of the Participant's Retirement Benefit accrued after 2003 of an amount less than $100, the present value of the portion of the Participant's Retirement Benefit that accrued after 2003 shall also be paid in the form of a single sum.

6.1.18 Anything in Section 6.1.1 to the contrary notwithstanding, if the Actuarial Equivalent value of a Participant's Retirement Benefit is $1,000 or less, his benefit shall be paid in the form of a lump sum distribution and no optional form of benefit payment shall be available.

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Exhibit 10.14

6.1.19 Payment in any form may only be made over one of the following periods (or a combination thereof):

(a) The life of the Participant;

(b) The life of the Participant and a designated Beneficiary;

(d) A period certain not extending beyond the joint and last survivor expectancy of the Participant and a designated Beneficiary.

6.1.20 If the Participant's Spouse is not his designated Beneficiary, the method of distribution must assure that at least 50% of the present value of the Participant's Retirement Benefit is paid within the life expectancy of the Participant.

6.2 Election of Optional Forms

6.2.5 By notice to the Administrator within the 180-day period prior to a Participant's Benefit Commencement Date, the Participant may elect, in writing and subject to the spousal consent rules as set forth in Section 6.2.4, not to receive the normal form of benefit payment otherwise applicable and to receive instead an optional form of benefit payment provided for in Section 6.1.1.

6.2.6 Within a reasonable period, but in no event later than 30 days before nor earlier than 180 days (unless the Participant elects to waive the 30 day limitation in favor of a seven day limitation as permitted under Code § 417(a)(7)(B)) before a Participant's Benefit Commencement Date, the Administrator shall provide to each Participant a written explanation of:

(q) The terms and conditions of the Participant's normal form of benefit payment;

(r) The Participant's right to make, and the effect of, an election to waive the normal form of benefit payment;

(s) The rights of the Participant's Spouse under Section 6.2.4;

(t) The right to make, and the effect of, a revocation of a previous election to waive the normal form of benefit payment; and

(u) The relative values of the various optional forms of benefit payment.

The Administrator may, on a uniform and nondiscriminatory basis, provide for such other notices, information or election periods or take such other action as the Administrator considers necessary or appropriate in order to comply with Code §§ 401(a)(11) and 417.

6.2.7 A Participant may revoke his election to take an optional form of benefit at any time prior to the Participant's Benefit Commencement Date, without the consent of his Spouse.

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Exhibit 10.14

6.2.8 The election of an optional form of benefit by a married Participant must be in the form of a waiver of a Qualified Joint and Survivor Annuity. The election must be in writing and consented to by the Participant's Spouse. The Spouse's consent to the waiver must specify the form of benefit being elected and the non-Spouse Beneficiary, if any, and must be witnessed by the Administrator or a notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of the Administrator that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, the Participant's election will be deemed effective. Any consent necessary under this provision will be valid only with respect to the Spouse who signs the consent, or in the event of a deemed effective election, the designated Spouse.

6.2.9 The election of an optional form of benefit which contemplates the payment of an annuity shall not be given effect if any person who would receive benefits under the annuity dies before the Benefit Commencement Date.

6.3 Direct Rollovers

6.3.19 A Participant or Spouse may elect to have all or a portion of any amount payable to him or her from the Plan which is an "eligible rollover distribution" (as defined in Section 6.3.2 below) transferred directly to an "eligible retirement plan" (as defined in Section 6.3.2 below). Any such election shall be made in accordance with such uniform rules and procedures as the Administrator may prescribe from time to time as to the timing and manner of the election in accordance with Code § 401(a)(31).

6.3.20 For purposes of this Section and Section 7.2.4:

(a) "Eligible rollover distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee other than: (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary; (ii) any distribution for a specified period of 10 years or more; (iii) any distribution to the extent such distribution is required under Code § 401(a)(9); (iv) the portion of any distribution that is not includable in gross income; or (v) any hardship distribution described in § 401(k)(2)(B)(i)(iv) received after December 31, 1998.

(b) "Eligible retirement plan" shall mean an individual retirement account or annuity described in Code § 408(a) or 408(b) ("IRA"); a Roth IRA described in Code § 408A(b); an annuity plan described in Code § 403(a); an annuity contract described in Code § 403(b); an eligible plan under Code § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan; or a qualified plan described in Code § 401(a), that accepts the distributee's eligible rollover distribution. The definition of eligible retirement plan shall also apply in the case of a distribution to a Surviving Spouse, or to a Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Code § 414(p).

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Exhibit 10.14

6.3.21 Direct rollover to qualified plan/403(b) plan. Section 6.3.2(a)(4) notwithstanding, for taxable years beginning after December 31, 2006, a Participant or Spouse may elect to transfer non-taxable or employee after-tax contributions by means of a direct rollover to a qualified plan or to a 403(b) plan that agrees to account separately for amounts so transferred (including interest thereon), including accounting separately for the portion of such distribution which is includible in gross income and the portion of such distribution which is not includible in gross income.

6.3.22 Non-Spouse Beneficiary rollover right. A non-Spouse Beneficiary who is a "designated beneficiary" under Code § 401(a)(9)(E) and the Regulations thereunder, by a direct trustee-to-trustee transfer ("direct rollover"), may roll over all or any portion of his or her distribution to an Individual Retirement Account (IRA) the Beneficiary establishes for purposes of receiving the distribution. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an "eligible rollover distribution" under Code § 401(a) (31). If the Participant's named Beneficiary is a trust, the Plan may make a direct rollover to an IRA on behalf of the trust, provided the trust satisfies the requirements to be a "designated beneficiary" within the meaning of Code § 401(a)(9)(E).

If a non-Spouse Beneficiary receives a distribution from the Plan, the distribution is not eligible for a 60-day (non-direct) rollover. A non-Spouse Beneficiary may not roll over an amount that is a required minimum distribution, as determined under applicable Treasury Regulations and other Internal Revenue Service guidance. If the Participant dies before his or her required beginning date and the non-Spouse Beneficiary rolls over to an IRA the maximum amount eligible for rollover, the Beneficiary may elect to use either the five-year rule or the life expectancy rule, pursuant to Treasury Regulations § 1.401(a)(9)-3, A-4(c), in determining the required minimum distributions from the IRA that receives the non-Spouse Beneficiary's distribution.

6.4 Notices

(a) Any reference to the 90-day maximum notice period requirements of Code §§ 402(f) (the rollover notice), 411(a)(11) (Participant's consent to distribution), and 417 (notice regarding the joint and survivor annuity rules) is changed to 180 days.

(b) Notices given to Participants pursuant to Code § 411(a)(11) shall include a description of how much larger benefits will be if the commencement of distributions is deferred.

(c) Notices to Participants shall include the relative values of the various optional forms of benefit, if any, under the Plan as provided in Regulation § 1.417(a)-3.

(d) Any notice to Participants or election by Participants that the Plan requires to be made in writing, may, at the option of the Administrator, be provided electronically in accordance with Regulation § 1.401(a)-21.

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Exhibit 10.14

ARTICLE VII
DEATH BENEFITS

7.1 Eligibility for Pre-Retirement Death Benefit

7.1.10 A pre-retirement death benefit shall be payable under the Plan in the event of the death of a Participant prior to his Benefit Commencement Date who, on the date of death, was either:

(n) Actively employed by the Employer;

(o) Disabled; or

(p) Terminated but eligible for Early Retirement.

The death benefit payable under this Section 7.1.1 shall be the larger of (d) or (e), where:

(q) Is the lump sum Actuarial Equivalent, as of the day before the death of the Participant, of the Accrued Retirement Benefit that would have been payable upon Normal Retirement of the Participant;

(r) Is the lump sum Actuarial Equivalent, as of the day before the Participant's death, of the monthly benefit which would have been payable to the Participant's Spouse in the form of an immediate Qualified Joint and Survivor Annuity under the Plan if (i) in the case of a Participant who dies after having attained the earliest retirement age under the Plan, the Participant had retired on the day before his death, and (ii) in the case of a Participant who dies before having attained the earliest retirement age under the Plan, the Participant had separated from service as of his date of death, survived until his earliest retirement age under the Plan, retired on the day after attainment of his earliest retirement age under the Plan, and died immediately thereafter.

7.1.11 A pre-retirement death benefit shall also be payable under the Plan in the event of the death of a married Participant prior to his or her Benefit Commencement Date who had a Vested Separation prior to eligibility for Early Retirement. The death benefit payable under this Section 7.1.2 shall be equal to the benefit calculated under Section 7.1.1(e).

7.2 Form of Pre-Retirement Death Benefit

7.2.23 The pre-retirement death benefit payable under Section 7.1.1 shall be payable to the Surviving Spouse of such Participant in the form of an Actuarially Equivalent single life annuity commencing on the date of death unless the Participant has no Surviving Spouse or the Participant has made an election under Section 7.3, with the Spouse's consent, not to have the benefit paid in such form. If the Participant has no Surviving Spouse or has made an effective election under Section 7.3, such benefit shall be paid to the Participant's Beneficiary in the Actuarially Equivalent form elected by the Participant commencing on the date elected, or if there is no designated Beneficiary, to the Participant's estate in a single lump sum. The Surviving Spouse or other Beneficiary may elect any other Actuarially Equivalent form of payment permitted under Section

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Exhibit 10.14

6.1.1, by an instrument in writing filed with the Administrator within 60 days after the Participant's death.

7.2.24 The pre-retirement death benefit payable under Section 7.1.2 shall be payable to the Surviving Spouse of such Participant in the form of an Actuarially Equivalent single life annuity commencing on the date the Participant would have attained earliest retirement age, unless the Surviving Spouse shall elect another Actuarially Equivalent form of payment permitted by Section 6.1.1, by an instrument in writing filed with the Administrator within 60 days after the Participant's death. No benefit shall be payable under Section 7.1.2 unless the Spouse is alive on such Benefit Commencement Date.

7.2.25 Notwithstanding the provisions of Sections 7.2.1 and 7.2.2, if the present value of the pre-retirement death benefit payable under Section 7.1.1 or 7.1.2 is $1,000 or less, such benefit shall be distributed in a single lump sum as soon as practicable following the death of the Participant.

7.2.26 Any lump sum payment payable to a Spouse pursuant to this Section 7.2 shall be eligible for a direct rollover in accordance with Section 6.3.

7.3 Election to Waive

7.3.2 An election by a married Participant under Section 7.2.1 must be in the form of an election to waive the Qualified Pre-Retirement Survivor Annuity. In order for any waiver pursuant to this Section 7.3.1 to be effective, the Participant's Spouse must consent in writing to such election, and such consent must acknowledge the effect of the election and must be witnessed by the Administrator or a notary public. Such spousal consent shall be effective only with respect to the Spouse giving this consent and, once given, such consent shall be irrevocable. The Participant shall have the right to revoke his waiver at any time prior to the earlier of the Participant's Benefit Commencement Date or death.

7.4 Beneficiaries

7.4.1 With respect to any death benefit payable pursuant to Section 7.1.1, a Participant's Beneficiary shall be his Surviving Spouse or, subject to the spousal consent rules in Section 7.3, other Beneficiary or Beneficiaries designated by the Participant in accordance with rules established by the Administrator. With respect to any death benefit payable pursuant to Section 7.1.2, a Participant's Beneficiary shall be his Surviving Spouse.

7.4.2 With respect to any form of payment of a Retirement Benefit pursuant to Article V providing for payments after the death of the Participant, a Participant shall designate, in accordance with the election procedure under Article VI, one or more Beneficiaries to whom amounts due after his death shall be paid, and the rights of such Beneficiary shall be governed by the terms of the form of payment so elected.

7.4.3 No Spouse or other Beneficiary shall have any right to benefits under the Plan unless he shall survive the Participant. If a Beneficiary fails to survive a Participant for at least 30 days, it shall be presumed that the Participant survived the Beneficiary.

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Exhibit 10.14

7.5 After-Death Distribution Rules

7.5.1 Notwithstanding any Plan provision to the contrary, if a Participant dies after distribution of his benefits has commenced, the remaining portion of such benefits will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death.

7.5.2 Notwithstanding any Plan provision to the contrary, if a Participant dies before distribution of his benefits has commenced, the Participant's entire interest will be distributed no later than 5 years after the Participant's death; provided, however, that if any portion of the Participant's interest is payable to his Beneficiary, distributions may be made in substantially equal installments over the life or life expectancy of the Beneficiary, commencing (i) in the case of a Beneficiary other than a Surviving Spouse, no later than one year after the Participant's death; and (ii) in the case of a Surviving Spouse, no later than the later of one year after the Participant's death or the date on which the Participant would have attained age 70 ½. If the Spouse dies before payments to such Spouse begin, subsequent distributions shall be made as if the Spouse had been the Participant.

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Exhibit 10.14

ARTICLE VIII
CONTRIBUTIONS AND FORFEITURES

8.1 Contribution by the Company

The Company and each Participating Affiliate will make contributions to the Trust at such times and in such amounts as the Company may determine.

8.2 Contributions by Employees

Employees are not required or permitted to make contributions under the Plan.

8.3 Forfeitures

Forfeitures under the Plan will be applied to reduce the Company's contributions and will not be applied to increase the benefits of any person hereunder prior to the termination of the Plan or complete discontinuance of contributions by the Company.

8.4 Return of Employer Contributions under Special Circumstances

Notwithstanding any provision of this Plan to the contrary, upon timely written demand by an Employer to the Trustee:

(v) Any contribution made by the Employer to the Plan under a mistake of fact shall be returned to the Employer by the Trustee within one year after the payment of the contribution;

(w) Any contribution made by the Employer incident to the determination by the Commissioner of Internal Revenue that the Plan is initially a Qualified Plan shall be returned to the Employer by the Trustee within one year after notification from the Internal Revenue Service that the Plan is not initially a Qualified Plan; and

(x) Any contribution made by the Employer conditioned upon the deductibility of the contribution under Code § 404 shall be returned to the Employer within one year after a deduction for the contribution under Code § 404 is disallowed by the Internal Revenue Service, but only to the extent disallowed. Each contribution by an Employer shall be conditioned upon the deductibility of the contribution under Code § 404 unless the Employer elects otherwise.

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Exhibit 10.14

ARTICLE IX
FIDUCIARIES

9.1 Named Fiduciaries

The named fiduciaries, who shall have authority to control and manage the operation and administration of the Plan, are as follows:

(a) The Company, which shall have the sole right to (i) appoint and remove from office the members of the Administrative Committee, the Trustee and any investment manager; (ii) establish a funding policy relating to, and the method for achieving the objectives of, the Plan; (iii) amend or terminate the Plan, and (iv), at its election, direct the Trustee concerning any aspect of the investment, management, or control of Plan assets;

(b) The Administrative Committee, which shall have the authority and duties specified in Article XI hereof;

(c) The Trustee, which shall have the authority and duties specified in Article X hereof and the Trust Agreement; and, in addition, the authority and duties of the Administrative Committee, in the event that no such Committee shall be appointed or constituted by the Company; and

(d) Any investment manager or managers selected by the Company who renders investment advice with respect to Plan assets.

9.2 Employment of Advisers

A "named fiduciary" with respect to the Plan (as defined in ERISA § 402(a)(2)) and any "fiduciary" (as defined in ERISA § 3(21)) appointed by such a "named fiduciary" may employ one or more persons to render advice with regard to any responsibility of such "named fiduciary" or "fiduciary" under the Plan.

9.3 Multiple Fiduciary Capacities

Any "named fiduciary" with respect to the Plan (as defined in ERISA § 402(a)(2)) and any other "fiduciary" (as defined in ERISA § 3(21)) with respect to the Plan may serve in more than one fiduciary capacity.

9.4 Reliance

Any fiduciary with respect to the Plan may rely upon any direction, information or action of any other fiduciary, acting within the scope of its responsibilities under the Plan, as being proper under the Plan.

9.5 Scope of Authority and Responsibility

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Exhibit 10.14

The responsibilities of the Administrative Committee and the Trustee for the operation and administration of the Plan are allocated between them in accordance with the provisions of the Plan and the Trust Agreement wherein their respective duties are specified. Each fiduciary shall have only the authority and duties as are specifically given to it under this Plan, shall be responsible for the proper exercise of its own authorities and duties, and shall not be responsible for any act or failure to act of any other fiduciary.

9.6 Trustee Subject to Directions of Named Fiduciary

In the event the Company elects, pursuant to Section 9.1(a)(iv), to direct the Trustee with respect to the investment, management, or control of Plan assets, the Company shall serve in such capacity as a Named Fiduciary of the Plan, and the Trustee shall be subject to such directions from the Company that are made in accordance with the terms of the Plan and are not contrary to the provisions of ERISA.

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Exhibit 10.14

ARTICLE X
TRUSTEE

10.1 Trust Agreement

The Company shall enter into one or more Trust Agreements with the Trustee or Trustees selected by it in its sole discretion, and the Trustee shall receive the contributions to the Trust Fund made by the Employer pursuant to the Plan and shall hold, invest, reinvest, and distribute such fund, as applicable, in accordance with the terms and provisions of the Trust Agreement. The Company will determine the form and terms of such Trust Agreement and may modify such Trust Agreement from time to time to accomplish the purposes of this Plan and may, in its sole discretion, remove any Trustee and select any successor Trustee.

10.2 Assets in Trust

Except as otherwise permitted under the Plan, all assets of the Plan shall be held in trust by the Trustee who upon acceptance of such office shall have such authority as is set forth in the Trust Agreement.

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Exhibit 10.14

ARTICLE XI
ADMINISTRATIVE COMMITTEE

11.1 Appointment and Removal of Administrative Committee

The administration of the Plan shall be vested in an Administrative Committee (hereinafter in this Article XI, the "Committee") of at least three (3) persons who shall be appointed by the Board, and may include persons who are not Participants in the Plan. A person appointed a member of the Committee shall signify his acceptance in writing. The Board may remove or replace any member of the Committee at any time in its sole discretion, and any Committee member may resign by delivering his written resignation to the Board, which resignation shall become effective upon its delivery or at any later date specified therein. If at any time there shall be a vacancy in the membership of the Committee, the remaining member or members of the Committee shall continue to act until such vacancy is filled by action of the Board.

11.2 Officers of Administrative Committee

The Committee shall appoint from among its members a chairman, and shall appoint as secretary a person who may be, but need not be, a member of the Committee or a Participant in the Plan.

11.3 Action by Administrative Committee

The Committee shall hold meetings upon such notice, at such place or places, and at such times as its members may from time to time determine. A majority of its members at the time in office shall constitute a quorum for the transaction of business. All action taken by the Committee at any meeting shall be by vote of the majority of its members present at such meeting, except that the Committee also may act without a meeting by a consent signed by a majority of its members. Any member of the Committee who is a Participant in the Plan shall not vote on any question relating exclusively to himself.

11.4 Rules and Regulations

Subject to the terms of the Plan, the Committee may from time to time adopt such rules and regulations as it shall deem appropriate for the administration of the Plan and for the conduct and transaction of its business and affairs.

11.5 Powers

The Committee shall have such powers as may be necessary to discharge its duties under the Plan, including the power:

(a) To interpret and construe the Plan in its discretion, to determine all questions with regard to employment, eligibility, Credited Service, Compensation, Retirement Benefits, and such factual matters as date of birth and marital status, and similarly related matters for the purpose of the Plan. The Committee's determination of all questions arising under the Plan shall be conclusive upon all Participants, the Board, the Company, Employers, the Trustee, and other interested parties;

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Exhibit 10.14

(b) To prescribe procedures to be followed by Participants and Beneficiaries filing application for benefits;

(d) To appoint or employ individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal, accounting and actuarial counsel;

(e) To instruct the Trustee to make benefit payments pursuant to the Plan;

(f) To appoint an enrolled actuary and to receive and review the periodic valuation of the Plan made by such actuary;

(g) To receive and review reports of disbursements from the Trust Fund made by the Trustees; and

(h) To receive and review the periodic audit of the Plan made by a certified public accountant appointed by the Company.

11.6 Information from Participants

Each Participant shall be required to furnish to the Committee, in the form prescribed by it, such personal data, affidavits, authorizations to obtain information, and other information as the Committee may deem appropriate for the proper administration of the Plan.

11.7 Reports

The Committee shall prepare, or cause to be prepared, such periodic reports to the U.S. Labor Department, the Internal Revenue Service and the Pension Benefit Guaranty Corporation as may be required pursuant to the Code or ERISA.

11.8 Authority to Act

The Committee may authorize one or more of its members, officers, or agents to sign on its behalf any of its instructions, directions, notifications, or communications to the Trustee, and the Trustee may conclusively rely thereon and on the information contained therein.

11.9 Liability for Acts

The members of the Committee shall be entitled to rely upon all valuations, certificates and reports furnished by the Plan actuary or accountant and upon all opinions given by any legal counsel selected by the Committee, and the members of the Committee shall be fully protected with respect to any action taken or suffered by their having relied in good faith upon such actuary, accountant or counsel and all action so taken or suffered shall be conclusive upon each of them and upon all Participants and their Beneficiaries. No member of the Committee shall incur any liability for anything done or omitted by him except only liability for his own willful misconduct.

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Exhibit 10.14

11.10 Compensation and Expenses

Unless authorized by the Board, a member or officer of the Committee shall not be compensated for his service in such capacity, but shall be reimbursed for reasonable expenses incident to the performance of such duty.

11.11 Indemnity

The Company shall indemnify the members of the Committee and any of their agents acting in behalf of the Plan against any and all liabilities or expenses, including all legal fees related thereto, to which they may be subjected as members of the Committee by reason of any act or failure to act which constitutes a breach or an alleged breach of fiduciary responsibility under ERISA or otherwise, except that due to a person's own willful misconduct.

11.12 Denied Claims

The claims procedures set forth in ERISA Regulation § 2560.503-1 are hereby incorporated into the Plan except as otherwise provided in this Section 11.12. If any application for payment of a benefit under the Plan shall be denied, the Committee shall with the denial write the claimant setting forth the specific reasons for the denial and explaining the Plan's claim review procedure. If a claimant whose claim has been denied wishes further consideration of his claim, he may appeal to the Committee to review his claim in a written statement of the claimant's position filed with the Committee no later than 60 days after the claimant receives such denial (180 days in the case of a Disability claim). The Committee shall make a full review of the claim and the denial, giving the claimant written notice of its decision within the next 60 days (45 days in the case of a Disability claim). Due to special circumstances, if no decision has been made within the first 60 days (45 days in the case of a Disability claim) and notice of the need for additional time has been furnished within such period, the decision may be made within the following 60 days (45 days in the case of a Disability claim). A claimant shall be required to exhaust the administrative remedies provided by this Section 11.12 prior to seeking any other form of relief, including a civil action under ERISA, provided that any such action must be filed no later than the 180th day after the date of the denial of the appeal.

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Exhibit 10.14

ARTICLE XII PLAN AMENDMENT OR TERMINATION

12.1 Plan Amendment

The Company shall have the right at any time to amend the Plan, which amendment shall be evidenced by an instrument in writing signed by an authorized officer of the Company, effective retroactively or otherwise. No such amendment shall have any of the effects specified in Section 12.2.

12.2 Limitations on Plan Amendment

No Plan amendment shall:

(a) Authorize any part of the Trust to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries;

(b) Decrease the accrued benefits of any Participant or his Beneficiary under the Plan (except to the extent permitted under Code § 412(c)(8)); or

(c) Change the vesting schedule, either directly or indirectly, unless each Participant having not less than three years of Vesting Service is permitted to elect, within a reasonable period specified by the Administrator after the adoption of such amendment, to have his vested percentage computed without regard to such amendment. The period during which the election may be made shall commence with the date the amendment is adopted and shall end as the later of:

(i) 60 days after the amendment is adopted;

(ii) 60 days after the amendment becomes effective; or

(iii) 60 days after the Participant is issued written notice by the Administrator.

No amendment to the Plan (including a change in the actuarial basis for determining optional or early retirement benefits) shall be effective to the extent that it has the effect of decreasing a Participant's accrued benefit. For purposes of this paragraph, a Plan amendment that has the effect of (1) eliminating or reducing an early retirement benefit or a retirement-type subsidy, or (2) eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the pre-amendment conditions for the subsidy. Notwithstanding the preceding sentences, a Participant's accrued benefit, early retirement benefit, retirement-type subsidy, or optional form of benefit may be reduced to the extent permitted under Code § 412(c)(8) (for Plan Years beginning on or before December 31, 2007) or Code § 412(d)(2) (for Plan Years beginning after December 31, 2007), or to the extent permitted under Regulation §§ 1.411(d)-3 and 1.411(d)-4. For purposes of this paragraph, a retirement-type subsidy is the excess, if any, of the actuarial present value of a retirement-type benefit over the actuarial present value of the accrued benefit commencing at Normal Retirement Age or at actual commencement date, if later, with both such actuarial present values determined as of the date the retirement-type benefit commences.

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Exhibit 10.14

12.3 Right of the Employer to Terminate Plan

The Company intends and expects that from year to year it will be able to and will deem it advisable to continue this Plan in effect and to make contributions as herein provided. The Company reserves the right, however, to terminate the Plan at any time which termination shall be evidenced by an instrument in writing signed by an authorized officer of the Company delivered to the Administrator and the Trustee.

12.4 Effect of Partial or Complete Termination

12.4.2 Determination of Date of Complete or Partial Termination. The date of complete or partial termination shall be established by the Administrator in accordance with the directions of the Company in accordance with applicable law.

12.4.3 Effect of Termination.

(g) As of the date of a partial termination of the Plan:

(iv) The accrued benefit of each affected Participant who is then an Employee, to the extent funded, shall become nonforfeitable;

(v) No affected Participant shall be granted Credited Service based on Years of Service after such date; and

(vi) Compensation paid to affected Participants after such date shall not be taken into account.

(h) As of the date of the complete termination of the Plan:

(i) The accrued benefit of each Participant who is then an Employee, to the extent funded, shall become non-forfeitable;

(ii) No Participant shall be granted Credited Service based on Years of Service after such date;

(iii) Compensation paid after such date shall not be taken into account;

(iv) No Eligible Employee shall become a Participant after such date; and

(v) Except as may otherwise be required by applicable law, all Employer obligations to fund the Plan shall terminate.

12.5 Allocation of Assets

At any time as the Company determines to distribute the Trust, the Trust shall be applied to the payment of or provision for benefits in accordance with the priority classes established by ERISA

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Exhibit 10.14

§ 4044. The respective amounts allocated to such priority classes shall be distributed to or set aside for the benefit of the persons entitled thereto in such manner as is determined by the Administrator.

12.6 Residual Assets

Any amounts remaining in the Trust after the satisfaction of all liabilities of the Trust with respect to all Participants and their Beneficiaries shall revert to the Employer.

12.7 Limitations Applicable to Certain Highly Paid Participants

Notwithstanding any provision in the Plan to the contrary, in any Plan Year the annual payments to a Participant who is among the 25 "highly compensated employees" (as defined in Code § 414(q)) with the greatest Compensation for the Plan Year shall not exceed the amount which would be payable to such Participant in the form of a single life annuity which is the Actuarial Equivalent of the sum of the Participant's accrued benefit and other Plan benefits, unless:

(a) After payment of all Plan benefits to such Participant, the value of the Plan's assets equals or exceeds 110 % of the value of the Plan's "current liabilities" (as defined in Code § 412(l)(7)); or

(b) The value of such Participant's Plan benefits is less than 1 % of the value of the Plan's current liabilities.

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Exhibit 10.14

ARTICLE XIII
MISCELLANEOUS PROVISIONS

13.1 Exclusive Benefit of Participants

The Trust shall be held for the benefit of all persons who shall be entitled to receive payments under the Plan. It shall be prohibited at any time for any part of the Trust (other than such part as is required to pay expenses) to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries.

13.2 Plan Not a Contract of Employment

The Plan is not a contract of Employment, and the terms of Employment of any Employee shall not be affected in any way by the Plan or related instruments except as specifically provided therein.

13.3 Source of Benefits

Benefits under the Plan shall be paid or provided for solely from the Trust, and neither the Company, an Employer, the Administrator, Trustee or Investment Manager shall assume any liability therefor.

13.4 Benefits Not Assignable

Benefits provided under the Plan may not be assigned or alienated, either voluntarily or involuntarily. The preceding sentence shall also apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a "domestic relations order" (as defined in Code § 414(p)) unless such order is determined by the Administrator to be a "qualified domestic relations order" (as defined in Code § 414(p)) or, in the case of a "domestic relations order" entered before January 1, 1985, if either payment of benefits pursuant to the order has commenced as of that date or the Administrator decides to treat such order as a "qualified domestic relations order" within the meaning of Code § 414(p) even if it does not otherwise qualify as such.

Exception for Certain Judgments on or after August 5, 1997: Effective as of August 5, 1997, the Plan will recognize and comply with an order, judgment, decree, or settlement agreement that satisfies the requirements of Code § 401(a)(13) (relating to crimes involving the plan or certain civil actions relating to breaches of fiduciary duty under ERISA.)

13.5 Domestic Relations Orders

Any other provision of the Plan to the contrary notwithstanding, the Administrator shall have all powers necessary with respect to the Plan for the proper operation of Code § 414(p) with respect to "qualified domestic relations orders" (or "domestic relations orders" treated as such) referred to in Section 13.4, including, but not limited to, the power to establish all necessary or appropriate procedures, to authorize the establishment of new accounts with such assets and subject

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Exhibit 10.14

to such restrictions as the Administrator may deem appropriate, and the Administrator may decide upon and direct appropriate distributions therefrom.

A domestic relations order that otherwise satisfies the requirements for a qualified domestic relations order (QDRO) will not fail to be a QDRO: (i) solely because the order is issued after, or revises, another domestic relations order or QDRO; or (ii) solely because of the time at which the order is issued, including issuance after the annuity starting date or after the Participant's death.

13.6 Benefits Payable to Minors, Incompetents and Others

In the event any benefit is payable to a minor or an incompetent or to a person otherwise under a legal disability, or who, in the sole discretion of the Administrator, is by reason of advanced age, illness or other physical or mental incapacity incapable of handling and disposing of his property, or otherwise is in such position or condition that the Administrator believes that he could not utilize the benefit for his support or welfare, the Administrator shall have discretion to apply the whole or any part of such benefit directly to the care, comfort, maintenance, support, education or use of such person, or pay the whole or any part of such benefit to the parent of such person, the guardian, committee, conservator or other legal representative, wherever appointed, of such person, the person with whom such person is residing, or to any other person having the care and control of such person. The receipt by any such person to whom any such payment on behalf of any Participant or Beneficiary is made shall be a sufficient discharge therefor.

13.7 Merger or Transfer of Assets

13.7.1 The merger or consolidation of the Company with any other person, or the transfer of the assets of the Company to any other person, shall not constitute a termination of the Plan, if provision is made for the continuation of the Plan.

13.7.2 The Plan may not merge or consolidate with, or transfer any assets or liabilities to, any other plan, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated).

13.7.3 The Liberty National Life Insurance Company Pension Plan and the Liberty National Life Insurance Company Pension Plan for Non-Commissioned Employees were merged with and into the Plan, effective as of January 1, 2004 pursuant to Section 13.7 of the Plan.

13.8 Participation in the Plan by an Affiliate

Section 13.8 was amended effective January 1, 2012 to read as follows:

13.8.1 Subject to the approval of the Board of Directors of the Company, an Affiliate, by duly authorized action of its board of directors, may adopt the Plan and determine the classes of its Employees who shall be Eligible Employees. Such Affiliate shall make such contributions to the Plan on behalf of such Employees as is determined by the Company. If no such action is taken, the

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Exhibit 10.14

Eligible Employees and the amount of Retirement Benefit shall be determined in accordance with the Plan provisions applicable to an Employer.

13.8.2 By duly authorized action of its board of directors, an Affiliate may terminate its participation in the Plan or withdraw from the Plan and the Trust.

13.8.3 An Employer other than the Company shall have no power with respect to the Plan except as specifically provided by this Section 13.8.

13.9 Action by Employer

Any action required to be taken by an Employer pursuant to the terms of the Plan shall be taken by the Board of Directors of the Employer or any person or persons duly empowered to exercise the powers of the Employer with respect to the Plan.

13.10 Provision of Information

For purposes of the Plan, each Employee shall execute such forms as may be reasonably required by the Administrator and the Employee shall make available to the Administrator and the Trustee any information they may reasonably request in this regard.

13.11 Controlling Law

The Plan is intended to qualify under Code § 401(a) and to comply with ERISA, and its terms shall be interpreted accordingly. Otherwise, to the extent not preempted by ERISA, the laws of the State of Alabama shall control the interpretation and performance of the terms of the Plan.

13.12 Conditional Restatement

Anything in the foregoing to the contrary notwithstanding, the Plan has been restated on the express condition that it will be considered by the Internal Revenue Service as qualifying under the provisions of Code § 401(a) and the Trust qualifying for exemption from taxation under Code § 501(a). If the Internal Revenue Service determines that the Plan or Trust does not so qualify, the Plan shall be amended or terminated as decided by the Company.

13.13 Rules of Construction

Masculine pronouns used herein shall refer to men or women or both and nouns and pronouns when stated in the singular shall include the plural and when stated in the plural shall include the singular, unless qualified by the context. Titles of Articles and Sections of the Plan are for convenience of reference only and are to be disregarded in applying the provisions of the Plan. Any reference in this Plan to an Article or Section is to the Article or Section so specified of the Plan.

13.14 USERRA

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Exhibit 10.14

Notwithstanding any provisions of the Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with Code §414(u).

In the case of a death or disability occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code § 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant had resumed and then terminated Employment on account of death.

An individual receiving a differential wage payment, as defined by Code § 3401(h)(2), shall be treated as an Employee of the Employer making the payment, the differential wage payment shall be treated as compensation, and the Plan shall not be treated as failing to meet the requirements of any provision described in Code § 414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment.

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Exhibit 10.14

ARTICLE XIV
MINIMUM RETIREMENT INCOME

14.1 Prior Plans

14.1.1 In no case, shall the monthly Retirement Benefit for any Participant who was a Participant in either the Retirement Plan for Employees of Globe Life and Accident Insurance Company and Its Affiliates or the Retirement Plan for Employees of United American Insurance Company ("the Prior Plans") whichever is applicable, on December 31, 1982, be less than (a) below or (b) plus (c), whichever is greater, where:

(e) Is the monthly normal retirement income which had accrued to such Participant on December 31, 1982, under the applicable Prior Plan, which shall be:

For the prior Globe Retirement Plan, an amount equal to 1/12 of (i) times .0115 times (ii) plus (iii) times ((ii) - $5,520) where:

(i) Is the Participant's number of years of credited service (as defined in such Prior Plan) (with a maximum of 35);

(ii) Is average salary (5 years of highest salary out of last 10 years with a maximum of $35,000);

(iii) Is the Participant's number of years of credited service as defined in such Prior Plan times .02, with a maximum of .3.

For the prior United American Plan, an amount equal to 1/12 of (i) plus (ii), where:

(i) Is an amount equal to the number of years of credited service as defined in such prior plan (up to 30) multiplied by 1 ½% of average annual compensation during the five consecutive calendar years (of the last 10) of highest average compensation; and

(ii) Is an amount equal to the number of years of credited service after age 40 (up to 18 years) times 1 ½% of that portion of average annual compensation, during the five consecutive calendar years (of the last 10 calendar years) of highest average compensation, which is in excess of the maximum Social Security wage base.

(f) Is the normal retirement income accrued to the Participants under such Prior Plans on December 31, 1982 pursuant to (a) above.

(g) Is the additional normal retirement income such Participants could have accrued up to December 31, 1988 under either of such Prior Plans, whichever is applicable, if such Prior Plans had continued in effect without amendment until December 31, 1988.

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Exhibit 10.14

14.1.2 For Participants who were participating in the Liberty National Life Insurance Company Pension Plan on April 5, 1982, the amount of annual Retirement Benefit commencing on the Normal Retirement Date of any such Participant retiring under this Plan after April 5, 1982, shall not be less than the amount calculated in (a) or (b) below, (whichever is greater), where:

(i) Is (i) plus (ii) less (iii), where:

(i) Applies only to Participants with less than 30 years of Credited Service on the anniversary of Employment immediately preceding April 5, 1982, and is 1/12 of .02 times Final Average Compensation times the number of complete months of service for benefit accrual purposes for an Employer participating in this Plan from March 6, 1982, through the earlier of the 30th Year of Service for benefit accrual purposes, or the date of separation from service;

(ii) Is 1/12 of .01 times Final Average Compensation times the number of complete months of service for benefit accrual purposes for an Employer participating in this Plan from March 6, 1982, or the 30th Year of Service for benefit accrual purposes, through the earlier of the date of separation from service or the 40th Year of Service for benefit accrual purposes;

(iii) Applies only to Participants with less than 30 years of Credited Service on the anniversary of Employment immediately preceding April 5, 1982, and is the smaller of (x) 1/12 of the Social Security Offset Percentage times the Participant's Special Average Earnings times the number of complete months of service for benefit accrual purposes for an Employer participating in this Plan from March 6, 1982, through the earlier of the 35th Year of Service for benefit accrual purposes, or the date of separation from service or (y) 50% of the sum of the amounts in (a)(i) plus (a)(ii) but substituting Special Average Earnings for Final Average Compensation in those formulas.

(j) Is (i) plus (ii) less (iii), where:

(i) Is 1/12 of .02 times Final Average Compensation times the number of complete months of service for benefit accrual purposes for an Employer participating in this Plan from April 5, 1982, through April 4, 1987;

(ii) Is 1/12 of .015 times Final Average Compensation times the number of complete months of service for benefit accrual purposes for an Employer participating in this Plan from April 5, 1987, through April 4, 1992;

(iii) Is the amount calculated in (a)(iii), above.

Any benefit provided under this Section 14.1.2 shall be based solely on Credited Service for benefit accrual purposes for an Employer participating in this Plan.

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Exhibit 10.14

ARTICLE XV
TOP-HEAVY PROVISIONS

15.1 Definitions

As used in this Article XV, each of the following terms shall have the meanings for that term set forth below:

(i) Defined Benefit Plan means, a plan of the type defined in Code § 414(j) maintained by the Company or an Affiliate, as applicable.

(j) Defined Contribution Plan means, a plan of the type defined in Code § 414(i) maintained by the Company or an Affiliate, as applicable.

(k) Determination Date means, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, Determination Date means the last day of that year.

(l) Determination Period means the Plan Year containing the Determination Date and the four preceding Plan Years.

(m) Key Employee means any Employee or former Employee (including deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Code § 416(i)(1)), a five-percent owner of the Employer, or a one-percent owner of the Employer having an annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Code § 415(c)(3). The determination of who is a Key Employee will be made in accordance with Code § 416(i)(1) and the applicable Regulations and other guidance of general applicability issued thereunder.

(n) Limitation Compensation means, for an Employee, the Employee's earned income, wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of Employment (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses); amounts described in Code §§ 104(a)(3), 105(a) and 105(h) to the extent includable in the Employee's gross income; amounts described in Code § 105(d) whether or not excludable from the Employee's gross income; reimbursed non-deductible moving expenses; the value of nonqualified stock options to the extent includable in the Employee's gross income in the year of grant; the amount includable in the Employee's gross income pursuant to an election under Code § 83(b); distributions from an unfunded, non-qualified plan of deferred compensation; and excluding the following:

(i) Contributions to a plan of deferred compensation which are not includible in the Employee's gross income for the taxable year in which contributed, or contributions under a "simplified employee pension" (within the meaning of Code § 408(k)) to the extent

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Exhibit 10.14

such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation (other than an unfunded non-qualified plan);

(ii) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or other property) held by the Employee either becomes freely "transferable" or is no longer subject to a "substantial risk of forfeiture" (both quoted terms within the meaning of Code § 83(a));

(iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and

(iv) Other amounts which received special tax benefits, or contributions made (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Code § 403(b) (whether or not the amounts are actually excludable from the gross income of the Employee).

Notwithstanding the above provisions, a Participant's Limitation Compensation will include any elective deferrals (as defined in Code §402(e)(3)), any amount which is contributed or deferred at the election of the Participant and which is not includable in the gross income of the Participant by reason of Code §125 or Code §457, and a Participant's elective deductions for "qualified transportation fringes" under Code §132(f)(4).

(o) Non-Key Employee means any Employee who is not a Key Employee.

(p) Permissive Aggregation Group means the Required Aggregation Group of plans plus any other plan or plans of the Company or an Affiliate which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code §§ 401(a)(4) and 410.

(q) Required Aggregation Group means (i) each qualified plan of an Employer in which at least one Key Employee participates, and (ii) any other qualified plan of an Employer which enables a plan described in clause (i) to meet the requirements of Code §§ 401(a)(4) and 410.

(r) Super Top-Heavy Plan means the Plan, if any Top-Heavy Ratio as determined under the definition of Top-Heavy Plan exceeds 90%.

(s) Top-Heavy Plan means the Plan, if any of the following conditions exists:

(i) If the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans.

(ii) If the Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%.

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Exhibit 10.14

(iii) If the Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

(t) Top-Heavy Ratio means:

(i) If the Company or an Affiliate maintains one or more Defined Benefit Plans and the Company or an Affiliate has never maintained any defined contribution Plan (including any "simplified employee pension" within the meaning of Code § 408(k)) which during the five-year period ending on the Determination Date has or has had account balances, the Top-Heavy Ratio for the Plan alone or for the Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the present values of accrued benefits under the aggregated Defined Benefit Plans of all Key Employees as of the respective Determination Date for each plan (including any part of any accrued benefit distributed in the five-year period ending on the Determination Date), and the denominator of which is the sum of the present values of all accrued benefits under the aggregated Defined Benefit Plans as of the respective Determination Date for each plan (including any part of any accrued benefit distributed in the five-year period ending on the Determination Date) determined in accordance with Code § 416.

(ii) If the Company or an Affiliate maintains one or more Defined Benefit Plans and the Company or an Affiliate maintains or has maintained one or more Defined Contribution Plans (including any "simplified employee pension" within the meaning of Code § 408(k)) which during the five-year period ending on the Determination Date has or has had any account balances, the Top-Heavy Ratio for any Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the present value of accrued benefits under the aggregated Defined Benefit Plans for all Key Employees, determined in accordance with (i) above, plus the sum of account balances under the aggregated Defined Contribution Plans for all Key Employees as of the respective Determination Date for each plan, and the denominator of which is the sum of the present value of all accrued benefits under the aggregated Defined Benefit Plans, determined in accordance with (i) above, plus the sum of all account balances under the aggregated Defined Contribution Plans for all Participants as of the respective Determination Date for each plan, all determined in accordance with Code § 416.

The present values of accrued benefits of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code § 416(g)(2) during the one-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code § 416(g)(2)(A)(i). In the case of a distribution made for a reason other than severance from Employment, death, or Disability, this provision shall be applied by substituting "five-year period" for "one-year period."

(iii) For purposes of (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date

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Exhibit 10.14

that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code § 416 for the first and second plan year of a Defined Benefit Plan. The account balances and accrued benefits of a Participant (1) who is a Non-Key Employee but who was a Key Employee in a prior year, or (2) who has not been credited with at least one Hour of Service with any Employer at any time during the one-year period ending on the Determination Date will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code § 416. Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the respective Determination Dates for the aggregated plans that fall within the same calendar year.

(iv) Solely for the purpose of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is Top-Heavy (within the meaning of Code § 416(g)) such determination shall be made under (1) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Employer, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code § 411(b)(l)(C).

(u) Valuation Date means, the date as of which account balances, or accrued benefits are valued for purposes of calculating the Top-Heavy Ratio.

15.2 Top Heavy Rules

If the Plan is determined to be a Top-Heavy Plan or a Super Top-Heavy Plan as of any Determination Date, then it shall be subject to the rules set forth in this Article XV, beginning with the first Plan Year commencing after such Determination Date. Even if, as of a subsequent Determination Date, the Plan is determined to no longer be a Top-Heavy Plan or a Super Top-Heavy Plan, the rules set forth in these Sections will continue to apply.

15.3 Compensation

If the Plan is a Top-Heavy Plan or a Super Top-Heavy Plan, Compensation for the purpose of this Plan shall be limited to the first $150,000 (or such larger amounts as may be prescribed for the Plan Year involved pursuant to Code § 416(d)(2)) of the amount that would otherwise have been Compensation.

15.4 Benefit

Except as provided in subparagraphs (a) and (b) below, for any Plan Year in or after which the Plan is a Top-Heavy Plan, each Participant who is a Non-Key Employee and has completed one Year of Service will accrue a Retirement Benefit (to be provided solely by Employer contributions) and expressed as a single life annuity commencing at normal retirement age (within the meaning of Code § 411(a)(8)) of not less than 2% of his or her average Limitation Compensation for the five consecutive years for which the Participant had the highest Limitation Compensation. The aggregate Limitation Compensation for the years during such five-year period in which the Participant was

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Exhibit 10.14

credited with one Year of Service will be divided by the number of such years in order to determine average Limitation Compensation. The minimum accrual is determined without regard to any Social Security contribution. The minimum accrual applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the Plan Year. The suspension of benefits provisions of this Plan shall not apply to the minimum benefits hereunder.

(c) No additional benefit accruals shall be provided pursuant to 15.4 above to the extent that the total accruals on behalf of the Participant attributable to Employer contributions will provide a Retirement Benefit expressed as a single life annuity commencing at normal retirement age (within the meaning of Code § 411(a)(8)) that equals or exceeds 20% of the Participant's highest average Limitation Compensation for the five consecutive years for which the Participant had the highest Limitation Compensation. All accruals of Employer derived benefits, whether or not attributable to years for which the Plan is a Top-Heavy Plan, may be used in computing whether the minimum accrual requirement of the preceding sentence is satisfied.

(d) The provision in 15.4 above shall not apply to any Participant to the extent that the Participant is covered under any other plan or plans of an Employer and the Employer has provided in that plan that the minimum allocation or benefit requirement applicable to this Top-Heavy Plan will be met in the other plan or plans.

(e) For purposes of satisfying the minimum benefit requirements of Code § 416(c)(1) and the Plan, in determining Years of Service with the Employer, any service with the Employer shall be disregarded to the extent that such service occurs during a Plan Year when the Plan benefits (within the meaning of Code § 410(b)) no Key Employee or former Key Employee.

15.5 Vesting

Beginning with the Plan Year in which this Plan is Top-Heavy, the following vesting schedule will apply:

Completed Years of Vesting Service Vested Percentage

2 20%

3 40%

4 60%

5 100%

15.6 Miscellaneous

In the event that any provision of this Article XV is no longer required to qualify the Plan under the Code, then such provision shall thereupon be void without the necessity of further amendment of the Plan.

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Exhibit 10.14

ARTICLE XVI
BENEFIT RESTRICTIONS

16.1 Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent or If the Plan Sponsor Is In Bankruptcy :

(s) Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent, But Not Less Than 60 Percent : Notwithstanding any other provisions of the Plan, if the Plan's adjusted funding target attainment percentage for a Plan Year is less than 80 percent (or would be less than 80 percent to the extent described in Section 16.1(a)(ii)) but is not less than 60 percent, then the limitations set forth in Section 16.1(a)(i) apply.

(i) 50 Percent Limitation on Single Sum Payments, Other Accelerated Forms of Distribution, and Other Prohibited Payments : A Participant or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, unless the present value of the portion of the benefit that is being paid in a prohibited payment does not exceed the lesser of:

(1) 50 % of the present value of the benefit payable in the optional form of benefit that includes the prohibited payment; or

(2) 100 % of the PBGC maximum benefit guarantee amount (as defined in Regulation § 1.436-1(d)(3)(iii)(C)).

The limitation set forth in this Section 16.1(a)(i) does not apply to any payment of a benefit which under Code § 411(a)(11) may be immediately distributed without the consent of the Participant. If an optional form of benefit that is otherwise available under the terms of the Plan is not available to a Participant or Beneficiary as of the annuity starting date because of the application of the requirements of this Section 16.1(a)(i), the Participant or Beneficiary is permitted to elect to bifurcate the benefit into unrestricted and restricted portions (as described in Regulation § 1.436-1(d)(3)(iii)(D)). The Participant or Beneficiary may also elect any other optional form of benefit otherwise available under the Plan at that annuity starting date that would satisfy the 50 percent/PBGC maximum benefit guarantee amount limitation described in this Section 16.1(a)(i), or may elect to defer the benefit in accordance with any general right to defer commencement of benefits under the Plan.

During a period when Section 16.1(a)(i) applies to the Plan, Participants and beneficiaries are permitted to elect payment in any optional form of benefit otherwise available under the Plan that provides for the current payment of the unrestricted portion of the benefit (as described in Regulation § 1.436-1(d)(3)(iii)(D)), with a delayed commencement for the restricted portion of the benefit (subject to other applicable qualification requirements, such as Code §§ 411(a)(11) and 401(a)(9)).

22672380 v1

Exhibit 10.14

(ii) Plan Amendments Increasing Liability for Benefits : No amendment to the Plan that has the effect of increasing liabilities of the Plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable shall take effect in a Plan Year if the adjusted funding target attainment percentage for the Plan Year is:

(1) Less than 80 %; or

(2) 80 % or more, but would be less than 80 percent if the benefits attributable to the amendment were taken into account in determining the adjusted funding target attainment percentage.

The limitation set forth in this Section 16.1(a)(ii) does not apply to any amendment to the Plan that provides a benefit increase under a Plan formula that is not based on compensation, provided that the rate of such increase does not exceed the contemporaneous rate of increase in the average wages of Participants covered by the amendment.

(t) Less Than 60 Percent : Notwithstanding any other provisions of the Plan, if the Plan's adjusted funding target attainment percentage for a Plan Year is less than 60 percent (or would be less than 60 percent to the extent described in Section 16.1(b)(ii)), then the limitations in Section 16.1(b)(i) apply.

(iv) Single Sums, Other Accelerated Forms of Distribution, and Other Prohibited Payments Not Permitted : A Participant or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment. The limitation set forth in this Section 16.1(b)(i) does not apply to any payment of a benefit which under Code § 411(a)(11) may be immediately distributed without the consent of the Participant.

(v) Shutdown Benefits and Other Unpredictable Contingent Event Benefits Not Permitted to Be Paid : An unpredictable contingent event benefit with respect to an unpredictable contingent event occurring during a Plan Year shall not be paid if the adjusted funding target attainment percentage for the Plan Year is:

(1) Less than 60 %; or

(2) 60 % or more, but would be less than 60 % if the adjusted funding target attainment percentage were redetermined applying an actuarial assumption that the likelihood of occurrence of the unpredictable contingent event during the Plan Year is 100 %.

(vi) Benefit Accruals Frozen : Benefit accruals under the Plan shall cease as of the applicable section 436 measurement date. In addition, if the Plan is required to cease

22672380 v1 2

Exhibit 10.14

benefit accruals under this Section 16.1(b)(iii), then the Plan is not permitted to be amended in a manner that would increase the liabilities of the Plan by reason of an increase in benefits or establishment of new benefits.

(u) Limitations Applicable If the Plan Sponsor Is In Bankruptcy : Notwithstanding any other provisions of the Plan, a Participant or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date that occurs during any period in which the Plan sponsor is a debtor in a case under title 11, United States Code, or similar Federal or State law, except for payments made within a Plan Year with an annuity starting date that occurs on or after the date on which the Plan's enrolled actuary certifies that the Plan's adjusted funding target attainment percentage for that Plan Year is not less than 100 percent. In addition, during such period in which the Plan sponsor is a debtor, the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, except for payments that occur on a date within a Plan Year that is on or after the date on which the Plan's enrolled actuary certifies that the Plan's adjusted funding target attainment percentage for that Plan Year is not less than 100 percent. The limitation set forth in this Section 16.1(c) does not apply to any payment of a benefit which under Code § 411(a)(11) may be immediately distributed without the consent of the Participant.

16.2 Provisions Applicable After Limitations Cease to Apply :

(v) Resumption of Prohibited Payments : If a limitation on prohibited payments under Section 16.1(a)(i), Section 16.1(b)(i), or Section 16.1(c) applied to the Plan as of a section 436 measurement date, but that limit no longer applies to the Plan as of a later section 436 measurement date, then that limitation does not apply to benefits with annuity starting dates that are on or after that later section 436 measurement date.

In addition, after the section 436 measurement date on which the limitation on prohibited payments under Section 16.1(a)(i) ceases to apply to the Plan, any Participant or Beneficiary who had an annuity starting date within the period during which that limitation applied to the Plan is permitted to make a new election (within 90 days after the section 436 measurement date on which the limit ceases to apply or, if later, 30 days after receiving notice of the right to make such election) under which the form of benefit previously elected is modified at a new annuity starting date to be changed to a single sum payment for the remaining value of the Participant or Beneficiary's benefit under the Plan, subject to the other rules in this Article XVI and applicable requirements of Code § 401(a), including spousal consent.

In addition, after the section 436 measurement date on which the limitation on prohibited payments under Section 16.1(b)(i) ceases to apply to the Plan, any Participant or Beneficiary who had an annuity starting date within the period during which that limitation applied to the Plan is permitted to make a new election (within 90 days after the section 436 measurement date on which the limit ceases to apply or, if later, 30 days after receiving notice of the right to make such election) under which the form of benefit previously elected is modified at a new annuity starting date to be changed to a single sum payment for the remaining value of the Participant's or Beneficiary's benefit

22672380 v1 3

Exhibit 10.14

under the Plan, subject to the other rules in this Article XVI (including Section 16.1(a)(i)) and applicable requirements of Code § 401(a), including spousal consent.

(w) Resumption of Benefit Accruals : If a limitation on benefit accruals under Section 16.1(b)(iii) applied to the Plan as of a section 436 measurement date, but that limitation no longer applies to the Plan as of a later section 436 measurement date, then benefit accruals shall resume prospectively and that limitation does not apply to benefit accruals that are based on service on or after that later section 436 measurement date, except as otherwise provided under the Plan. The Plan shall comply with the rules relating to partial years of participation and the prohibition on double proration under Department of Labor Regulation 29 CFR § 2530.204-2(c) and (d).

In addition, benefit accruals that were not permitted to accrue because of the application of Section 16.1(b)(iii) shall be restored when that limitation ceases to apply if the continuous period of the limitation was 12 months or less and the Plan's enrolled actuary certifies that the adjusted funding target attainment percentage for the Plan Year would not be less than 60 % taking into account any restored benefit accruals for the prior Plan Year.

(x) Shutdown and Other Unpredictable Contingent Event Benefits : If an unpredictable contingent event benefit with respect to an unpredictable contingent event that occurs during the Plan Year is not permitted to be paid after the occurrence of the event because of the limitation of Section 16.1(b)(ii), but is permitted to be paid later in the same Plan Year (as a result of additional contributions or pursuant to the enrolled actuary's certification of the adjusted funding target attainment percentage for the Plan Year that meets the requirements of Regulation § 1.436-1(g)(5)(ii)(B), then that unpredictable contingent event benefit shall be paid, retroactive to the period that benefit would have been payable under the terms of the Plan (determined without regard to Section 16.1(b)(ii)). If the unpredictable contingent event benefit does not become payable during the Plan Year in accordance with the preceding sentence, then the Plan is treated as if it does not provide for that benefit.

(y) Treatment of Plan Amendments That Do Not Take Effect : If a Plan amendment does not take effect as of the effective date of the amendment because of the limitation of Section 16.1(a)(ii) or Section 16.1(b)(iii), but is permitted to take effect later in the same Plan Year (as a result of additional contributions or pursuant to the enrolled actuary's certification of the adjusted funding target attainment percentage for the Plan Year that meets the requirements of Regulation § 1.436-1(g)(5)(ii)(C), then the Plan amendment must automatically take effect as of the first day of the Plan Year (or, if later, the original effective date of the amendment). If the Plan amendment cannot take effect during the same Plan Year, then it shall be treated as if it were never adopted, unless the Plan amendment provides otherwise.

16.3 Notice Requirement : See ERISA § 101(j) for rules requiring the Administrator of a single employer defined benefit pension Plan to provide a written notice to Participants and Beneficiaries within 30 days after certain specified dates if the Plan has become subject to a limitation described in Section 16.1(a)(i), Section 16.1(b), or Section 16.1(c).

16.4 Methods to Avoid or Terminate Benefit Limitations : See Code §§ 436(b)(2), (c)(2), (e)(2), and (f) and Regulation § 1.436-1(f) for rules relating to Employer contributions and other methods

22672380 v1 4

Exhibit 10.14

to avoid or terminate the application of the limitations set forth in Sections 16.1(a) through 16.1(c) for a Plan Year. In general, the methods a Plan sponsor may use to avoid or terminate one or more of the benefit limitations under Sections 16.1(a) through 16.1(c) for a Plan Year include Employer contributions and elections to increase the amount of Plan assets which are taken into account in determining the adjusted funding target attainment percentage, making an Employer contribution that is specifically designated as a current year contribution that is made to avoid or terminate application of certain of the benefit limitations, or providing security to the Plan.

16.5 Special Rules:

(e) Rules of Operation for Periods Prior to and After Certification of Plan's Adjusted Funding Target Attainment Percentage:

(i) In General : Code § 436(h) and Treasury Regulations § 1.436-1(h) set forth a series of presumptions that apply (1) before the Plan's enrolled actuary issues a certification of the Plan's adjusted funding target attainment percentage for the Plan Year and (2) if the Plan's enrolled actuary does not issue a certification of the Plan's adjusted funding target attainment percentage for the Plan Year before the first day of the 10th month of the Plan Year (or if the Plan's enrolled actuary issues a range certification for the Plan Year pursuant to Treasury Regulations § 1.436-1(h)(4)(ii) but does not issue a certification of the specific adjusted funding target attainment percentage for the Plan by the last day of the Plan Year). For any period during which a presumption under Code § 436(h) and Regulation § 1.436-1(h) applies to the Plan, the limitations under Sections 16.1(a) through 16.1(c) are applied to the Plan as if the adjusted funding target attainment percentage for the Plan Year were the presumed adjusted funding target attainment percentage determined under the rules of Code § 436(h) and Regulation § 1.436-1(h)(1), (2), or (3). These presumptions are set forth in Section 16.5(a)(ii) through (iv).

(ii) Presumption of Continued Underfunding Beginning First Day of Plan Year : If a limitation under Section 16.1(a), 16.1(b), or 16.1(c) applied to the Plan on the last day of the preceding Plan Year, then, commencing on the first day of the current Plan Year and continuing until the Plan's enrolled actuary issues a certification of the adjusted funding target attainment percentage for the Plan for the current Plan Year, or, if earlier, the date Section 16.5(a)(iii) or Section 16.5(a)(iv) applies to the Plan:

(1) The adjusted funding target attainment percentage of the Plan for the current Plan Year is presumed to be the adjusted funding target attainment percentage in effect on the last day of the preceding Plan Year; and

(2) The first day of the current Plan Year is a section 436 measurement date.

(iii) Presumption of Underfunding Beginning First Day of 4th Month : If the Plan's enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the Plan Year before the first day of the 4th month of the Plan Year and the Plan's adjusted funding target attainment percentage for the preceding Plan Year was either

22672380 v1 5

Exhibit 10.14

at least 60 % but less than 70 % or at least 80 % but less than 90 %, or is described in Regulation § 1.436-1(h)(2)(ii), then, commencing on the first day of the 4th month of the current Plan Year and continuing until the Plan's enrolled actuary issues a certification of the adjusted funding target attainment percentage for the Plan for the current Plan Year, or, if earlier, the date Section 16.5(a)(iv) applies to the Plan:

(1) The adjusted funding target attainment percentage of the Plan for the current Plan Year is presumed to be the Plan's adjusted funding target attainment percentage for the preceding Plan Year reduced by 10 percentage points; and

(2) The first day of the 4th month of the current Plan Year is a section 436 measurement date.

(iv) Presumption of Underfunding On and After First Day of 10th Month : If the Plan's enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the Plan Year before the first day of the 10th month of the Plan Year (or if the Plan's enrolled actuary has issued a range certification for the Plan Year pursuant to Regulation § 1.436-1(h)(4)(ii) but has not issued a certification of the specific adjusted funding target attainment percentage for the Plan by the last day of the Plan Year), then, commencing on the first day of the 10th month of the current Plan Year and continuing through the end of the Plan Year:

(1) The adjusted funding target attainment percentage of the Plan for the current Plan Year is presumed to be less than 60 %; and

(2) The first day of the 10th month of the current Plan Year is a section 436 measurement date.

(f) New Plans, Plan Termination, Certain Frozen Plans, and Other Special Rules :

(i) First 5 Plan Years : The limitations in Section 16.1(a)(ii), Section 16.1(b)(ii), and Section 16.1(b)(iii) do not apply to a new Plan for the first 5 Plan Years of the Plan, determined under the rules of Code § 436(i) and Regulation § 1.436-1(a)(3)(i).

(ii) Plan Termination : The limitations on prohibited payments in Section 16.1(a), Section 16.1(b)(i), and Section 16.1(c) do not apply to prohibited payments that are made to carry out the termination of the Plan in accordance with applicable law. Any other limitations under this section of the Plan do not cease to apply as a result of termination of the Plan.

(iii) Exception to Limitations on Prohibited Payments Under Certain Frozen Plans : The limitations on prohibited payments set forth in Sections 16.1(a)(i), 16.1(b)(i) and 16.1(c) do not apply for a Plan Year if the terms of the Plan, as in effect for the period beginning on September 1, 2005, and continuing through the end of the Plan Year, provide for no benefit accruals with respect to any Participants. This Section 16.5(b)(iii) shall cease

22672380 v1 6

Exhibit 10.14

to apply as of the date any benefits accrue under the Plan or the date on which a Plan amendment that increases benefits takes effect.

(iv) Special Rules Relating to Unpredictable Contingent Event Benefits and Plan Amendments Increasing Benefit Liability : During any period in which none of the presumptions under Section 16.5(a) apply to the Plan and the Plan's enrolled actuary has not yet issued a certification of the Plan's adjusted funding target attainment percentage for the Plan Year, the limitations under Section 16.1(a)(ii) and Section 16.1(b)(ii) shall be based on the inclusive presumed adjusted funding target attainment percentage for the Plan, calculated in accordance with the rules of Regulation § 1.436-1(g)(2)(iii).

(g) Special Rules Under PRA 2010:

(i) Payments Under Social Security Leveling Options : For purposes of determining whether the limitations under Section 16.1(a)(i) or 16.1(b)(i) apply to payments under a social security leveling option, within the meaning of Code § 436(j)(3)(C)(i), the adjusted funding target attainment percentage for a Plan Year shall be determined in accordance with the "Special Rule for Certain Years" under Code § 436(j)(3) and any Regulation or other published guidance thereunder issued by the Internal Revenue Service.

(ii) Limitation on Benefit Accruals : For purposes of determining whether the accrual limitation under Section 16.1(b)(iii) applies to the Plan, the adjusted funding target attainment percentage for a Plan Year shall be determined in accordance with the "Special Rule for Certain Years" under Code § 436(j)(3) (except as provided under section 203(b) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, if applicable).

(h) Interpretation of Provisions : The limitations imposed by this section of the Plan shall be interpreted and administered in accordance with Code § 436 and Regulation § 1.436-1.

16.6 Definitions : The definitions in the following Regulations apply for purposes of Sections 16.1 through 16.5: § 1.436-1(j)(1) defining adjusted funding target attainment percentage; § 1.436-1(j)(2) defining annuity starting date; § 1.436-1(j)(6) defining prohibited payment; § 1.436-1(j)(8) defining section 436 measurement date; and § 1.436-1(j)(9) defining an unpredictable contingent event and an unpredictable contingent event benefit.

16.7 Effective Date : The rules in Sections 16.1 through 16.6 are effective for Plan Years beginning after December 31, 2007.

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Exhibit 10.14

IN WITNESS WHEREOF, TORCHMARK CORPORATION has caused this Plan to be amended and restated, on this the _____ day of _____________, 2015, effective generally as of January 1, 2014 (except as otherwise provided herein).

TORCHMARK CORPORATION

By: __________________________

Its: __________________________

Attest:

By: _________________________

Its: _________________________

22672380 v1 8

Exhibit 10.16

THE

TORCHMARK CORPORATION

SAVINGS AND INVESTMENT PLAN

(Amended and Restated as of January 1, 2014)

24983590 v1

BACKGROUND

Effective as of April 5, 1982, Liberty National Insurance Holding Company, which was a predecessor of Torchmark Corporation (the "Company"), established a defined contribution profit sharing plan ("Plan") which is intended to be qualified pursuant to the provisions of the Internal Revenue Code of 1986, as amended. The Plan is intended to provide eligible employees of the Company, and those of any affiliate which adopts the Plan, with a supplemental source of retirement income.

Effective as of January 1, 1987, the Company amended the Plan to be an employee stock ownership plan, as well as a profit sharing plan, pursuant to the Code.

Effective as of January 1, 1989, the Plan was amended and restated to (i) comply with the Tax Reform Act of 1986 and (ii) eliminate the employee stock ownership plan provisions which were never utilized by the Company. This amended and restated Plan incorporated Amendments One and Two to the Plan.

Amendment Three to the Plan was adopted at the request of the Internal Revenue Service on December 16, 1996.

Amendment Four to the Plan was adopted on October 17, 1996.

Amendment Five to the Plan was adopted on April 23, 1997.

Amendment Six to the Plan was adopted on October 20, 1998.

Amendment Seven to the Plan was adopted on October 20, 1998.

Amendment Eight to the Plan was adopted on March 20, 2000.

Effective as of January 1, 1997 (except as otherwise provided for therein) the Plan was amended and restated for a number of tax law changes generally encompassed within the acronym "GUST." This amended and restated Plan document constituted Amendment Nine to the Plan.

Amendment Ten was adopted on October 12, 2001.

Amendment Eleven was adopted on June 27, 2002.

Amendment Twelve was adopted on November 22, 2002.

Amendment Thirteen was adopted on December 4, 2002.

Amendment Fourteen was adopted on October 27, 2004.

Amendment Fifteen was adopted on September 21, 2005.

Amendment Sixteen was adopted on December 19, 2006.

24983590 v1

Effective as of January 1, 2007 (except as otherwise provided for therein), the Plan was amended and restated to, among other changes incorporate a 401(k) salary deferral feature into the Plan. This amended and restated Plan also included certain provisions intended to reflect portions of the Final Regulations under Code § 401(k) that were published on December 29, 2004 (hereinafter referred to as the "Final 401(k) Regulations"). Those portions of the Plan relating to the Final 401(k) Regulations were included as good faith compliance therewith and, unless otherwise noted, apply to Plan Years beginning after December 31, 2005. This amended and restated Plan constituted Amendment Seventeen to the Plan.

Amendments adopted subsequent to Amendment Seventeen are numbered beginning with Amendment One.

Amendment One was adopted on December 22, 2008.

Amendment Two was adopted on August 25, 2009.

Amendment Three was adopted on December 16, 2009.

Effective January 1, 2009 (except as otherwise provided for therein), the Plan was amended and restated for a number of tax law changes generally encompassed within the acronym "EGTRRA." This amended and restated Plan document constituted Amendment Four to the Plan.

Amendment Five was adopted on November 17, 2011.

Amendment Six was adopted on November 9, 2012.

Effective January 1, 2014 (except as otherwise provided for herein), the Plan is hereby amended and restated for a number of tax law changes generally encompassed with the acronyms "PPA" and "HEART." This amended and restated Plan document constitutes Amendment Seven to the Plan.

The benefit under the Plan of any participant who terminates employment shall be determined in accordance with the provisions of the Plan as in effect on the date of such termination of employment.

24983590 v1

TABLE OF CONTENTS

Page

ARTICLE 1 DEFINITIONS 1-1

Section 1.1 Account 1-1

Section 1.2 Account Balance 1-1

Section 1.3 ACP Test 1-1

Section 1.4 Adjustment Factor 1-1

Section 1.5 Administrative Committee 1-1

Section 1.6 Administrator 1-1

Section 1.7 ADP Test 1-1

Section 1.8 Affiliate 1-1

Section 1.9 Annual Addition 1-2

Section 1.10 Annuity Contract 1-2

Section 1.11 Beneficiary 1-2

Section 1.12 Benefit Commencement Date 1-2

Section 1.13 Board of Directors 1-2

Section 1.14 Code 1-2

Section 1.15 Company 1-2

Section 1.16 Company Stock 1-2

Section 1.17 Company Stock Account 1-2

Section 1.18 Compensation 1-2

Section 1.19 Contribution 1-4

Section 1.20 Direct Rollover 1-4

Section 1.21 Disability 1-4

Section 1.22 Early Retirement Age 1-4

Section 1.23 Effective Date 1-4

Section 1.24 Eligible Employee 1-4

Section 1.25 Eligible Retirement Plan 1-5

Section 1.26 Eligible Rollover Distribution 1-5

Section 1.27 Employee 1-5

Section 1.28 Employer 1-6

Section 1.29 Employer Contributions 1-6

Section 1.30 Employer Contributions Account 1-6

Section 1.31 Employment 1-6

Section 1.32 Entry Date 1-6

Section 1.33 ERISA 1-6

Section 1.34 Excess Aggregate Contributions 1-6

Section 1.35 Excess Matching Contributions 1-6

Section 1.36 Excess Salary Deferral Contributions 1-7

Section 1.37 Five-percent Owner 1-7

Section 1.38 Forfeitures 1-7

24983590 v1 1v

Section 1.39 Fully Vested Separation 1-7

Section 1.40 Highly Compensated Employee 1-7

Section 1.41 Hour of Service 1-8

Section 1.42 Investment 1-9

Section 1.43 Investment Company 1-9

Section 1.44 Investment Company Shares 1-9

Section 1.45 Limitation Year 1-9

Section 1.46 Matching Contributions 1-9

Section 1.47 Non-Highly Compensated Employee 1-9

Section 1.48 Non-Vested Separation 1-9

Section 1.49 Normal Retirement Age 1-9

Section 1.50 One Year Break in Service 1-9

Section 1.51 Partially Vested Separation 1-10

Section 1.52 Participant 1-10

Section 1.53 Participant Contributions 1-10

Section 1.54 Participant Contributions Account 1-10

Section 1.55 Participating Affiliate 1-10

Section 1.56 Plan 1-10

Section 1.57 Plan Year 1-10

Section 1.58 Qualified Joint and Survivor Annuity 1-10

Section 1.59 Qualified Plan 1-10

Section 1.60 Rollover Contribution 1-10

Section 1.61 Salary Deferral Contributions 1-11

Section 1.62 Spousal Consent 1-11

Section 1.63 Spouse 1-11

Section 1.64 Surviving Spouse 1-11

Section 1.65 Trust or Trust Fund 1-11

Section 1.66 Trust Agreement 1-11

Section 1.67 Trustee 1-11

Section 1.68 Valuation Date 1-11

Section 1.69 Vesting Service 1-11

Section 1.70 W&R Class A and Class B Financial Stock Accounts 1-12

Section 1.71 Years of Service 1-12

ARTICLE 2 PARTICIPATION 2-1

Section 2.1 Participation in the Plan 2-1

Section 2.2 Crediting of Service for Eligibility Purposes. 2-1

Section 2.3 Rollover Membership. 2-1

ARTICLE 3 ACCOUNTS AND CONTRIBUTIONS 3-1

Section 3.1 Establishment of Accounts 3-1

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Section 3.2 Participant and Employer Contributions 3-1

Section 3.3 Salary Deferral Contributions 3-1

Section 3.4 Rollovers 3-3

Section 3.5 Participant's Elections 3-3

Section 3.6 Automatic Enrollment of Participants 3-4

Section 3.7 Changes in Salary Deferral Contributions 3-4

Section 3.8 Matching Contributions 3-4

Section 3.9 Safe Harbor Matching Contribution 3-5

Section 3.10 Fail-Safe Contributions 3-5

Section 3.11 Makeup Contributions 3-6

Section 3.12 Overall Limits on Contributions 3-6

Section 3.13 Permitted Employer Refunds 3-7

Section 3.14 Final Section 415 Regulations 3-7

Section 3.15 415 Compensation paid after severance from employment 3-7

Section 3.16 Administrative delay ("the first few weeks") rule 3-8

Section 3.17 Inclusion of certain nonqualified deferred compensation amounts 3-8

Section 3.18 Definition of annual additions 3-8

Section 3.19 Change of Limitation Year 3-9

Section 3.20 Excess annual additions 3-9

Section 3.21 Aggregation and Disaggregation of Plans 3-9

Section 3.22 Merged Profit Sharing Account 3-11

Section 3.23 Discretionary Contributions 3-11

ARTICLE 4 ADP and ACP NONDISCRIMINATION TESTS 4-1

Section 4.1 Satisfaction of ADP and ACP Tests 4-1

Section 4.2 Actual Deferral Percentage 4-1

Section 4.3 ADP Test 4-1

Section 4.4 Actual Contribution Percentage 4-1

Section 4.5 ACP Test 4-2

Section 4.6 Compliance Measures 4-2

Section 4.7 Additional Limitations 4-3

ARTICLE 5 VESTING 5-1

Section 5.1 Determination of Vesting 5-1

Section 5.2 Rules for Crediting Vesting Service 5-2

Section 5.3 Account Forfeitures 5-2

ARTICLE 6 INVESTMENT OF CONTRIBUTIONS; MANAGEMENT OF ACCOUNTS 6-1

Section 6.1 Initial Investment Election 6-1

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Section 6.2 Change in Investment Election for Contributions 6-1

Section 6.3 Transfer of Investment Accounts 6-1

Section 6.4 Reinvestment 6-1

Section 6.5 Voting of Shares of Investments 6-2

Section 6.6 Valuation of Accounts 6-2

Section 6.7 Distributions or Withdrawals 6-3

Section 6.8 Insider Trading Restrictions 6-3

Section 6.9 Tender of Company Stock or W&R Class A or Class B Financial
Stock 6-3

Section 6.10 Divestment of Employer Securities 6-4

Section 6.11 Black Out Period 6-5

ARTICLE 7 AMOUNT AND PAYMENT OF BENEFITS TO PARTICIPANTS 7-1

Section 7.1 Fully Vested Separation 7-1

Section 7.2 Partially Vested Separation 7-1

Section 7.3 Non-Vested Separation 7-1

Section 7.4 Benefit Commencement Date 7-1

Section 7.5 Participant Account Withdrawals 7-3

Section 7.6 Employer Contributions Account Withdrawal 7-3

Section 7.7 Age 59½ Distributions 7-4

Section 7.8 Withdrawals of Rollover Contributions 7-4

Section 7.9 TEFRA Section 242(b)(2) Elections 7-4

Section 7.10 Required Minimum Distributions 7-4

Section 7.11 Required Minimum Distributions During Participant’s Lifetime 7-6

Section 7.12 Required Minimum Distributions After Participant’s Death 7-6

Section 7.13 Definitions for Sections 7.10 through 7.14 7-7

Section 7.14 2009 RMD Suspension 7-8

ARTICLE 8 FORMS OF PAYMENT OF ACCOUNTS 8-1

Section 8.1 Methods of Distribution 8-1

Section 8.2 Election of Optional Forms 8-3

Section 8.3 Change in Form or Timing of Benefit Payments 8-4

Section 8.4 Direct Rollovers 8-4

Section 8.5 Hardship Withdrawals 8-4

Section 8.6 Loans to Participants 8-6

ARTICLE 9 DEATH BENEFITS 9-1

Section 9.1 Payment of Account Balances 9-1

Section 9.2 Beneficiaries 9-1

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ARTICLE 10 FIDUCIARIES 10-1

Section 10.1 Named Fiduciaries 10-1

Section 10.2 Employment of Advisers 10-1

Section 10.3 Multiple Fiduciary Capacities 10-1

Section 10.4 Reliance 10-1

Section 10.5 Scope of Authority and Responsibility 10-1

ARTICLE 11 TRUSTEE 11-1

Section 11.1 Trust Agreement 11-1

Section 11.2 Assets in Trust 11-1

ARTICLE 12 ADMINISTRATIVE COMMITTEE 12-1

Section 12.1 Appointment and Removal of Administrative Committee 12-1

Section 12.2 Officers of Administrative Committee 12-1

Section 12.3 Action by Administrative Committee 12-1

Section 12.4 Rules and Regulations 12-1

Section 12.5 Powers 12-1

Section 12.6 Information from Participants 12-2

Section 12.7 Reports 12-2

Section 12.8 Authority to Act 12-2

Section 12.9 Liability for Acts 12-2

Section 12.10 Compensation and Expenses 12-3

Section 12.11 Indemnity 12-3

Section 12.12 Denied Claims 12-3

ARTICLE 13 PLAN AMENDMENT OR TERMINATION 13-1

Section 13.1 Plan Amendment or Termination 13-1

Section 13.2 Limitations on Plan Amendment 13-1

Section 13.3 Right of Company to Terminate Plan or Discontinue Contributions 13-2

Section 13.4 Effect of Partial or Complete Termination or Complete Discontinuance
of Contributions 13-2

ARTICLE 14 MISCELLANEOUS PROVISIONS 14-1

Section 14.1 Exclusive Benefit of Participants 14-1

Section 14.2 Plan Not a Contract of Employment 14-1

Section 14.3 Source of Benefits 14-1

Section 14.4 Benefits Not Assignable 14-1

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Section 14.5 Domestic Relations Orders 14-1

Section 14.6 Benefits Payable to Minors, Incompetents and Others 14-2

Section 14.7 Merger or Transfer of Assets 14-2

Section 14.8 Participation in the Plan by an Affiliate 14-2

Section 14.9 Action by Employer 14-3

Section 14.10 Provision of Information 14-3

Section 14.11 Controlling Law 14-3

Section 14.12 Conditional Restatement 14-3

Section 14.13 Rules of Construction 14-3

Section 14.14 USERRA Model Amendment 14-3

Section 14.15 Written Communications Required 14-4

Section 14.16 Offset 14-4

ARTICLE 15 TOP-HEAVY PROVISIONS 15-1

Section 15.1 Top Heavy Plan Requirements 15-1

Section 15.2 Determinations of Top Heavy Status 15-1

Section 15.3 Minimum Vesting 15-4

Section 15.4 Minimum Benefits 15-4

Section 15.5 Applicability 15-5

Section 15.6 Requirements 15-5

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24983590 v1 11-12

ARTICLE 1
DEFINITIONS

Each of the following terms shall have the meaning set forth in this ARTICLE 1 for purposes of this Plan and any amendments thereto:

Section 1.1 Account . Section 1.1 was amended effective November 28, 2011 to read as follows:

A separate account for each Participant consisting of an Employer Contributions Account, a Participant Contributions Account, a Salary Deferral Account, a Matching Contributions Account, a Rollover Account, and a Merged Profit Sharing Account, as the case may be. Additional accounts may be maintained as the Administrator shall determine are necessary or desirable to facilitate the administration of the Plan.

Section 1.2 Account Balance . The value of an Account determined as of the date on which funds are liquidated or transferred. A Participant's Account Balance shall consist of shares or units in one or more Investments. As the value of the shares or units credited to a Participant's Account rises or falls, the Participant's Account Balance shall rise and fall to the same extent. All withdrawals, distributions, or Investment transfers under the Plan shall be based upon the amount realized from the liquidation of shares or units credited to the Participant's Account.

Section 1.3 ACP Test . The actual contributions percentage test described in ARTICLE 4 of the Plan and Code § 401(m).

Section 1.4 Adjustment Factor . The cost of living adjustment factor prescribed by the Secretary of the Treasury under Code § 415(d), as applied to such items and in such manner as the Secretary shall provide.

Section 1.5 Administrative Committee . The committee appointed by the Board pursuant to, and having the responsibilities specified in, ARTICLE 12 of the Plan.

Section 1.6 Administrator . The Company or committee appointed by the Board of Directors pursuant to, and having the responsibilities specified in, ARTICLE 12 of the Plan.

Section 1.7 ADP Test . The actual deferral percentage test described in ARTICLE 4 of the Plan and Code § 401(k).

Section 1.8 Affiliate . Any corporation or unincorporated trade or business (other than the Company) while it is:


(a)	A member of a "controlled group of corporations" (within the meaning of Code § 414(b)) of which the Company is a member;


(b)	A trade or business under "common control" (within the meaning of Code § 414(c)) with the Company;

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(c)	A member of an "affiliated service group" (within the meaning of Code § 414(m)) which includes the Company; or


(d)	Any other entity required to be aggregated with the Company under Code § 414(o).

Section 1.9 Annual Addition . For each Participant, the sum of the following amounts credited to the Participant's Accounts for the Limitation Year:

(a) Employer contributions;

(b) Employee contributions;

(d) Amounts described in Code §§ 415(l)(1) and 419A(d)(2).

Notwithstanding the foregoing, Annual Addition shall not include amounts attributable to Rollover Contributions or trust to trust transfers.

Section 1.10 Annuity Contract . An individual or group annuity contract, issued by an insurance company, providing periodic benefits, whether fixed, variable or both, the benefits or value of which a Participant or Beneficiary cannot transfer, sell, assign, discount, or pledge as collateral for a loan or as security for the performance of an obligation, or for any other purpose to any person other than the issuer thereof.

Section 1.11 Beneficiary . A person other than a Participant entitled to receive any payment of benefits pursuant to ARTICLE 8.

Section 1.12 Benefit Commencement Date . The date, determined under Section 7.4, as of which a Participant or a Beneficiary receives or begins to receive, as the case may be, payment of his benefits under the Plan.

Section 1.13 Board of Directors . The Board of Directors of the Company.

Section 1.14 Code . The Internal Revenue Code of 1986, as now in effect or as amended from to time. A reference to a specific provision of the Code shall include such provision and any applicable regulation pertaining thereto.

Section 1.15 Company . Torchmark Corporation, a Delaware corporation, or any successor thereto by consolidation, merger, transfer of assets or otherwise.

Section 1.16 Company Stock . The voting common stock of the Company.

Section 1.17 Company Stock Account . An account maintained by the Trustee with respect to a part of the Trust Fund consisting of amounts which Participants have elected to be invested in Company Stock.

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Section 1.18 Compensation . The total cash compensation paid to an Employee during a calendar year by his Employer, including salary, wages, any amounts not paid directly and currently in cash to an Employee but paid for the benefit of an Employee through a "salary reduction" agreement in conjunction with one or more welfare plans of the Employer and the total amount deferred pursuant to an Employee's election under a "cash or deferred arrangement" in conjunction with one or more qualified retirement plans of the Employer, but excluding:


(a)	Any reimbursement of or allowance for expenses except for amounts reimbursed under the Liberty National Life Insurance Company Business Expenses for Agents and Management Plan;


(b)	Employer contributions to any form of employee retirement, pension, profit sharing or thrift plan;


(c)	Any amount received in connection with the exercise of a stock option or realized from the sale, exchange or other disposition of stock acquired under a stock option;


(d)	Director's fees;


(e)	Annual service awards;


(f)	Deferred compensation accrued under any nonqualified deferred compensation agreement or contract or any amendment or replacement thereof;


(g)	Renewal commissions, other than renewal commissions paid to agents authorized to solicit applications for both ordinary and home service policies of insurance;


(h)	Any amounts due to or paid to a Participant as a result of the settlement of his commission account balance upon the termination of his employment for any reason;


(i)	Payments made to any Employee after such Employee's separation from service, in the form of severance benefits; and


10)	Any other form of compensation designated by an Employer as not included in Compensation for its Employees.

The annual Compensation of each Participant taken into account in determining allocations shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code § 401(a)(17)(B). Annual Compensation means Compensation during the plan year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

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Compensation shall include elective amounts that are not includible in the gross income of the Employee under Code §§ 125, 132(f)(4), 402(e)(3), 402(h), or 403(b).

The determination of Compensation will be in accordance with records maintained by the Employer and shall be conclusive.

Participants may not make elective deferrals with respect to amounts that are not 415 Compensation. However, for this purpose, 415 Compensation is not limited to the annual compensation limit of Code § 401(a)(17).

Compensation for purposes of allocations (hereinafter referred to as Plan Compensation) shall be adjusted in the same manner as 415 Compensation pursuant to Section 3.15 through Section 3.17, except the term "limitation year" shall be replaced with the term "Plan Year" and the term "415 Compensation" shall be replaced with the term "Plan Compensation."

Section 1.19 Contribution . A contribution made under the Plan by the Employer for or on behalf of a Participant. Contributions include Salary Deferral Contributions, Fail-Safe Contributions, and Matching Contributions.

Section 1.20 Direct Rollover . A payment by the Plan to the Eligible Retirement Plan specified by the Participant or Beneficiary.

Section 1.21 Disability . Total and permanent disability for a period of at least six months as defined by either (i) the group disability benefit plan maintained by the Participant's Employer, or (ii) the United States Social Security Administration.

Section 1.22 Early Retirement Age . Age 60.

Section 1.23 Effective Date . The effective date of this amended and restated Plan which shall be January 1, 2014. The original effective date of the Plan was April 5, 1982.

Section 1.24 Eligible Employee . Section 1.24 was amended effective January 1, 2012 to read as follows:

All Employees of an Employer other than:

(a) Employees included in a unit of employees covered by a collective bargaining agreement between the Employer and the employee representatives in the negotiation of which retirement benefits were the subject of good faith bargaining, unless such bargaining agreement provides for participation in the Plan;

(b) Leased employees which are not otherwise Employees of the Employer and who, pursuant to a leasing agreement between the Employer and any other person, have performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Code §144(a)(3)) on a substantially full time basis for at

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least one year and who performs services under the primary direction and control of the Employer;

(c) Any Employee of United Investors Life Insurance Company who is first credited with an Hour of Service on or after January 1, 1995;

(d) Any Employee of Liberty National Life Insurance Company who is first credited with an Hour of Service on or after January 1, 1995 and before January 1, 2012 except those who are classified, treated or otherwise characterized by the Employer as general agents, trainers, agents, branch managers, regional managers, district managers, brokers, solicitors, unit managers, assistant unit managers or any other individual whose primary duty involves the direct sale of insurance, regardless of the mode of compensation; and

(e) Any Employee holding the position of branch manager with Globe Life and Accident Insurance Company.

Section 1.25 Eligible Retirement Plan . An individual retirement account described in Code § 408(a), an individual retirement annuity described in Code § 408(b), a Roth IRA described in Code § 408A, an annuity plan described in Code § 403(a), a qualified trust described in Code § 401(a), an annuity contract described in Code § 403(b), or an eligible plan under Code § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision that agrees to separately account for amounts transferred from this plan, that accepts the Distributee’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Beneficiary, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.

Section 1.26 Eligible Rollover Distribution . Any distribution of all or any portion of the balance to the credit of the Participant or Beneficiary, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or the life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more; or any distribution to the extent such distribution is required under Code § 401(a)(9). A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because it consists of after-tax contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code §§ 408(a) or (b), or to a qualified plan or 403(b) plan that agrees to separately account for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. The term “Eligible Rollover Distribution” shall not include amounts distributed on account of hardship and the distributee may not elect to have any portion of such distribution placed directly into an Eligible Retirement Plan.

Section 1.27 Employee . Section 1.27 was amended effective January 1, 2012 to read as follows:

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Any individual who is classified, treated or otherwise characterized by an Employer as a common law employee of an Employer, and leased employees within the meaning of Code § 414(n)(2). Notwithstanding the foregoing, if such leased employees do not constitute more than twenty percent of the Employer's nonhighly compensated work force within the meaning of Code § 414(n)(5)(C)(ii), the term "Employee" shall not include those leased employees covered by a plan described in Code § 414(n)(5) unless otherwise provided by the terms of this Plan. Any individual who is classified, treated or otherwise characterized by an Employer as an independent contractor is not included in the term "Employee." The foregoing determination of whether an individual is an "Employee" for purposes of this Plan shall be made by an Employer subject to the approval and consent of the Administrator in its sole discretion. Said determination shall apply for all purposes of this Plan and regardless of whether such individual is later classified by any governmental agency, court, tribunal, governing body or any other person or entity as a common law employee of an Employer. It is the intent hereof that an Employer subject to the approval and consent of the Administrator shall decide in its sole discretion which individuals are classified as an Employee for purposes of this Plan.

Section 1.28 Employer . The Company and each Affiliate participating in the Plan pursuant to Section 14.8.

Section 1.29 Employer Contributions . The contributions made to the Plan by the Company or Participating Affiliate attributed to after-tax Participant Contributions prior to January 1, 2007.

Section 1.30 Employer Contributions Account . The account established for a Participant to hold Employer Contributions.

Section 1.31 Employment . An Employee's employment with the Company or an Affiliate or, to the extent determined by the Administrator, any predecessor of any of them.

Section 1.32 Entry Date . The first day of the payroll period coinciding with or next following the date the Eligible Employee has satisfied the requirements of Section 2.1.

Section 1.33 ERISA . The Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA shall include such provision and any applicable regulation pertaining thereto.

Section 1.34 Excess Aggregate Contributions . With respect to any Plan Year, the aggregate amount of Contributions taken into account under Code § 401(m) and actually paid over to the Trustee for the Plan Year on behalf of Highly Compensated Employees over the maximum amount of such contributions permitted under the ACP test set forth in Section 4.5.

Section 1.35 Excess Matching Contributions . With respect to any affected Participant, the amount of the Participant’s actual Matching Contributions minus the product of the Participant’s Compensation and his adjusted actual contribution ratio (as determined below).

The Excess Matching Contributions with respect to a Highly Compensated Employee shall be determined by reducing 401(m) contributions made on behalf of such Highly Compensated

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Employees in order of the amount of 401(m) contributions, as provided for in the Internal Revenue Service Notice 97-2 or such other guidance published by the Internal Revenue Service dealing with distributions of Excess Matching Contributions after the effective date of the Small Business Job Protection Act of 1996.

Section 1.36 Excess Salary Deferral Contributions . With respect to any affected Participant, the amount of the Participant’s actual Salary Deferral Contributions minus the product of the Participant’s Compensation and his adjusted actual deferral ratio (as determined below).

The Excess Salary Deferral Contributions with respect to a Highly Compensated Employee shall be determined by reducing 401(k) contributions made on behalf of such Highly Compensated Employees in order of the amount of 401(k) contributions, as provided for in Internal Revenue Service Notice 97-2 or such other guidance published by the Internal Revenue Service dealing with distributions of Excess Salary Deferral Contributions after the effective date of the Small Business Job Protection Act of 1996.

The amount of Excess Salary Deferrals with respect to an Employee for a Plan Year is reduced by amounts previously distributed to such Employee pursuant to Section 4.6 of the Plan for the Employee’s taxable year ending with or within the Plan Year.

Section 1.37 Five-percent Owner . Any person who owns (or is considered as owning within the meaning of Code § 318) more than 5% of the outstanding stock of the Employer, or stock possessing more than 5% of the total voting power of the Employer.

Section 1.38 Forfeitures . Those portions of accounts that are forfeited and reallocated as described in Section 5.3.

Section 1.39 Fully Vested Separation . Termination of Employment of a Participant whose vested percentage in his Accounts is 100%.

Section 1.40 Highly Compensated Employee .

Any Employee who:

(a) During the preceding Plan Year:

(i) Was at any time a Five percent Owner; or

(ii) Received compensation in excess of $80,000 (multiplied by the applicable cost of living adjustment factor prescribed by the Secretary of the Treasury under Code § 415(d)) and, if the Employer so elects, was in the group consisting of the top 20% of all Employees when ranked by compensation; or who

(b) During the current Plan Year:

(i) Was at any time a Five-percent Owner.

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Notwithstanding the foregoing, the Employer may elect, without further need of amending this section of the Plan, to use any simplified or alternative definition of Highly Compensated Employee permitted by the Internal Revenue Service.

The determination of who is a Highly Compensated Employee, including the compensation that is considered, will be made in accordance with Code § 414(q) and the regulations thereunder.

Section 1.41 Hour of Service .


(a)	Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) during the applicable computation period.

(b)

Each hour for which an Employee is paid, or entitled to payment, by an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), lay-off, jury duty, military duty or leave of absence. An hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which no duties are performed is not credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of providing severance benefits or complying with the applicable unemployment compensation laws. Hours of Service are not credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.


(c)	Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate). The same Hours of Service shall not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c).

(d)

If, in accordance with standard personnel policies applied in a non-discriminatory manner to all Employees similarly situated, each hour for which the Employee on the approved unpaid leave of absence would normally have received credit under this Plan if he had been working in his regular employment for the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate).


(e)	An Employee of the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate)

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who is regularly employed by such Employer (or Affiliate) for at least 37½ hours a week shall be credited with forty-five Hours of Service if under this Plan he would be credited with at least one Hour of Service during the week.


(f)	An Employee of the Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate) who is not regularly employed by such Employer (or Affiliate) for at least 37½ hours a week shall be credited with the actual Hours of Service for which he is paid or entitled to credit under this Plan.


(g)	Hours of Service shall be calculated and credited pursuant to § 2530-200b-2 of the Department of Labor Regulations which are incorporated herein by this reference.


(h)	In the case of an Employee who is paid on a commission basis, he will be deemed to perform his first Hour of Service on the date on which he is first designated an Employee by the Employer.

Section 1.42 Investment . Investment Company Shares, the shares of Class A common stock of Waddell & Reed Financial, Inc. credited to a Participant’s W&R Class A Financial Stock Account pursuant to the terms of the Plan or, if designated by the Company for investment of contributions, an interest in the Company Stock Account. Effective as of January 1, 1999, all Investments under the Plan shall be unitized based upon generally accepted common trust fund valuation methods. The Company Stock Account and the W&R Class A Financial Stock Accounts shall consist predominately of shares of the applicable common stock in addition to such cash or cash equivalents as are necessary to provide for sufficient liquidity in the accounts as determined by the Trustee pursuant to guidelines established by the Administrator.

Section 1.43 Investment Company . An investment company or companies designated by the Company for investment of contributions under the Plan. In the case of an Investment Company which has more than one class of shares, each class of shares will be considered a separate Investment Company for the purposes of this Plan.

Section 1.44 Investment Company Shares . Shares issued by an Investment Company.

Section 1.45 Limitation Year . Each twelve consecutive month period ending on the same last day as the Plan Year.

Section 1.46 Matching Contributions . Amounts contributed to the Plan by the Employer pursuant to Section 3.8.

Section 1.47 Non-Highly Compensated Employee . An Employee of the Employer who is not a Highly Compensated Employee.

Section 1.48 Non-Vested Separation . Termination of Employment of a Participant whose vested percentage in any Account is less than 100 percent.

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Section 1.49 Normal Retirement Age . Age 65.

Section 1.50 One Year Break in Service . Any period of twelve consecutive months, beginning with the date of an Employee's Employment or any anniversary of the date of such Employment, during which the Employee has not completed more than 500 Hours of Service; except that a Participant who is absent from work due to such Participant's pregnancy, the birth of the Participant's child or by reason of the adoption of a minor child by the Participant for the purpose of caring for such child immediately following its birth or adoption and who provides timely information establishing to the satisfaction of the Administrator the reasons for the absence and the number of days of such absence will be treated as performing a normal schedule (or eight hours per day) up to a maximum of 501 Hours of Service in either the year in which the absence begins or the year immediately following the year in which the absence begins as necessary to prevent such Participant from incurring a One Year Break in Service in either (but not both) the year in which the absence begins or the year immediately following the year in which the absence begins.

Section 1.51 Partially Vested Separation . Termination of Employment of a Participant whose vested percentage in any Account is less than 100% but greater than zero percent.

Section 1.52 Participant . An Employee who has commenced, but not terminated, participation in the Plan as provided in ARTICLE 2.

Section 1.53 Participant Contributions . The Participant's Basic Participant Contributions and Supplementary Participant Contributions. Participant Contributions were after-tax “thrift” contributions and were prospectively eliminated from the Plan effective January 1, 2007.

Section 1.54 Participant Contributions Account . The account established for a Participant Contributions.

Section 1.55 Participating Affiliate . Any Affiliate which in accordance with Section 14.8, by duly authorized action has adopted the Plan and not withdrawn therefrom.

Section 1.56 Plan . The Torchmark Corporation Savings and Investment Plan.

Section 1.57 Plan Year . Each twelve consecutive month period ending on December 31, during any part of which the Plan is in effect.

Section 1.58 Qualified Joint and Survivor Annuity . An annuity for the life of the Participant with a survivor annuity continuing after the Participant's death to the Participant's Surviving Spouse for the Surviving Spouse's life in an amount equal to fifty percent of the amount payable during the joint lives of the Participant and such Surviving Spouse.

Section 1.59 Qualified Plan . A defined contribution plan or a defined benefit plan which is qualified under Code § 401(a).

Section 1.60 Rollover Contribution . A contribution attributable to:

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(a)	A "qualified total distribution" (as defined in Code § 402(a)(5)), made to an Eligible Employee from a Qualified Plan or made to the Eligible Employee under Code § 403(a)(4) from an "employee annuity" as referred to in that section; or

(b)

A payout or distribution to an Eligible Employee referred to in Code § 408(d)(3) from an "individual retirement account" or an "individual retirement annuity" described, respectively, in Code § 408(a) or § 408(b) consisting exclusively of amounts attributable to "qualifying rollover distributions" (as defined in Code § 402(a)(5)) from a Qualified Plan. Notwithstanding the foregoing, a Rollover Contribution shall in no event include amounts attributable to a distribution from a Qualified Plan under which the Eligible Employee was at any time a self-employed individual deemed to be an "employee" under Code § 401(c)(1).

Section 1.61 Salary Deferral Contributions . Amounts deferred into the Plan by Participants pursuant to Section 3.3.

Section 1.62 Spousal Consent . Written consent by a Participant's Spouse waiving the benefit otherwise payable to the Spouse, where such waiver is witnessed by a Plan representative or a notary public and includes acknowledgment by the Spouse of the effect of such waiver.

Section 1.63 Spouse . The person lawfully married to a Participant. "Lawfully married" means the marriage occurred in a jurisdiction that recognized the marriage as legal.

Section 1.64 Surviving Spouse . The Spouse of a Participant on the earlier of:


(a)	The date of the Participant's death; or


(b)	The Participant's Benefit Commencement Date.

Section 1.65 Trust or Trust Fund . The trust established under the Plan in which Plan assets are held.

Section 1.66 Trust Agreement . The agreement between the Company and the Trustee with respect to the Trust.

Section 1.67 Trustee . The person appointed as trustee pursuant to ARTICLE 11, and any successor trustee.

Section 1.68 Valuation Date . The Trust Fund and each Investment under the Plan shall be unitized based upon generally accepted common trust fund valuation methods. The value of units or shares allocated to a Participant's Account shall be determined by the fair market value of shares or units allocated to such Participant's Account as of the date on which such shares are purchased or sold to provide for distributions, withdrawals, or transfers between Investments. All withdrawals and distributions under the Plan shall be based upon the amount realized from the liquidation of units or shares credited to the Account of a Participant. "Valuation Date" shall mean

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any date on which units or shares credited to the Account of a Participant are valued for any purpose under the Plan.

Section 1.69 Vesting Service . The Years of Service credited to a Participant under Section 5.2 for purposes of determining the Participant's vested percentage in the Account Balance of the Employer Contributions Account established for the Participant.

Section 1.70 W&R Class A and Class B Financial Stock Accounts . The separate accounts established and maintained under the Plan for the purposes of holding (i) the distribution of shares of Class A and Class B common stock of Waddell & Reed Financial, Inc. received as a stock dividend on Company Stock, and (ii), transfers or rollovers of Class A common stock of Waddell & Reed Financial, Inc. received prior to the spin off of Waddell & Reed Financial, Inc. from Torchmark Corporation. [Effective as of October 1, 1998.] Pursuant to a vote of the stockholders of Waddell & Reed Financial, Inc. on April 25, 2001, a merger resulted in the combination of the two classes of Waddell & Reed Financial, Inc. common stock into a single class of common stock by converting Class B common stock into Class A common stock on a one-for-one basis.

Section 1.71 Years of Service . For purposes of determining eligibility to participate under ARTICLE 2 and for purposes of determining Vesting Service:

(a)

For Employment, or return to Employment after a One Year Break in Service, beginning in 1975 or later years, a period of 12 consecutive months beginning with the date of Employment or return to Employment during which an Employee has not less than 1,000 Hours of Service for an Employer, Vesta Insurance Group, Inc. or its subsidiaries or TMK Hogan (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate); and


(b)	For Employment which began before 1975, with respect to periods before the 1975 anniversary of such Employment, an aggregate of fifty-two weeks during each of which an Employee was employed on a permanent basis for at least 35 hours a week by an Employer (or by an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate); and

(c)

For Employment which began before 1975, with respect to periods after the 1975 anniversary of such Employment, a period of twelve consecutive months beginning with the date of such anniversary in 1975 or later years during which an Employee has not less than 1,000 Hours of Service for an Employer (or an Affiliate in the case of an Employee who has transferred his Employment to the Employer from such Affiliate).


(d)	For purposes of vesting, for an Employee who terminates Employment with the Company as of December 31, 1999, and commences employment with Waddell & Reed, Inc. or one of its affiliates as of January 1, 2000, a period of 12 consecutive month beginning with the date of employment with

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Waddell & Reed, Inc. or one of its affiliates during which such person has not less than 1,000 Hours of Service for Waddell & Reed, Inc. or one of its affiliates. For this purpose, Hours of Service will be determined by disregarding the fact that services are not being performed for an Employer or Affiliate (as defined herein).

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ARTICLE 2
PARTICIPATION

Section 2.1 Participation in the Plan . Section 2.1 was amended effective January 1, 2012 to read as follows:

An Eligible Employee may begin participation in the Plan as of the Entry Date coincident with or immediately following his date of hire, provided such Eligible Employee is employed by the Employer on such Entry Date. An individual who has ceased participation in the Plan and who is rehired by the Employer as an Eligible Employee shall become a Participant as of the date of rehire, unless he has had a One Year Break in Service. If an individual resumes employment with the Employer as an Eligible Employee after a One Year Break in Service, he shall become a Participant upon completion of a Year of Service, retroactive to a date which is not later than the date of rehire.

Section 2.2 Crediting of Service for Eligibility Purposes .

An Employee who terminates Employment without any vested rights to a benefit under the Plan derived from contributions by the Employer shall lose credit for his Years of Service prior to such termination of Employment if the total of his consecutive One Year Breaks in Service immediately preceding his reemployment equals or exceeds the greater of five years or his Years of Service prior to such termination (whether or not consecutive but excluding any Years of Service previously disregarded under this rule).

Section 2.3 Rollover Membership .

An Eligible Employee who makes a Rollover Contribution shall become a Participant as of the date of such contribution even if he has not previously become a Participant. Such an Eligible Employee shall be a Participant only with respect to his Rollover Contributions.

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ARTICLE 3
ACCOUNTS AND CONTRIBUTIONS

Section 3.1 Establishment of Accounts . Section 3.1 was amended effective November 28, 2011 to read as follows:

A Salary Deferral Account, a Matching Account, a Participant Contributions Account, an Employer Contributions Account, a Rollover Account and a Merged Profit Sharing Account shall be established for each Participant, as applicable. All Contributions by or on behalf of a Participant shall be deposited to the appropriate Account.

Section 3.2 Participant and Employer Contributions . Effective January 1, 2007, (i) Participants may no longer make after-tax Participant Contributions to the Plan, and (ii) the Employer will no longer make Employer Contributions on behalf of any Participant.

Section 3.3 Salary Deferral Contributions .

3.3.1 Each Participant may authorize the Employer to reduce his Compensation by up to thirty percent (30%), and to have such amount deposited to the Participant's Salary Deferral Account as "Salary Deferral Contributions" hereunder. However, the total Salary Deferral Contributions made on a Participant's behalf to this Plan or any other qualified plan maintained by the Employer, during such Participant's taxable year may not exceed maximum salary reduction contribution permitted under Code § 402(g), except to the extent permitted under Code § 414(v), if applicable.

3.3.2 All Employees who are eligible to make Salary Deferral Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make Catch-Up Contributions in accordance with, and subject to the limitations of, Code § 414(v). Such Catch-Up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code §§ 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code §§ 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such Catch-Up Contribution.

3.3.3 A Participant’s election with respect to Salary Deferral Contributions cannot relate to compensation that is currently available prior to the adoption or effective date of the Plan’s cash or deferral arrangement. In addition, except for occasional, bona fide administrative considerations, Salary Deferral Contributions made pursuant to such an election cannot precede the earlier of (i) the performance of services relating to the contribution and (ii) the date the compensation that is subject to the election would be currently available to the Participant in the absence of an election to defer.

3.3.4 In the event the dollar limit described above is exceeded when one takes into account only contributions to the Plan and/or any other plan, contract, or arrangement of the Employer that is subject to Code § 402(g), (i) the Participant is deemed to notify the Administrator of such excess deferral, and (ii) the Administrator shall direct the Trustee of

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the Plan to distribute such excess amount, and any income or loss allocable to such amount, to the Participant no later than the first April 15th following the close of the Participant's taxable year. Matching Contributions attributable to such excess deferral shall be forfeited and applied like other forfeitures.

3.3.5 In the event a Participant is also a participant in one or more of the following types of arrangements sponsored by another employer:

(a) Another qualified cash or deferred arrangement (as defined in Code § 401(i));

(b) A simplified employee pension (as defined in Code § 408(k));

(d) A 403(b) annuity contract or custodial account, and the elective deferrals (as defined in Code § 402(g)(3)) made under such other arrangement(s) and his or her salary or wage deferrals made under this Plan cumulatively exceed the $10,000 limitation (as adjusted) for such Participant's taxable year, the Participant may, not later than March 1st following the close of such Participant's taxable year, notify the Administrator in writing of such excess and request that his or her salary or wage deferrals made under this Plan be reduced by an amount specified by the Participant. Such amount, and any income or loss allocable to such amount, shall then be distributed at the same time and in the same manner as provided in paragraph (b) above.

If the Administrator determines during the course of the Participant's taxable year that an excess deferral has been made on behalf of a Participant during such taxable year, the Administrator may direct the Trustee to make a corrective distribution of such excess deferral before the end of the taxable year. Such a corrective distribution is permissible only if (i) the Participant notifies the Administrator of the excess deferral (or, under the circumstances described in paragraph (b) above, the Participant is deemed to have made such notification), (ii) the corrective distribution is made after the date on which the Plan receives the excess deferral, and (iii) the distribution is designated as a distribution of an excess deferral. The income allocable to such excess amounts shall be computed in a manner consistent with Section 4.6. Any excess deferrals for the Participant's taxable year that would otherwise be distributed to the Participant shall be reduced, in accordance with Treasury Regulations, by the amount of Excess Salary Deferral Contributions previously distributed to the Participant for the Plan Year beginning with or within such taxable year.

3.3.6 The Administrator reserves the right to reduce Salary Deferral Contributions on behalf of Highly Compensated Employees to the extent necessary to preserve the Plan's qualified status under the Code.

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Section 3.4 Rollovers .

3.4.1 With the consent of the Administrator, the Plan may accept a Rollover Contribution by an Eligible Employee, provided the Rollover Contribution will not jeopardize the tax exempt status of the Plan or create adverse tax consequences for the Employer. Prior to accepting any Rollover Contributions to which this Section applies, the Administrator may require the Employee to establish (by providing opinion of counsel or otherwise) that amounts to be rolled over to this Plan meet the requirements of this Section. The amounts rolled over shall be held in the Participant’s Rollover Account. Such account shall be fully Vested at all times and shall not be subject to forfeiture for any reason.

For purposes of this Section, the term “qualified plan” shall mean any tax qualified plan under Code § 401(a), or, any other plans from which distributions are eligible to be rolled over into this Plan pursuant to the Code. The term “rollover” means: (i) amounts transferred to this Plan directly from another qualified plan; (ii) distributions received by an Employee from other “qualified plans” which are eligible for tax-free rollover to a “qualified plan” and which are transferred by the Employee to this Plan within sixty (60) days following receipt thereof; (iii) amounts transferred to this Plan from a conduit individual retirement account provided that the conduit individual retirement account has no assets other than assets which (A) were previously distributed to the Employee by another “qualified plan,” (B) were eligible for tax-free rollover to a “qualified plan” and (C) were deposited in such conduit individual retirement account within sixty (60) days of receipt there of; (iv) amounts distributed to the Employee from a conduit individual retirement account meeting the requirements of clause (iii) of this paragraph, and transferred by the Employee to this Plan within sixty (60) days of receipt thereof from such conduit retirement account; and (v) any other amounts which are eligible to be rolled over to this Plan pursuant to the Code.

3.4.2 Amounts in a Participant’s Rollover Account shall be held pursuant to the provisions of this Plan and may not be withdrawn by, or distributed to the Participant, in whole or in part, except as provided in Section 7.8. The Plan shall have no duty or responsibility to inquire as to the propriety of the amount, value or type of assets transferred, nor to conduct any due diligence with respect to such assets; provided, however, that such assets are otherwise eligible to be held under the terms of this Plan. Amounts held in the Participant’s Rollover Account shall be considered as part of a Participant’s benefit in determining whether an involuntary cash-out of benefits may be made without Participant consent.

3.4.3 Notwithstanding anything herein to the contrary, a transfer directly to this Plan from another qualified plan (or a transaction having the effect of such a transfer) shall only be permitted if it will not result in the elimination or reduction of any “Section 411(d)(6) protected benefit.”

Section 3.5 Participant's Elections . Each Eligible Employee who wishes to participate in the Plan shall file a written election form with the Administrator specifying the portion of his Compensation to be contributed to the Plan as a Salary Deferral Contribution. The form shall also

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designate a Beneficiary and specify any applicable investment choices. The election shall take effect as soon as administratively practicable, and the portion of Compensation contributed shall be deposited to the Participant's "Salary Deferral Account." Such election of the Participant shall remain in effect until a new election is filed with the Administrator.

Section 3.6 Automatic Enrollment of Participants . Section 3.6 was amended effective January 1, 2012 to read as follows:

The automatic enrollment feature set forth in this Section is intended to be a Qualified Automatic Contribution Arrangement ("QACA") as described in § 902(a) of the Pension Protection Act of 2006 and Code § 401(k)(13).

Notwithstanding Section 3.5, any Eligible Employee who completes a Year of Service and has not completed an enrollment form by the Entry Date coincident with or immediately following the completion of a Year of Service shall be automatically enrolled as a Participant and shall automatically have an amount equal to 3% of his or her Compensation for each pay period deferred and deposited to his or her Salary Deferral Account.

Unless modified by the Participant pursuant to Section 3.7, each Participant's Salary Deferral percentage shall be determined in accordance with the following:

(a) 3% of Compensation beginning on the Participant's Entry Date and ending on the last day of the first Plan Year beginning after the Participant's Entry Date.

(b) 4% of Compensation for the Plan Year immediately following the period set forth in (a).

(d) 6% of Compensation for the Plan Year immediately following the period set forth in (c) and all subsequent Plan Years.

The Participant's Salary Deferral Account shall be invested in a fund selected by the Plan Administrator unless and until the Participant gives appropriate notice to the Plan Administrator to reallocate Investments under the Plan. The Plan Administrator may implement this automatic enrollment program through whatever procedure it deems appropriate, provided that such procedure applies on a non-discriminatory basis to all Participants.

Section 3.7 Changes in Salary Deferral Contributions . A Participant may elect to change his rate of Salary Deferral Contributions up to eight (8) times in any Plan Year. The change in election shall be submitted in writing to the Administrator, and shall take effect as soon as administratively practicable, but no sooner than the first day of any payroll period after the Participant submits his change in election.

Section 3.8 Matching Contributions . The Company shall have the authority to change the rate of Matching Contribution, or the amount of Salary Deferral Contributions subject to the

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match, provided such new rate is communicated to Participants. The Employer shall cease making Matching Contributions for Plan Years beginning after December 31, 2008.

Section 3.9 Safe Harbor Matching Contribution . Effective January 1, 2009:

3.9.1 For each pay period, the Employer will make a Safe Harbor Matching Contribution equal to the sum of (i) 100% of a Participant's Salary Deferrals that do not exceed 1% of Compensation; plus (ii) 50% of such Participant's Salary Deferrals that exceed 1% of Compensation but do not exceed 6% of Compensation.

3.9.2 Notwithstanding anything in the Plan to the contrary, the Plan will be treated as meeting the ADP test as set forth in Code § 401(k)(3)(A)(ii) in any Plan Year in which the Plan includes a QACA.

3.9.3 Notwithstanding anything in the Plan to the contrary, the Plan shall be treated as having satisfied the ACP test as set forth in Code § 401(m)(2) with respect to the Safe Harbor Matching Contribution as set forth in this Section 3.9 in any Plan Year in which the Plan includes a QACA.

3.9.4 Notwithstanding anything in the Plan to the contrary, in any Plan Year in which the Plan consists solely of: (i) Salary Deferrals under a QACA and (ii) Safe Harbor Matching Contributions which meet the requirements of Code § 401(m)(12), then such Plan will not be treated as a top heavy Plan and will be exempt from the top heavy requirements of Code § 416. Furthermore, if the Plan (but for the prior sentence) would be treated as a top heavy Plan because the Plan is a member of an aggregation group which is a top heavy group, then the contributions under the Plan may be taken into account in determining whether any other plan in the aggregation group meets the top heavy requirements of Code § 416.

3.9.5 Notwithstanding the foregoing, the Employer will not make a Safe Harbor Matching Contribution with respect to a Participant's Salary Deferrals made before the Participant completes a Year of Service. This Section 3.9.5 was added to the Plan effective January 1, 2012.

Section 3.10 Fail-Safe Contributions . If the Plan fails to satisfy the ADP Test or ACP Test, the Employer may, in its discretion, make Fail-Safe Contributions on behalf of Participants who are Nonhighly Compensated Employees. Such Fail-Safe Contributions shall, for any Plan Year, be in an amount sufficient, when allocated among active Participants who are Nonhighly Compensated Employees, to bring the Plan into compliance with the ADP Test or ACP Test. Such additional Fail-Safe Contributions shall be allocated to the Salary Deferral Account of each such Participant in the same proportion that each such Participant's Compensation for the year bears to the total Compensation of all such Participants. In the alternative, such contributions may be distributed to accounts of Participants who are Nonhighly Compensated Employees in any nondiscriminatory manner. A Participant whose participation in the Plan for the Plan Year in question is limited to maintenance of a Rollover Account need not be included in the allocation of Fail-Safe Contributions. Fail-Safe Contributions shall be vested at all times. Fail-Safe Contributions shall also be subject

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to the same distribution restrictions that Salary Deferral Contributions are subject to, as described in Code § 401(k)(2)(B). Fail-Safe Contributions, however, and income attributable to such contributions, may not be distributed on account of financial hardship.

Fail-Safe Contributions may be used to pass the ADP Test or ACP Test only if they satisfy the requirements of Treasury Regulation § 1.401(k)-1(b)(3).

Section 3.11 Makeup Contributions . To the extent required by the Uniformed Services Employment and Reemployment Rights Act of 1994 and otherwise permitted by applicable law, an employee who has been absent from work by reason of military duty may make up missed Salary Deferral Contributions and shall be entitled to have related Matching Contributions credited to his Account.

Section 3.12 Overall Limits on Contributions . Except to the extent permitted through the addition of an amendment that provides for catch-up contributions under EGTRRA § 631 and Code § 414(v), if applicable, the Annual Addition that may be contributed or allocated to a Participant’s account under the Plan for any Limitation Year shall not exceed the lesser of:

(a) $40,000, as adjusted for increases in the cost-of-living under Code § 415(d), or

(b) 100 percent of the Participant’s compensation, within the meaning of Code § 415(c)(3), for the Limitation Year. The compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code §§ 401(h) or 419A(f)(2)), which is otherwise treated as an annual addition.

For purposes of this Section 3.12 only, "compensation" shall mean the Participant's W-2 compensation subject to income tax, i.e., such Participant's wages as defined in Code § 3401(a) and all other payments of compensation by the Employer for the Plan Year for which the Employer is required to furnish the Participant a written statement under Code §§ 6041(d), 6051(a)(3), and 6052. Compensation must be determined without regard to any rules under Code § 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed. Effective as of January 1, 1998, compensation for purposes of Code § 415 testing shall include amounts excludable from the Employee's gross income under Code §§ 125, 132(f)(4), 402(a)(8), 402(h), or 403(b), and contributed by the Employer, at the Employee's election, to a Code § 401(k) arrangement, a simplified employee pension plan, cafeteria plan, or tax-sheltered annuity.

If as a result of the allocation of Forfeitures, a reasonable error in estimating a Participant's Compensation, or other facts and circumstances to which Treasury Regulation § 1.415-6(b)(6) shall be applicable, the Annual Additions under this Plan would cause the maximum Annual Additions to be exceeded for any Participant, the Administrator shall: (i) return any Salary Deferral Contributions credited for the Plan Year (unadjusted for earnings or losses) to the extent the return would reduce the excess amount allocated to the Participant, (ii) hold any excess amount remaining after the return of salary or wage deferrals in a "Section 415 suspense account," (iii) allocate and reallocate the "Section 415 suspense account" funds in the next Plan Year (and succeeding Plan

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Years if necessary) to all Participants in the Plan before any Employer contributions which would contribute Annual Additions are made to the Plan for such Plan Year, and (iv) reduce Matching Contributions to the Plan for such Plan Year by the amount of the "Section 415 suspense account" allocated and reallocated during such Plan Year. The Plan may not distribute excess amounts to Participants except as provided for above. Matching Contributions attributable to returned Salary Deferral Contributions shall be placed in the "Section 415 suspense account." The sum of suspended Matching Contributions and returned Salary Deferral Contributions shall not exceed the amount necessary to reduce the Participant's Annual Additions to an acceptable level. The "Section 415 suspense account" shall not share in any earnings or losses of the Trust Fund.

Section 3.13 Permitted Employer Refunds . Employer contributions hereunder are made with the understanding that this Plan will qualify under Code § 401, and that such contributions will be deductible under Code § 404. Any contribution that is disallowed as a deduction shall be refunded to the Employer within one year of such disallowance:

(a) If approval of the Plan as originally adopted is denied, Employer contributions affected by such denial shall be returned to the Employer within one year after the denial occurs.

(b) Any contribution made by the Employer due to a mistake of fact shall be refunded to the Employer within one year of such contribution.

(c) Refunds of contributions due to a disallowance, denial, or mistake of fact shall be governed by the following requirements:

(i) Earnings attributable to the amount being refunded shall remain in the Plan, but losses thereto must reduce the amount to be refunded.

(ii) In no event may a refund be made that would cause the Account Balance of any Participant to be reduced to less than what the Participant's Account Balance would have been had the mistaken amount not been contributed.

Section 3.14 Final Section 415 Regulations . The provisions of Sections 3.13 through 3.20 shall apply beginning on and after January 1, 2008.

Section 3.15 415 Compensation paid after severance from employment . 415 Compensation shall be adjusted or not adjusted for the following types of compensation paid after a Participant's severance from employment with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Code §§ 414(b), (c), (m) or (o)). However, amounts described in Section 3.15(a) below may only be included in 415 Compensation to the extent such amounts are paid by the later of 2½ months after severance from employment or by the end of the Limitation Year that includes the date of such severance from employment. Payments described in Sections 3.15 (b) through (d) below and any other payment of compensation paid after severance of employment that is not described in Section 3.15(a) below is not considered 415 Compensation

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within the meaning of Code § 415(c)(3), even if payment is made within the time period specified above.

(a) Regular pay. 415 Compensation shall include regular pay after severance of employment if:

(iii) The payment is regular compensation for services during the Participant's regular working hours, or compensation for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(iv) The payment would have been paid to the Participant prior to a severance from employment if the participant had continued in employment with the Employer.

(b) Leave cashouts and deferred compensation. Leave cashouts shall not be included in 415 Compensation. Leave cashouts are payments for unused accrued bona fide sick, vacation, or other leave. Deferred compensation shall not be included in 415 Compensation.

(c) Salary continuation payments for military service participants. 415 Compensation does not include payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Code § 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

(d) Salary continuation payments for disabled Participants. 415 Compensation does not include compensation paid to a Participant who is permanently and totally disabled (as defined in Code § 22(e)(3)).

Section 3.16 Administrative delay ("the first few weeks") rule . 415 Compensation for a Limitation Year shall not include amounts earned but not paid during the Limitation Year solely because of the timing of pay periods and pay dates.

Section 3.17 Inclusion of certain nonqualified deferred compensation amounts . If the Plan's definition of compensation for purposes of Code § 415 is the definition in Regulation § 1.415(c)-2(b) and the simplified compensation definition of Regulation § 1.415(c)‑2(d)(2) is not used, then 415 Compensation shall include amounts that are includible in the gross income of a Participant under the rules of Code §§ 409A or 457(f)(1)(A) or because the amounts are constructively received by the Participant.

Section 3.18 Definition of annual additions . The Plan's definition of "annual additions" is modified as follows:

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(a) Restorative payments. Annual additions for purposes of Code § 415 shall not include restorative payments. A restorative payment is a payment made to restore losses to a Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the plan's losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to a plan made pursuant to a Department of Labor order, the Department of Labor's Voluntary Fiduciary Correction Program, or a court‑approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered annual additions.

(b) Other Amounts. Annual additions for purposes of Code § 415 shall not include: (i) the direct transfer of a benefit or employee contributions from a qualified plan to this Plan; (ii) rollover contributions (as described in Code §§ 401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16)); (iii) repayments of loans made to a Participant from the Plan; and (iv) repayments of amounts described in Code § 411(a)(7)(B) (in accordance with Code § 411(a)(7)(C)) and Code § 411(a)(3)(D)), as well as Employer restorations of benefits that are required pursuant to such repayments.

Section 3.19 Change of Limitation Year . The Limitation Year may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan's Limitation Year, then the Plan is treated as if the Plan had been amended to change its Limitation Year.

Section 3.20 Excess annual additions . Notwithstanding any provision of the Plan to the contrary, if the annual additions (within the meaning of Code § 415) are exceeded for any Participant, then the Plan may only correct such excess in accordance with the Employee Plans Compliance Resolution System (EPCRS) as set forth in Revenue Procedure 2006‑27 or any superseding guidance, including, but not limited to, the preamble of the final §415 regulations.

Section 3.21 Aggregation and Disaggregation of Plans .

(a) For purposes of applying the limitations of Code § 415, all defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a "predecessor employer") under which the Participant receives annual additions are treated as one defined contribution plan. The "Employer" means the Employer that adopts this Plan and all members of a

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controlled group or an affiliated service group that includes the Employer (within the meaning of Code §§ 414(b), (c), (m) or (o)), except that for purposes of this Section, the determination shall be made by applying Code § 415(h), and shall take into account tax‑exempt organizations under Regulation Section 1.414(c)‑5, as modified by Regulation Section 1.415(a)-1(f)(1). For purposes of this Section:

(i) A former Employer is a "predecessor employer" with respect to a Participant in a plan maintained by an Employer if the Employer maintains a plan under which the Participant had accrued a benefit while performing services for the former Employer, but only if that benefit is provided under the plan maintained by the Employer. For this purpose, the formerly affiliated plan rules in Regulation § 1.415(f)‑1(b)(2) apply as if the Employer and predecessor Employer constituted a single employer under the rules described in Regulation §§ 1.415(a)‑1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in Regulation §§ 1.415(a)‑1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship.

(ii) With respect to an Employer of a Participant, a former entity that antedates the Employer is a "predecessor employer" with respect to the Participant if, under the facts and circumstances, the employer constitutes a continuation of all or a portion of the trade or business of the former entity.

(b) Break-up of an affiliate employer or an affiliated service group. For purposes of aggregating plans for Code § 415, a "formerly affiliated plan" of an Employer is taken into account for purposes of applying the Code § 415 limitations to the Employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the "cessation of affiliation." For purposes of this paragraph, a "formerly affiliated plan" of an Employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the Employer (as determined under the employer affiliation rules described in Regulation §§ 1.415(a)‑1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the Employer (as determined under the employer affiliation rules described in Regulation §§ 1.415(a)‑1(f)(1) and (2)). For purposes of this paragraph, a "cessation of affiliation" means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in Regulation §§ 1.415(a)‑1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of Regulation §§ 1.415(a)‑ 1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

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(c) Midyear Aggregation. Two or more defined contribution plans that are not required to be aggregated pursuant to Code § 415(f) and the Regulations thereunder as of the first day of a limitation year do not fail to satisfy the requirements of Code § 415 with respect to a Participant for the Limitation Year merely because they are aggregated later in that Limitation Year, provided that no annual additions are credited to the participant's account after the date on which the plans are required to be aggregated.

Section 3.22 Merged Profit Sharing Account . A separate account shall be established and maintained for each Participant who had an account in the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company on November 28, 2011, the date on which such plan was merged into this Plan. Each such Participant's Merged Profit Sharing Account shall be credited with the amount received by this Plan in the merger on behalf of such Participant, which amount shall be fully vested. No additional contributions shall be made to the Merged Profit Sharing Account.

Section 3.23 Discretionary Contributions . The Company reserves the right to make a discretionary nonelective contribution to the Plan for any Plan Year. The amount thereof, if any, shall be determined by the Company in its sole discretion. Any such discretionary nonelective contribution shall be allocated to the Participants described in paragraph (a) below and in the manner described in paragraph (b) below.

(a) Participants eligible to receive an allocation of the contribution described in Section 3.23 are those who are credited with 1,000 or more Hours of Service during the Plan Year who are employed by the Company on the last day of the Plan Year.

(b) The contribution described in Section 3.23 shall be allocated among the Participants described in paragraph (a) above in the ratio that each Participant's Compensation for the Plan Year bears to the aggregate Compensation for the Plan Year of all Participants described in paragraph (a) above.

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ARTICLE 4
ADP AND ACP NONDISCRIMINATION TESTS

Section 4.1 Satisfaction of ADP and ACP Tests . Contributions under the Plan will satisfy the ADP and ACP Tests described in this Article, and the Employer will maintain such records as are necessary to demonstrate compliance with such tests, including records of the extent to which Fail-Safe Contributions are taken into account in calculating percentages.

Section 4.2 Actual Deferral Percentage . The "Actual Deferral Percentage" for a specified group of Eligible Employees for a Plan Year shall be the average of the deferral ratios calculated for Eligible Employees in such group by dividing (a), below, by (b) below, where:

(a) Equals the amount of Salary Deferral Contributions (and Fail-Safe Contributions treated like Salary Deferral Contributions, if any) actually paid under the Plan on behalf of the Eligible Employee for such Plan Year; and

(b) Equals the Eligible Employee's Testing Compensation for such Plan Year.

Section 4.3 ADP Test . The Actual Deferral Percentage for Highly Compensated Eligible Employees for any Plan Year shall not exceed, in such Plan Year, the greater of (a) or (b) as follows:

(a) The Actual Deferral Percentage for Nonhighly Compensated Eligible Employees multiplied by 1.25 (or the applicable limit in effect at any time in the future); or

(b) The Actual Deferral Percentage for Nonhighly Compensated Eligible Employees multiplied by 2 (or the applicable limit in effect at any time in the future); provided however, the Actual Deferral Percentage for Highly Compensated Eligible Employees may not exceed the Actual Deferral Percentage for Nonhighly Compensated Eligible Employees by more than 2 percentage points (or the applicable limit in effect at any time in the future).

Section 4.4 Actual Contribution Percentage . The "Actual Contribution Percentage" for a specified group of Eligible Employees for a Plan Year shall be the average of the contribution ratios calculated for Eligible Employees in such group by dividing (a), below, by (b), below, where:

(a) Equals the amount of Matching Contributions (and Fail-Safe Contributions treated like Matching Contributions, if any) actually paid under the Plan on behalf of the Eligible Employee for such Plan Year; and

(b) Equals the Eligible Employee's Testing Compensation for such Plan Year.

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Section 4.5 ACP Test . The Actual Contribution Percentage for Highly Compensated Eligible Employees for any Plan Year shall not exceed, in such Plan Year, the greater of (a) or (b) as follows:

(c) The Actual Contribution Percentage for Nonhighly Compensated Eligible Employees multiplied by 1.25 (or the applicable limit in effect at any time in the future); or

(d) The Actual Contribution Percentage for Nonhighly Compensated Eligible Employees multiplied by 2 (or the applicable limit in effect at any time in the future); provided, however, the Actual Contribution Percentage for Highly Compensated Eligible Employees may not exceed the Actual Contribution Percentage for Nonhighly Compensated Eligible Employee by more than 2 percentage points (or the applicable limit in effect at any time in the future).

Section 4.6 Compliance Measures . If the ADP or ACP Tests are not satisfied, or if there is a possibility such tests will not be satisfied, the Employer may, in its discretion, take any one or more of the following actions: (i) reduce Salary Deferral Contributions on behalf of one or more Highly Compensated Employees, (ii) make Fail-Safe Contributions in accordance with Section 3.10, or (iii) distribute Excess Salary Deferral Contributions and Excess Matching Contributions as defined in Section 1.36 and Section 1.35. If the Employer distributes Excess Salary Deferral Contributions or Excess Matching Contributions, it shall also distribute income allocable to such Contributions, both for the Plan Year and for the period between the end of the Plan Year and the time of distribution. The amount of such income shall be determined in accordance with Treasury Regulations. Moreover, if the Employer relies on the distribution of Excess Salary Deferral Contributions or Excess Matching Contributions to satisfy the ADP or ACP Tests, such contributions and income allocable thereto must be distributed by the close of the Plan Year following the Plan Year in which such excess contributions were made. Moreover, the Employer will be liable for a 10% excise tax on the amount of such excess contributions unless the contributions are distributed within 2½ months of the close of the Plan Year in which such contributions were made.

4.6.1 Distribution of Income attributable to Excess Salary Deferral Contributions . Distributions of Excess Salary Deferral Contributions must be adjusted for income (gain or loss). The Administrator has the discretion to determine and allocate income using any of the methods set forth below:

(e) Reasonable method of allocating income . The Administrator may use any reasonable method for computing the income allocable to Excess Salary Deferral Contributions, provided that the method does not violate Code § 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participant’s accounts. A Plan will not fail to use a reasonable method for computing the income allocable to Excess Salary Deferral Contributions merely because the income allocable to Excess Salary Deferral Contributions is determined on a date that is no more than seven (7) days before the distribution.

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(f) Alternative method of allocating income . The Administrator may allocate income to Excess Salary Deferral Contributions for the Plan Year by multiplying the income for the Plan Year allocable to the salary or wage deferral contributions and other amounts taken into account under the ADP Test (including contributions made for the Plan Year), by a fraction, the numerator of which is the Excess Salary Deferral Contributions for the Participant for the Plan Year, and the denominator of which is the sum of the:

(i) Account balance attributable to salary or wage deferral contributions and other amounts taken into account under the ADP Test as of the beginning of the Plan Year; and

(ii) Any additional amount of such contributions made for the Plan Year.

4.6.2 Corrective contributions . If a failed ADP Test is to be corrected by making an Employer contribution, then the provisions of the Plan for the corrective contributions shall be applied limiting the contribution made on behalf of any Non-Highly Compensated Employee (hereinafter referred to in this ARTICLE 4 as an NHCE) pursuant to such provisions to an amount that does not exceed the targeted contribution limits of ARTICLE 4.

4.6.3 Distribution of Income attributable to Excess Aggregate Contributions . Distributions of Excess Aggregate Contributions must be adjusted for income (gain or loss). For the purpose of this Section 4.6.3, "income" shall be determined and allocated in accordance with the provisions of Section 4.6.1, except that such Section shall be applied by substituting "Excess Salary Deferral Contributions" with "Excess Aggregate Contributions" and by substituting amounts taken into account under the ACP Test for amounts taken into account under the ADP Test.

4.6.4 Corrective contributions . If a failed ACP Test is to be corrected by making an Employer contribution, then the provisions of the Plan for the corrective contributions shall be applied by limiting the contribution made on behalf of any NHCE pursuant to such provisions to an amount that does not exceed the targeted contribution limits of Section 4.7 of this Plan.

Section 4.7 Additional Limitations . Section 4.7 is effective January 1, 2006.

4.7.1 Targeted matching contribution limit . A matching contribution with respect to a Salary Deferral Contribution for a Plan Year is not taken into account under the ACP Test for an NHCE to the extent it exceeds the greatest of:

(d) The NHCE's Salary Deferral Contributions for the Plan Year; and

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(e) The product of two (2) times the Plan’s "representative matching rate" and the NHCE's Salary Deferral Contributions for the Plan Year.

For purposes of this Section 4.7.1, the Plan’s "representative matching rate" is the lowest "matching rate" for any eligible NHCE among a group of NHCEs that consists of half of all eligible NHCEs in the Plan for the Plan Year who make Salary Deferral Contributions for the Plan Year (or, if greater, the lowest "matching rate" for all eligible NHCEs in the Plan who are employed by the Employer on the last day of the Plan Year and who make Salary Deferral Contributions for the Plan Year).

For purposes of this Section 4.7.1, the "matching rate" for an Employee generally is the matching contributions made for such Employee divided by the Employee’s Salary Deferral Contributions for the Plan Year. If the matching rate is not the same for all levels of Salary Deferral Contributions for an Employee, then the Employee’s "matching rate" is determined assuming that an Employee’s Salary Deferral Contributions are equal to six percent (6%) of Code § 414(s) compensation.

If the Plan provides a match with respect to the sum of the Employee’s after-tax Employee contributions and Salary Deferral Contributions, then for purposes of this Section 4.7.1, that sum is substituted for the amount of the Employee’s Salary Deferral Contributions in Sections 4.7.1(b) and (c) above and in determining the "matching rate," and Employees who make either after-tax Employee contributions or Salary Deferral Contributions are taken into account in determining the Plan's "representative matching rate." Similarly, if the Plan provides a match with respect to the Employee’s after-tax Employee contributions, but not Salary Deferral Contributions, then for purposes of this Section 4.7.1, the Employee’s after-tax Employee contributions are substituted for the amount of the Employee’s Salary Deferral Contributions in Sections 4.7.1(b) and (c) above and in determining the "matching rate," and Employees who make after-tax Employee contributions are taken into account in determining the Plan's "representative matching rate."

4.7.2 Targeted QNEC limit . Qualified Nonelective Contributions (as defined in Regulation § 1.401(k)-6) cannot be taken into account under the ACP Test for a Plan Year for an NHCE to the extent such contributions exceed the product of that NHCE’s Code § 414(s) compensation and the greater of five percent (5%) or two (2) times the Plan's "representative contribution rate." Any Qualified Nonelective Contribution taken into account under an ADP Test under Regulation § 1.401(k)-2(a)(6) (including the determination of the "representative contribution rate" for purposes of Regulation § 1.401(k)-2(a)(6)(iv)(B)) is not permitted to be taken into account for purposes of this Section (including the determination of the "representative contribution rate" for purposes of Section 4.7.2(a) below). For purposes of this Section 4.7.2:

(a) The Plan's "representative contribution rate" is the lowest "applicable contribution rate" of any eligible NHCE among a group of eligible NHCEs that consists of half of all eligible NHCEs for the Plan Year (or, if greater, the lowest

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"applicable contribution rate" of any eligible NHCE who is in the group of all eligible NHCEs for the Plan Year and who is employed by the Employer on the last day of the Plan Year); and

(b) The "applicable contribution rate" for an eligible NHCE is the sum of the matching contributions (as defined in Regulation § 1.401(m)-1(a)(2)) taken into account in determining the "actual contribution ratio" (hereinafter referred to in this ARTICLE 4 as ACR) for the eligible NHCE for the Plan Year and the Qualified Nonelective Contributions made for that NHCE for the Plan Year, divided by that NHCE's Code § 414(s) compensation for the Plan Year.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for a Plan Year for an NHCE to the extent such contributions do not exceed 10 percent (10%) of that NHCE’s Code § 414(s) compensation.

4.7.3 ACR of HCE if multiple plans . The ACR for any Participant who is a Highly Compensated Employee (hereinafter referred to in this Article 4 as an HCE) and who is eligible to have matching contributions or after-tax Employee contributions allocated to his or her account under two (2) or more plans described in Code § 401(a), or arrangements described in Code § 401(k) that are maintained by the same Employer, shall be determined as if the total of such contributions was made under each plan and arrangement. If an HCE participates in two (2) or more such plans or arrangements that have different plan years, then all matching contributions and after-tax Employee contributions made during the Plan Year being tested under all such plans and arrangements shall be aggregated, without regard to the plan years of the other plans. For plan years beginning before the effective date of this Amendment, all such plans and arrangements ending with or within the same calendar year shall be treated as a single plan or arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Regulations of Code § 401(m).

4.7.4 Plans using different testing methods for the ACP and ADP test . Except as otherwise provided in this Section 4.7.4, the Plan may use the current year testing method or prior year testing method for the ACP Test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the ADP Test for that Plan Year. However, if different testing methods are used, then the Plan cannot use:

(a) The recharacterization method of Regulation § 1.401(k)-2(b)(3) to correct excess contributions for a Plan Year;

(b) The rules of Regulation § 1.401(m)-2(a)(6)(ii) to take Salary Deferral Contributions into account under the ACP Test (rather than the ADP Test); or

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(c) The rules of Regulation § 1.401(k)-2(a)(6) to take Qualified Matching Contributions into account under the ADP Test (rather than the ACP Test).

4.7.5 Targeted Contribution Limit . If the Plan provides for Qualified Nonelective Contributions (as defined in Regulation § 1.401(k)-(6), such contributions cannot be taken into account in determining the "actual deferral ratio" (hereinafter referred to in this Article 4 as an ADR) for a Plan Year for an NHCE to the extent such contributions exceed the product of that NHCE’s Code § 414(s) compensation and the greater of five percent (5%) or two (2) times the Plan’s “representative contribution rate.” Any Qualified Nonelective Contribution taken into account under an ACP Test under Regulation § 1.401(m)-2(a)(6) (including the determination of the “representative contribution rate” under this Section). For purposes of this Section 4.7.5:

(c) The Plan’s “representative contribution rate” is the lowest “applicable contribution rate” of any eligible NHCE among a group of eligible NHCEs that consists of half of all eligible NHCEs for the Plan Year (or, if greater, the lowest “applicable contribution rate” of any eligible NHCE who is in the group of all eligible NHCEs for the Plan Year and who is employed by the Employer on the last day of the Plan Year); and

(d) The “applicable contribution rate” for an eligible NHCE is the sum of the Qualified Matching Contributions (as defined in Regulation § 1.401(k)-6) taken into account in determining the ADR for the eligible NHCE for the Plan Year and the Qualified Nonelective Contributions made for the eligible NHCE for the Plan Year, divided by the eligible NHCE’s Code § 414(s) compensation for the same period.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for a Plan Year for an NHCE to the extent such contributions do not exceed 10 percent (10%) of that NHCE’s Code § 414(s) compensation.

Qualified Matching Contributions may only be used to calculate an ADR to the extent that such Qualified Matching Contributions are matching contributions that are not precluded from being taken into account under the ACP test for the Plan Year under the rules of Regulation § 1.401(m)-2(a)(5)(ii) as set forth in Section 4.5.

4.7.6 Limitation on QNECs and QMACs . If provided for in the Plan, Qualified Nonelective Contributions and Qualified Matching Contributions cannot be taken into account to determine an ADR to the extent such contributions are taken into account for purposes of satisfying any other ADP Test, any ACP Test, or the requirements of Regulation §§ 1.401(k)-3, 1.401(m)-3, or 1.401(k)-4. Thus, for example, matching contributions that are made pursuant to Regulation § 1.401(k)-3(c), Qualified Nonelective Contributions that

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are taken into account under the current year testing method for a year may not be taken into account under the prior year testing method for the next year.

4.7.7 ADR of HCE if multiple plans . The ADR of any Participant who is an HCE for the Plan Year and who is eligible to have Salary Deferral Contributions (as defined in Regulation § 1.401(k)-6) (and Qualified Nonelective Contributions and/or Qualified Matching Contributions, if treated as Salary Deferral Contributions for purposes of the ADP Test) allocated to such Participant’s accounts under two (2) or more cash or deferred arrangements described in Code § 401(k), that are maintained by the same Employer, shall be determined as if such Salary Deferral Contributions (and, if applicable, such Qualified Nonelective Contributions and/or Qualified Matching Contributions) were made under a single arrangement. If an HCE participates in two or more cash or deferred arrangements of the Employer that have different Plan Years, then all Salary Deferral Contributions made during the Plan Year being tested under all such cash or deferred arrangements shall be aggregated, without regard to the plan years of the other plans. However, for Plan Years beginning before the effective date of this Amendment, if the plans have different Plan Years, then all such cash or deferred arrangements ending with or within the same calendar year shall be treated as a single cash or deferred arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Regulations of Code § 401(k).

4.7.8 Plans using different testing methods for the ADP and ACP Test . Except as otherwise provided in this Section, the Plan may use the current year testing method or prior year testing method for the ADP Test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the ACP Test for that Plan Year. However, if different testing methods are used, then the Plan cannot use:

(e) The recharacterization method of Regulation § 1.401(m)-2(a)(6)(ii) to correct excess contributions for a Plan Year;

(f) The rules of Regulation § 1.401(m)-2(a)(6)(ii) to take Salary Deferral Contributions into account under the ACP Test (rather than the ADP Test); or

(g) The rules of Regulation § 1.401(k)-2(a)(6)(v) to take Qualified Matching Contributions into account under the ADP Test (rather than the ACP Test).

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ARTICLE 5
VESTING

Section 5.1 Determination of Vesting

5.1.7 A Participant shall at all times have a vested percentage of 100% in the Account Balance of his Participant Contributions Account. A Participant shall at all times be fully vested and have a nonforfeitable interest in the balance of his Salary Deferral and Rollover Accounts, including amounts contributed to his Salary Deferral Account as Fail-Safe Contributions. Salary Deferral Contributions are always fully vested and nonforfeitable. The Plan shall disregard Salary Deferral Contributions in applying the vesting provisions of the Plan to other contributions or benefits under Code § 411(a)(2). However, the Plan shall otherwise take a Participant’s Salary Deferral Contributions into account in determining the Participant’s vested benefits under the Plan. Thus, for example, the Plan shall take Salary Deferral Contributions into account in determining whether a Participant has a nonforfeitable right to contributions under the Plan for purposes of forfeitures, and for applying provisions permitting the repayment of distributions to have forfeited amounts restored, and the provisions of Code §§ 410(a)(5)(D)(iii) and 411(a)(6)(D)(iii) permitting a plan to disregard certain service completed prior to breaks-in-service (sometimes referred to as “the rule of parity”).

5.1.8 A Participant whose Employment terminates either because of his death or Disability or upon or after attaining Early Retirement Age or Normal Retirement Age shall have a vested percentage of 100% in the Account Balance of his Matching Contributions and Employer Contributions Accounts.

5.1.9 The vested percentage of a Participant in the Account Balance of his Matching Contributions Account and Employer Contributions Account shall be determined in accordance with the following schedule:

Completed Years of Vested

Vesting Service Percentage

less than 2 0%

2 but less than 3 20%

3 but less than 4 40%

4 but less than 5 60%

5 but less than 6 80%

6 or more 100%

5.1.10 The vested percentage of a Participant's Account Balance in his Safe Harbor Matching Contributions Account shall be determined in accordance with the following schedule:

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2-Year Cliff Vesting Schedule



less than 2 Years of completed Vesting Service	0%
2 or more Years of completed Vesting Service	100%

Section 5.2 Rules for Crediting Vesting Service

5.2.4 Subject to Sections 5.2.2 through 5.2.5 below, a Participant's Vesting Service shall mean the sum of a Participant's Years of Service under the Plan.

5.2.5 If an Employee is on an authorized unpaid leave of absence granted by his Employer in accordance with standard personnel policies of such Employer applied in a non-discriminatory manner to all Employees similarly situated, his period of absence shall not be considered a One Year Break in Service and shall be counted as Vesting Service upon his return to active Employment.

5.2.6 If an Employee is on an authorized military leave while his reemployment rights are protected by law and provided that he directly entered military service from his Employer's service and shall not have voluntarily reenlisted after the date of first entering active military service, his period of absence shall not be considered a One Year Break in Service and shall be counted as Vesting Service upon his return to active Employment.

5.2.7 An Employee who terminates Employment with no vested percentage in the Account Balance of his Matching Contributions and Employer Contributions Accounts shall, if he returns to Employment, have no credit for Vesting Service prior to such termination of Employment if the total of his consecutive One Year Breaks in Service immediately preceding his reemployment exceeds the greater of 5 years or his aggregate years of Vesting Service prior to such termination (whether or not consecutive, but excluding Vesting Service previously disregarded under this rule). A Participant who had a Partially Vested Separation and returns to Employment will retain credit for his prior years of Vesting Service.

5.2.8 Vesting Service of an Employee reemployed following five or more One Year Breaks in Service (or one or more One Year Breaks in Service for years prior to January 1, 1985) shall not be counted for the purpose of computing his vested percentage in his Matching Contributions and Employer Contributions Accounts derived from contributions accrued prior to his termination of Employment. Separate records shall be maintained reflecting the Participant's vested percentage in such Account attributable to service prior to terminating Employment and reflecting the Participant's vested percentage in that Account attributable to service after reemployment.

Section 5.3 Account Forfeitures

5.3.2 Upon the Non-Vested Separation or Partially Vested Separation of a Participant, the non-vested portion of his Matching or Employer Contributions Account will

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be treated as a Forfeiture as of the earlier of: (i) the date on which the Participant completes five One Year Breaks in Service; or (ii), the distribution of the Participant's vested Account Balance. Such Forfeitures shall be applied toward the reduction of the Matching Contributions. In the case of a Non-Vested Separation, the Participant shall be deemed to have received a distribution of his vested Account Balance (that is, distribution of an amount equal to zero) as of the date of his termination of Employment.

5.3.3 Amounts forfeited pursuant to Section 5.3.1 (unadjusted by any subsequent gains or losses) shall be restored if the Participant returns to the service of the Employer and repays the full amount of the distribution before the earlier of (i) five years after the Participant's Employment recommencement date, or (ii), the close of the first period of five consecutive One Year Breaks in Service after the distribution. A Participant who returns to Employment following a Non-Vested Separation shall be deemed as of his Employment recommencement date to have repaid the full amount of his distribution. The restored amount shall be derived from amounts forfeited and, if such Forfeitures are not sufficient, from a contribution by the Employer, as appropriate, made as of that date.

5.3.4 With respect to any Forfeiture of the non-vested interest in a Participant's sub-account that contains the Safe Harbor Matching Contribution of Section 3.9, the Administrator may elect to use all or any portion of the Forfeitures to pay administrative expenses incurred by the Plan. Forfeitures that are not used to pay administrative expenses will be used first to restore previous Forfeitures of Participants' accounts as necessary and permitted pursuant to the provisions of the Plan. Forfeitures that are not used to pay administrative expenses and are not used to satisfy the provisions of the previous sentence will then be allocated/used to reduce the Safe Harbor Matching Contribution in Section 3.9.

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ARTICLE 6
INVESTMENT OF CONTRIBUTIONS; MANAGEMENT OF ACCOUNTS

Section 6.1 Initial Investment Election .

Prior to the date an Eligible Employee is first eligible to become a Participant under Section 2.1, the Administrator will inform him of the Investments available under the Plan for investment of Accounts and will make available to him information for each Investment. Subject to Section 3.6, at least ten days prior to the date an Eligible Employee becomes a Participant hereunder, he must make an initial investment election which will apply to the investment of his Salary Deferral Contributions and Matching Contributions made with respect to him. Investment elections shall be made in whole percentages. The election of Investments is the sole responsibility of each Participant, and no Employer or representative of the Employer including the Administrator is authorized to make any recommendation to the Participant with respect thereto.

Contributions to be invested in Investment Company Shares will be so invested and credited to the Account of a Participant as soon as is practicable following the deposit of such contributions in the Trust Fund. Contributions to be invested in Company Stock will be invested in the Company Stock Account and credited to the Account of a Participant as soon as is practicable following the deposit of such contributions in the Trust Fund.

Section 6.2 Change in Investment Election for Contributions .

Pursuant to a nondiscriminatory policy established by the Administrator and communicated to Participants, a Participant may elect to change his investment election with respect to the investment of Salary Deferral Contributions, Matching Contributions, Participant Contributions, and Employer Contributions. Such changes shall be made in whole percentages, and shall take effect as soon as is practicable following or as of the date on which such change is made.

Section 6.3 Transfer of Investment Accounts .

Pursuant to a nondiscriminatory policy established by the Administrator and communicated to Participants, a Participant may elect to transfer in any whole percentage the value of an investment in his Participant Contributions Account and Employer Contributions Account from one Investment to another Investment. Such transfers shall take effect as soon as practicable following or as of the date on which such election is made, and shall be based upon the value of units or shares of the applicable Investments of the Participant as of the date on which such units or shares are bought or sold in order to effectuate the investment transfer.

Section 6.4 Reinvestment .

6.4.5 All dividends and capital gains or other distributions received on the Investment Company Shares held for each Participant's Account will (unless received in additional Investment Company Shares) be reinvested in full and fractional shares of the same Investment Company at a price determined in accordance with the then current prospectus of the Investment Company.

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6.4.6 All dividends, interest and other distributions received on assets of the Company Stock Account held for each Participant's account will (unless received in additional Company Stock) be reinvested in full and fractional shares of the same investment in the Company Stock Account except to the extent needed to meet the liquidity need of the Company Stock Account.

Shares of Class A common stock of Waddell & Reed Financial, Inc. will be maintained in a separate account under the Plan designated the W&R Class A Financial Stock Account. Any cash dividends received on such shares held in such account will be retained as cash or cash equivalents in the applicable account to the extent needed to meet the liquidity needs of the account and, to the extent not so needed, invested in additional shares of common stock of Waddell & Reed Financial, Inc.

Section 6.5 Voting of Shares of Investments .

Subject to any requirements of applicable law, the Administrator will deliver to each Participant copies of any notices of shareholders' meetings, proxies and proxy-soliciting materials, prospectuses and the annual and other reports to shareholders which have been received with respect to the Company Stock and shares of Class A common stock of Waddell & Reed, Inc. held by the Trustee for the account of the Participant.

Each Participant may direct the Administrator to direct the Trustee to vote the Company Stock or shares of Class A common stock of Waddell & Reed Financial, Inc. held by the Trustee under the Plan for his Account with respect to matters to be voted upon by the shareholders of such Investment. The Participant's directions must be in writing, on a form approved by the Administrator, and delivered to the Administrator within the time prescribed by it. With respect to shares of Investments for which the Administrator receives no written directions from the Participants, the Administrator will direct the Trustee to vote such shares in the same proportion as the shares instructed by the Participants.

Section 6.6 Valuation of Accounts .

A Participant's Accounts shall be revalued at fair market value on the last business day of each Plan Year and at such other times as the Administrator determines. On such date, the Administrator will determine the current value of the Investments held for each Participant's Employer Contributions Account and Participant Contributions Account and report the same in writing to the Participant.

All allocations to a Participant's Account shall be made in shares or units of one or more Investments, and all cash receipts allocable to the Account of a Participant, except to the extent needed to meet Plan liquidity needs, shall be used to purchase shares or units of an Investment in accordance with the Participant's current investment election. The value of units or shares allocated to a Participant's Account shall be determined by the fair market value of shares or units allocated to such Participant's Account as of the date on which shares are purchased or sold to provide for distributions, withdrawals, or transfers between Investments. All withdrawals and distributions

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under the Plan shall be based upon the amount realized from the liquidation of units or shares credited to the Account of a Participant.

Section 6.7 Distributions or Withdrawals .

If the Administrator receives a request for withdrawal or distribution of an Investment out of Investment Company Shares, the withdrawal or distribution will be effected by redeeming the requested amount from the Investment Company as soon as is practicable following or as of the date of receipt of the request.

If the Administrator receives a request for withdrawal or distribution of an Investment out of the Company Stock Account, the withdrawal or distribution will be effected by redeeming the number of units the Participant has in the Company Stock Account for cash or, if a withdrawal or distribution in kind is requested, by distributing the required number of shares of Company Stock. Such withdrawal or distribution will be processed as soon as is practicable following or as of the date on which the Participant's request is received, and shall be based upon the value of the units in the Company Stock Account as the date on which the request is processed.

If the Administrator receives a request for withdrawal or distribution of an Investment out of the W&R Class A Financial Stock Account, the withdrawal or distribution will be effected by redeeming the number of units the Participant has in the W&R Class A Financial Stock Account for cash or, if a withdrawal or distribution in kind is requested, by distributing the required number of shares of Class A common stock of Waddell & Reed Financial, Inc. (as the case may be). Such withdrawal or distribution will be processed as soon as is practicable following or as of the date on which the Participant's request is received, and shall be based upon the value of the units in the W&R Class A Financial Stock Account as the date on which the request is processed.

Section 6.8 Insider Trading Restrictions .

If a Participant is an officer, director, or a ten percent (10%) shareholder of the Employer within the scope of § 16 of the Securities Exchange Act of 1934, any election by the Participant to purchase or sell units of the Company Stock shall not become effective unless and until appropriate advance notice is given to the Administrator and the Administrator has authorized the transaction.

Section 6.9 Tender of Company Stock or W&R Class A or Class B Financial Stock .

6.9.2 The Trustee may not take any action in response to a tender offer except as otherwise provided in this Section 6.9. Each Participant may direct the Trustee to sell, offer to sell, exchange, or otherwise dispose of the Company Stock or W&R Class A Financial Stock allocated to such Participant's Company Stock Account or W&R Class A Financial Stock Account in accordance with the provisions, conditions and terms of such tender offer and the provisions of this Section 6.9.

6.9.3 The Trustee shall sell, offer to sell, exchange, or otherwise dispose of the Company Stock allocated to the Participant's Company Stock Account or W&R Class A

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Financial Stock allocated to the Participant's W&R Class A Financial Stock Account with respect to which it has received directions to do so under this Section 6.9 from Participants.

6.9.4 To the extent that Participants do not instruct the Trustee or do not issue valid directions to the Trustee to sell, offer to sell, exchange, or otherwise dispose of shares of Company Stock or W&R Class A Financial Stock allocated to such Participants' Accounts, such Participants shall be deemed to have directed that such shares remain invested in Company Stock or W&R Class A Financial Stock.

Section 6.10 Divestment of Employer Securities .

6.10.2 Rule applicable to Salary Deferral Contributions and Participant Contributions. If any portion of the Account of a Participant (including, for purposes of Section 6.10, a Beneficiary entitled to exercise the rights of a Participant) attributable to Salary Deferral Contributions or Participant Contributions is invested in publicly-traded Employer securities, the Participant may elect to direct the Plan to divest any such securities, and to reinvest an equivalent amount in other investment options which satisfy the requirements of Section 6.10.3.

6.10.3 Rule applicable to Employer contributions . If any portion of a Participant’s account attributable to nonelective or matching contributions is invested in publicly-traded Employer securities, then a Participant who has completed at least 3 years of vesting service, or a Beneficiary of any deceased Participant entitled to exercise the right of a Participant, may elect to direct the Plan to divest any such securities, and to reinvest an equivalent amount in other investment options which satisfy the requirements of Section 6.10.3.

(h) Three-year phase-in applicable to Employer contributions. For Employer securities acquired with nonelective or matching contributions during a Plan Year beginning before January 1, 2007, the rule described in this Section 6.10.2 only applies to the percentage of the Employer securities (applied separately for each class of securities) as follows:



Plan Year	Percentage

2007	33
2008	66
2009	100

(i) Exception to phase-in for certain age 55 Participants. The 3-year phase-in rule of Section 6.10.2(a) does not apply to a Participant who has attained age 55 and who has completed at least 3 years of service before January 1, 2006.

6.10.4 Investment options. For purposes of Section 6.10, other investment options must include not less than 3 investment options, other than Employer securities, to which the Participant may direct the proceeds of divestment of Employer securities required by

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Section 6.10, each of which options is diversified and has materially different risk and return characteristics. The Plan must provide reasonable divestment and reinvestment opportunities at least quarterly. Except as provided in regulations, the Plan may not impose restrictions or conditions on the investment of Employer securities which the Plan does not impose on the investment of other Plan assets, other than restrictions or conditions imposed by reason of the application of securities laws or a condition permitted under IRS Notice 2006-107 or other applicable guidance.

6.10.5 Treatment as publicly traded Employer securities. Except as provided in Treasury Regulations or in Code §401(a)(35)(F)(ii) (relating to certain controlled groups), a plan holding Employer securities which are not publicly traded Employer securities is treated as holding publicly traded Employer securities if any Employer corporation, or any member of a controlled group of corporations which includes such Employer corporation (as defined in Code §401(a)(35)(F)(iii)) has issued a class of stock which is a publicly traded Employer security.

Section 6.11 Black Out Period .

Effective as of November 28, 2011, there shall be a black out period during which, notwithstanding anything in the Plan to the contrary, there shall not be allowed any transfers to or between Investment Funds or withdrawals, loans or distributions of benefits, with respect to the Merged Profit Sharing Accounts. The black out period shall last as long as necessary to complete the consolidation of record keeping functions and transfer of assets and liabilities in connection with the merger of the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company with and into the Plan

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ARTICLE 7
AMOUNT AND PAYMENT OF BENEFITS TO PARTICIPANTS

Section 7.1 Fully Vested Separation .

A Participant's benefits upon his Fully Vested Separation shall be the Account Balance of his Accounts determined as of the date on which shares or units of Investments allocated to his Accounts are sold or liquidated in order to process the Participant's distribution.

Section 7.2 Partially Vested Separation .

A Participant's benefits upon his Partially Vested Separation shall be the sum of:

(e) The Account Balance of his Matching Contributions Account and Employer Contributions Account determined as of the date on which shares or units of Investments allocated to his Account are sold or liquidated in order to process the Participant's distribution, multiplied by his vested percentage, determined pursuant to Section 5.1.3; plus

(f) The Account Balance of his Salary Deferrals Account, Rollover Account and Participant Contributions Account as of the same date specified in clause (a).

Section 7.3 Non-Vested Separation .

A Participant's benefits upon his Non-Vested Separation shall be the Account Balance of his Salary Deferrals Account, Participant Contributions Account, and Rollover Account determined as of the date on which shares or units of Investments allocated to such Account are sold or liquidated in order to process the Participant's distribution.

Section 7.4 Benefit Commencement Date .

7.4.9 Payment of Benefits .

(a) Severance of Employment due to Retirement, Death, or Disability . A Participant who experiences a severance of employment due to retirement after attainment of Normal Retirement Age, Early Retirement Age or Disability shall be fully vested in his Account Balance and entitled to receive his vested Account Balance in accordance with the provisions of the Plan. A Participant who dies while employed by the Employer shall be fully vested in his Account Balance and the Participant’s Beneficiary shall be entitled to receive the deceased Participant’s vested Account Balance in accordance with the provisions of the Plan.

(b) Severance of Employment for Reason Other than Retirement, Death, or Disability . A Participant who experiences a severance of employment for any reason other than retirement after the attainment of Normal Retirement Age, Early Retirement Age, Death or Disability shall receive his vested Account Balance on or

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after his Normal Retirement Age in accordance with ARTICLE 8 below; provided, however, that such Participant may elect in writing to receive his vested Account Balance as soon as is practicable following his or her termination of employment.

(c) Cashouts . Notwithstanding the foregoing, the Administrator shall direct the settlement of any Participant’s Account in a single sum payment if the Participant’s vested Account Balance is $1,000 or less.

7.4.10 The following provisions shall apply to all amounts attributable to pre-January 1, 2007 contributions held in a Participant’s Participant Contributions and Employer Contributions Accounts. Except as provided in or by operation of this ARTICLE 7, a Participant's Benefit Commencement Date shall be as soon as practicable after the first to occur of:

(a) The date the Participant properly requests such distribution to commence after the Participant's severance of employment with the Employer and all Affiliates provided, however, any such request by a Participant shall not be valid unless the Participant is furnished with a written explanation of his right to defer the commencement of the benefit payment;

(b) The date the Participant properly requests such distribution to commence following the incurrence of a Disability;

(c) The 60th day after the close of the Plan Year in which the Participant attains Normal Retirement Age or, if later, when he terminates Employment with the Employer and all Affiliates, unless the Participant has requested to defer the distribution to a later date; or

(d) The April 1 following the calendar year in which the Participant attains age 70½; provided, however, that:

(i) In the case of a Participant who was born prior to July 1, 1917 and at no time during a Plan Year ending in or after the calendar year in which he attains age 66½ was a Five-percent Owner of the Employer within the meaning of Code § 416(i)(1), such date shall be the April 1 following the later of (A) the calendar year during which he attains age 70½, or (B) the calendar year in which the Participant retires; and

(ii) In the case of a Participant who was born prior to July 1, 1917 and at any time during a Plan Year ending in or after the calendar year in which he attains age 66½, was a Five-percent Owner of the Employer within the meaning of Code § 416, such date shall be the April 1 following the later of (A) the calendar year during which he attained age 70½, or (B) the earlier of (1) the calendar year ending in the Plan Year during which he first became a Five-percent Owner, or (2) the calendar year in which the Participant retires; and

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(iii) In the case of a Participant who is not a Five-percent Owner with respect to the Plan Year ending in the calendar year in which the Participant attains age 70½, such date shall be April 1 following the later of (A) the calendar year during which the Participant attained age 70½, or (B), the calendar year in which the Participant retired.

7.4.11 If the value of a Participant's Account exceeds $1,000 at the time of any distribution, the Participant (and, if applicable, his Spouse) must consent in a written election filed with the Administrator, to any distribution before the Participant's attainment of Normal Retirement Age. Notwithstanding anything in this Article to the contrary, the Administrator may direct the Trustee to distribute to the Participant the distributable balance of the Participant's Account as soon as practicable without such Participant's written consent if, at the time of distribution, the value of the Participant's Account does not exceed $1,000.

7.4.12 In no event shall the amount distributable in any year be less than the amount determined in accordance with the minimum distribution incidental benefit requirements of Treasury Regulation § 1.401(a)(9)-2.

Section 7.5 Participant Account Withdrawals . In accordance with such rules and procedures as the Administrator may prescribe, a Participant may withdraw his Participant Contributions, in the order set forth in paragraphs (a) and (b) below by giving written notice to the Administrator of intention to so withdraw on a form prescribed or approved by the Administrator. Each Participant may make no more than two (2) such withdrawals in any calendar year. All such withdrawals will be made in accordance with Section 8.1 and Section 8.2. Notwithstanding the foregoing, a married Participant shall not withdraw any amount of Participant Contributions without obtaining the Consent of his Spouse within the 180-day period ending on the date the withdrawal is made.

(d) Withdrawal of Pre-1987 Participant Contributions. A Participant may withdraw from his Participant Contributions Account under this paragraph (a) an amount up to the total amount of his Participant Contributions made prior to January 1, 1987, less any previous withdrawals; provided, however, the amount of such withdrawal under this paragraph (a) cannot be less than $500 (or, if less, the amount of his pre 1987 Participant Contributions);

(e) Withdrawal of Post-1986 Participant Contributions. A Participant who is withdrawing the maximum amount permitted under (a) above may also withdraw from his Participant Contributions Account under this paragraph (b) an amount up to the total amount of his post 1986 Participant Contributions plus earnings less any previous withdrawals; provided, however, the amount of such withdrawal under this paragraph (b) cannot be less than $500 (or, if less, the amount of his post 1986 Participant Contributions and earnings).

Section 7.6 Employer Contributions Account Withdrawal . A Participant who (i) is 100% vested in his Employer Contributions Account and (ii) is withdrawing the entire balance of his Participant Contributions Account in accordance with Section 7.5 may, at the same time as the

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withdrawal under Section 7.5, withdraw an amount up to the total value of his Employer Contributions Account (but not less than $500 unless the value of his Employer Contributions Account is less than $500) by giving prior written notice to the Administrator of his intention to so withdraw on a form prescribed or approved by the Administrator. The right of a Participant withdrawing Employer Contributions under this Section 7.6 to make further Participant Contributions under the Plan will be suspended for a period of six months from the date of his last withdrawal. Notwithstanding the foregoing, a married Participant shall not withdraw any amount of Employer Contributions without obtaining the written, notarized consent of his Spouse within the 180-day period ending on the date the withdrawal is made. Withdrawals shall be processed by reducing all of the Participant's Investments in his Employer Contributions Account by the pro-rata amount needed to fund the withdrawal.

Section 7.7 Age 59½ Distributions . At such time as a Participant shall have attained the age of 59½ years, the Administrator, at the election of the Participant who has not severed employment with the Employer, shall direct the Trustee to distribute all or a portion of the vested amount then credited to the Accounts maintained on behalf of the Participant. In the event that the Administrator makes such a distribution, the Participant shall continue to be eligible to participate in the Plan on the same basis as any other Employee. Any distribution made pursuant to this Section shall be made in a manner consistent with the other provisions of the Plan including, but not limited to, all notice and consent requirements of Code §§ 417 and 411(a)(11) and the Regulations thereunder.

Section 7.8 Withdrawals of Rollover Contributions . A Participant who has made a Rollover Contribution to the Plan, no more frequently than twice per Plan Year, may make in-service withdrawals of amounts credited to his Rollover Contributions Account.

Section 7.9 TEFRA Section 242(b)(2) Elections . Notwithstanding the other provisions of this Plan, distributions may be made under a designation made before January 1, 1984, in accordance with § 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to § 242(b)(2) of TEFRA.

Section 7.10 Required Minimum Distributions . Notwithstanding any provision of this Article or Plan to the contrary, all distributions under the Plan will proceed at least as rapidly as the following:

7.10.1 Required Beginning Date . The Participant’s entire interest will be distributed or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

7.10.2 Death of Participant Before Distributions Begin . If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(j) If the Participant’s Surviving Spouse is the Participant’s sole Designated Beneficiary, then, except as provided in paragraph (e) below, distributions to the Participant will begin by December 31 of the calendar year

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immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained 70½, if later.

(k) If the Participant’s Surviving Spouse is not the Participant’s sole Designated Beneficiary, then, except as provided in paragraph (e) below, distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(l) If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(m) If the Participant’s Surviving Spouse is the Participant’s sole Designated Beneficiary and the Surviving Spouse dies after the Participant but before distributions to the Surviving Spouse begin, this Section 7.10.2, other than Section 7.10.2(a), will apply as if the Surviving Spouse were the Participant.

For purposes of this Section 7.10.2 and Section 7.12, unless Section 7.10.2(d) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If Section 7.10.2(d) applies, distributions are considered to begin on the date distributions are required to begin to the Surviving Spouse under Section 7.10.2(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s Surviving Spouse before the date distributions are required to begin to the Surviving Spouse under Section 7.10.2(a)), the date distributions are considered to begin is the date distributions actually commence.

(n) Participants or beneficiaries may elect on an individual basis whether the 5-year rule or the life expectancy rule in Sections 7.10.2 and 7.12.2 of the Plan applies to distributions after the death of a Participant who has a designated Beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under Section 7.10.2 of the Plan, or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, the Surviving Spouse’s) death. If neither the Participant nor Beneficiary makes an election under this paragraph, distributions will be made in accordance with Sections 7.10.2 and 7.12.2 of the Plan and, if applicable the elections in Section 7.10 above.

7.10.3 Forms of Distribution . Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with Section 7.11 and Section 7.12 of the Plan. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company,

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distributions thereunder will be made in accordance with the requirements of Code § 401(a)(9) and the Treasury Regulations.

Section 7.11 Required Minimum Distributions During Participant’s Lifetime .

7.11.2 Amount of Required Minimum Distribution For Each Distribution Calendar Year . During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:

(d) The quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in § 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

(e) If the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s Spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in § 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and Spouse’s attained ages as of the Participant’s and Spouse’s birthdays in the Distribution Calendar Year.

7.11.3 Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death . Required minimum distributions will be determined under this Section 7.11 beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant’s date of death.

Section 7.12 Required Minimum Distributions After Participant’s Death .

7.12.1 Death On or After Date Distributions Begin .

(f) Participant Survived by Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as follows:

(iii) The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(iv) If the Participant’s Surviving Spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the Surviving Spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the Surviving Spouse’s age as of the Spouse’s

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birthday in that year. For Distribution Calendar Years after the year of the Surviving Spouse’s death, the remaining Life Expectancy of the Surviving Spouse is calculated using the age of the Surviving Spouse as of the Spouse’s birthday in the calendar year of the Spouse’s death, reduced by one for each subsequent calendar year.

(v) If the Participant’s Surviving Spouse is not the Participant’s sole Designated Beneficiary, the designated Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(g) No Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Distribution Calendar Year after the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

7.12.2 Death Before Date Distributions Begin .

(e) Participant Survived by Designated Beneficiary . Except as provided in Section 7.10.2(e) of the Plan, if the Participant dies before the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as provided in Section 7.12.1.

(f) No Designated Beneficiary . If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(g) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin . If the Participant dies before the date distributions begin, the Participant’s Surviving Spouse is the Participant’s sole Designated Beneficiary, and the Surviving Spouse dies before distributions are required to begin to the Surviving Spouse under Section 7.10.2(a), this Section 7.12.2 will apply as if the Surviving Spouse were the Participant.

Section 7.13 Definitions for Sections 7.10 through 7.14 .

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7.13.1 Designated Beneficiary . The individual who is designated as the Beneficiary under the Plan and is the designated Beneficiary under Code § 401(a)(9) and § 1.401(a)(9)-1, Q&A-4 of the Treasury Regulations.

7.13.2 Distribution Calendar Year . A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section 7.11. The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

7.13.3 Life Expectancy . Life Expectancy as computed by use of the Single Life Table in § 1.401(a)(9)-9 of the Treasury Regulations.

7.13.4 Participant’s Account Balance . The Account Balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account Balance as of dates in the valuation calendar year after the valuation date. The Account Balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

7.13.5 Required beginning date . The date specified in Section 7.4.2 of the Plan.

Section 7.14 2009 RMD Suspension . Notwithstanding the foregoing provisions of Sections 7.10 through 7.13, a Participant or Beneficiary who would have been required to receive required minimum distributions for 2009 but for the enactment of Code § 401(a)(9)(H) ("2009 RMDs"), and who would have satisfied that requirement by receiving distributions that are (i) equal to the 2009 RMDs or (ii) one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life (or Life Expectancy) of the Participant, the joint lives (or joint Life Expectancy) of the Participant and the Participant's Designated Beneficiary, or for a period of at least 10 years ("Extended 2009 RMDs"), will not receive those distributions for 2009 unless the Participant or Beneficiary chooses to receive such distributions. Participants and Beneficiaries described in the preceding sentence will be given the opportunity to elect to receive the distributions described in the preceding sentence. In addition, and solely for purposes of applying the direct rollover provisions of the Plan, distributions of 2009 RMDs and Extended 2009 RMDs will be treated as Eligible Rollover Distributions. This Section 7.14 is effective January 1, 2009 for the Plan and the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company.

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ARTICLE 8
FORMS OF PAYMENT OF ACCOUNTS

Section 8.1 Methods of Distribution .

8.1.2 A Participant's benefits shall be payable in the normal form of a Qualified Joint and Survivor Annuity (under an Annuity Contract purchased with the aggregate Account Balance of the Participant's Account at the Benefit Commencement Date) if the Participant is married on his Benefit Commencement Date and in the normal form of a life annuity with payments guaranteed for 120 months (under an Annuity Contract purchased with the aggregate Account Balance of the Participant's Accounts at the Benefit Commencement Date) if the Participant is not married on that date, provided that a Participant may at any time prior to the Benefit Commencement Date elect, in accordance with Section 8.2, any of the following optional forms of benefit payment instead of the normal form:

(g) A lump sum in cash or in kind; or

(h) An annuity (under an Annuity Contract purchased with the aggregate Account Balance of the Participant's Account at the Benefit Commencement Date) of the type described in Section 8.1.2.

Anything in this Section 8.1.1 to the contrary notwithstanding, if the nonforfeitable Account Balance of a terminated Participant shall be equal to or less than $1,000 when the amount thereof is first determined, the entire amount shall be distributed in a lump sum as promptly as possible. The value of a Participant’s nonforfeitable account balance shall be determined without regard to that portion of the account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Code §§ 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).

8.1.3 For purposes of Section 8.1.1(b), the optional annuity form may be any one of the following:

(f) A single life annuity, under which equal or substantially equal monthly installments are paid to the Participant during his lifetime, with no further payments to anyone after his death.

(g) An annuity under which equal or substantially equal monthly installments are paid to the Participant during his lifetime, with payment of monthly installments guaranteed for a period selected by the Participant which may be either 60, 120, 180, 240 or 300 months.

(h) An annuity under which equal or substantially equal annual, semi-annual, quarterly or monthly installments are paid in an amount specified in the election until the net sum payable with interest thereon at the rate of 3% per annum and such additional interest, if any, as may be declared under the Annuity Contract

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is exhausted. Any balance remaining at the end of twenty-five years shall be paid in a lump sum.

(i) An annuity under which equal or substantially equal annual, semi-annual, quarterly or monthly installments, except for any excess interest, are paid for a fixed period not exceeding twenty-five years. Such amounts shall include interest on the unpaid balance at a rate (not less than 3% per annum) declared annually under the Annuity Contract.

(j) An annuity under which equal or substantially equal monthly installments are paid to the Participant during his lifetime with such payments continuing during the lifetime of a contingent annuitant if the contingent annuitant survives the Participant.

(k) An annuity under which equal or substantially equal monthly installments are paid for the longer of the lifetime of the Participant, the lifetime of a contingent annuitant or a guaranteed period selected by the Participant. The period may be either 60, 120, 180, 240 or 300 months.

(l) An annuity under which equal or substantially equal monthly installments are paid for the Participant so long as both the Participant and a contingent annuitant shall live. Upon the death of the first of them to die the amount of each installment shall be reduced to two-thirds of the amount previously paid, and such reduced installments shall be paid to the survivor for his lifetime.

(m) An annuity under which equal or substantially equal monthly installments are paid for the longer of the period during which both the Participant and a contingent annuitant shall live or a guaranteed period selected by the Participant. The guaranteed period may be either 60, 120, 180, 240 or 300 months. Upon the later of (i) the death of the first to die of the Participant or the contingent annuitant or (ii) the expiration of the guaranteed period, if one of them is then living the amount of each installment shall be reduced to two-thirds of the amount previously paid and such reduced installments shall be paid to the survivor for his lifetime.

(n) A qualified optional survivor annuity which is an annuity:

(vi) For the life of the Participant with a survivor annuity for the life of the Spouse which is equal to 75% of the amount of the annuity which is payable during the joint lives of the Participant and the Spouse; and

(vii) Which is the actuarial equivalent of a single annuity for the life of the Participant.

Such term also includes any annuity in a form having the effect of an annuity described in the preceding sentence.

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(o) Waiver of 30-day waiting period . If a distribution is one to which Code §§ 401(a)(11) and 417 do not apply, such distribution may commence less than 30 days after the notice required under Treasury Regulations § 1.411(a)-11(c) is given, provided that:

(i) The Administrator clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution; and

(ii) The Participant, after receiving the notice, affirmatively elects a distribution.

8.1.4 Notwithstanding Section 8.1.1, the normal form of benefits of a Participant shall be a lump sum and Sections 8.1.1 and 8.2.4 shall not apply unless the Participant (i) is credited with at least one Hour of Service on or after August 23, 1984, or (ii) his interest under this Plan, or under a plan of which this Plan is a continuation, had not been distributed, or distribution thereof had not commenced, prior to August 23, 1984.

Section 8.2 Election of Optional Forms .

8.2.7 By notice to the Administrator within the 180-day period prior to a Participant's Benefit Commencement Date, the Participant may elect, in writing, not to receive the normal form of benefit payment otherwise applicable and to receive instead an optional form of benefit payment provided for in Section 8.1.1.

8.2.8 Within the 180-day period prior to a married Participant's Benefit Commencement Date, but in no event later than the 30-day period prior to a married Participant's Benefit Commencement Date, the Administrator shall provide to each married Participant a written explanation of:

(a) The terms and conditions of the Participant's normal form of benefit payment;

(b) The terms and conditions of the qualified optional survivor annuity;

(d) The rights of the Participant's Spouse under Section 8.2.4; and

(e) The right to make, and the effect of, a revocation of a previous election to waive the normal form of benefit payment.

The Administrator may, on a uniform and nondiscriminatory basis, provide for such other notices, information or election periods or take such other action as the Administrator considers necessary or appropriate so that this Section 8.2 is implemented in such a manner as to comply with Code §§ 401(a)(11) and 417.

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8.2.9 A Participant may revoke his election to take an optional form of benefit, and elect a different form of benefit, at any time prior to the Participant's Benefit Commencement Date.

8.2.10 The election of an optional benefit by a married Participant must also be a waiver of a Qualified Joint and Survivor Annuity by the Participant. A waiver of a Qualified Joint and Survivor Annuity shall not be effective unless: (i) the Participant's Spouse consents in writing; (ii) the Spouse's consent to the waiver is witnessed by a Plan representative or notary public; and (iii) the Spouse's consent acknowledges the effect of the election. Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity will not be effective unless the election designates a form of benefit payment which, if the Participant is married, may not be changed without the Spouse's consent. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, the election will be deemed effective. Any consent necessary under this provision will not be valid with respect to any other Spouse.

8.2.11 The election of an optional form of benefit which contemplates the payment of an annuity shall not be given effect if any person who would receive benefits under the annuity dies before the annuity starting date.

Section 8.3 Change in Form or Timing of Benefit Payments . Subject to the Administrator's consent, any former Employee whose payments are being deferred or who is receiving installment payments may request acceleration or other modification of the form of benefit distribution, provided that any necessary consent to such change required pursuant to Section 8.2.4 is obtained from the former Employee's Spouse.

Section 8.4 Direct Rollovers . A Participant or Spouse may elect to have all or a portion of any amount payable to him or her from the Plan which is an Eligible Rollover Distribution transferred directly to an Eligible Retirement Plan. A Beneficiary of a deceased Participant may elect to have all or a portion of any Eligible Rollover Distribution payable to him or her from the Plan transferred directly to an individual retirement account (as defined in Code § 402(c)(8)(B)(i)) or an individual retirement annuity (as defined in Code § 402(c)(8)(B)(ii)) which was established for the purpose of receiving such a direct rollover. Any such election shall be made in accordance with such uniform rules and procedures as the Administrative Committee may prescribe from time to time as to the timing and manner of the election in accordance with Code § 401(a)(31).

Section 8.5 Hardship Withdrawals . Upon the application by any Participant to the Administrator, accompanied by his or her Spouse's written consent, the Administrator may at any time permit such Participant to withdraw all or a portion of the amounts then credited to his or her Salary Deferral Account, (not including the earnings thereon attributable to the year of the withdrawal or any prior year) if the withdrawal is made on account of financial hardship. A withdrawal is made on account of financial hardship if the withdrawal both (i) is made on account of an immediate and heavy financial need of the Participant and (ii) is necessary to satisfy the financial need. A withdrawal will not be considered made on account of an immediate and heavy financial need unless it is made for one or more of the following purposes:

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(a) Expenses for (or necessary to obtain) medical care that would be deductible under Code § 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income);

(b) Costs directly related to purchase of a principal residence for the Employee (excluding mortgage payments);

(c) Payment of tuition, related educational fees, and room and board expenses, for up to the next twelve (12) months of post-secondary education for the Employee, the Employee’s Spouse, children, or dependents (as defined in Code § 152 without regard to Code §§ 152(b)(1), (b)(2), and (d)(1)(B));

(d) Payments necessary to prevent eviction of the Employee from the Employee’s principal residence or foreclosure on the mortgage on that residence;

(e) Payments for burial or funeral expenses for the Employee’s deceased parent, Spouse, children or dependents (as defined in Code § 152 without regard to Code § 152(d)(1)(B)); or

(f) Expenses for the repair of damage to the Employee’s principal residence that would qualify for the casualty deduction under Code § 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).

8.5.1 Hardship Withdrawal Restrictions . No hardship withdrawal will be permitted unless: (i) the amount of the withdrawal does not exceed the amount of the need (the amount of the need may include any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution); and (ii) the Participant has obtained all distributions, other than hardship distributions, and all nontaxable (at the time of the loan) loans currently available under all plans maintained by the Employer.

If a Participant’s application for a hardship withdrawal is approved, the Administrator shall then instruct the Trustee to make payment of the approved amount of the hardship withdrawal to the Participant.

If the Participant applying for a hardship withdrawal has an outstanding Plan Loan, such hardship withdrawal will be limited to the extent necessary to ensure the Participant’s Loan remains adequately secured under Section 8.6.

8.5.2 Consequences of Hardship Withdrawals .

A Participant who makes a hardship withdrawal is prohibited from making Salary Deferral Contributions or other elective or employee contributions to the Plan or to any other plan of the Employer for at least six (6) months after receipt of the hardship withdrawal. For this purpose “any other plan of the Employer” indicates any qualified or nonqualified plan of deferred compensation maintained by the Employer. The phrase does not include

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any health or welfare benefit plan, including one that is part of a cafeteria plan under Code § 125.

Withdrawals shall be processed by reducing all of the Participant’s Investments by the pro-rata amount needed to fund the withdrawal.

Section 8.6 Loans to Participants . 7.4 p.8-6

8.6.1 The Trustee may, in the Trustee's discretion, make loans to Participants and Beneficiaries under the following circumstances: (i) loans shall be made available to all Participants and Beneficiaries on a reasonably equivalent basis; (ii) loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Participants and Beneficiaries; (iii) loans shall bear a reasonable rate of interest; (iv) loans shall be adequately secured; and (v) loans shall provide for periodic repayment over a reasonable period of time.

8.6.2 Loans made pursuant to this Section 8.6 (when added to the outstanding balance of all other loans made by the Plan to the Participant) will be limited to the lesser of:

(e) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan to the Participant during the one year period ending on the day before the date on which such loan is made, over the outstanding balance of loans from the Plan to the Participant on the date on which such loan was made; or

(f) One‑half (1/2) of the present value of the non‑forfeitable accrued benefit of the Participant under the Plan.

For purposes of this limit, all plans of the Employer shall be considered one plan. Additionally, with respect to any loan made prior to January 1, 1987, the $50,000 limit specified in (a) above shall be unreduced.

8.6.3 Notwithstanding any other provision of this Article, no Participant may take more than one (1) loan per calendar year and no Participant may have more than one (1) loan outstanding at any one time.

8.6.4 Loans shall provide for level amortization with payments to be made not less frequently than quarterly over a period not to exceed five (5) years. Loan repayments may be suspended under this Plan as permitted under Code § 414(u)(4).

8.6.5 Any loan where the vested interest of the Participant is used to secure such loan shall require the written (or such other form as permitted by the Internal Revenue Service) consent of the Participant's Spouse. Such written (or such other form as permitted by the Internal Revenue Service) consent must be obtained within the ninety (90) day period

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prior to the date the loan is made. However, the Spouse's consent shall not be required under this paragraph if the total accrued benefit subject to the security is not in excess of $1,000.

8.6.6 Any loans granted or renewed shall be made pursuant to a Participant loan program. Such loan program shall be established in writing and must include, but need not be limited to, the following:

(h) The identity of the person or positions authorized to administer the Participant loan program;

(i) A procedure for applying for loans;

(j) The basis on which loans will be approved or denied;

(k) Limitations, if any, on the types and amounts of loans offered;

(l) The procedure under the program for determining a reasonable rate of interest;

(m) The types of collateral which may secure a Participant loan; and

(n) The events constituting default and the steps that will be taken to preserve Plan assets.

Such Participant loan program shall be contained in a separate written document which, when properly executed, is hereby incorporated by reference and made a part of the Plan. Furthermore, such Participant loan program may be modified or amended in writing from time to time without the necessity of amending this Section 8.6.

8.6.7 Notwithstanding anything in this Plan to the contrary, if a Participant or Beneficiary defaults on a loan made pursuant to this Section 8.6, then the loan default will be a distributable event to the extent permitted by the Code and Regulations.

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ARTICLE 9
DEATH BENEFITS

Section 9.1 Payment of Account Balances .

9.1.1 If a Participant dies before distribution of his interest in the Plan, if any, has commenced, the Participant's non-forfeitable Account Balance shall, subject to Section 9.1.2 be distributed to the Participant's Beneficiary in the form, at the time and from among the methods specified in Section 8.1.1 as elected by the Beneficiary within 60 days following the Participant's death. If an election is not received by the Administrator, the distribution shall be made, if to a Surviving Spouse, in accordance with Section 8.1.2(a), and, if to some other Beneficiary, to the Beneficiary in a lump sum. Notwithstanding the foregoing, if the total amount distributable to the Beneficiary is $1,000 or less, the distribution shall be made in a lump sum.

9.1.2 Notwithstanding any other provision of the Plan to the contrary:

(p) If the Participant dies leaving a Surviving Spouse before distribution of his interest in the Plan has commenced, and unless the Participant's Surviving Spouse has elected, by written notice to the Administrator within 60 days after the Participant's death, any other form of benefit payment specified in Section 8.1.1, or the Participant's Surviving Spouse has already consented in a manner described in Section 8.2.4 to a distribution to some other Beneficiary designated by the Participant, the Participant's Account Balance shall be distributed to the Participant's Surviving Spouse in the form of an annuity for the life of the Surviving Spouse (under an Annuity Contract purchased with the aggregate Account Balance of the Participant's Account) or in lump sum form if the total amount distributable is $1,000 or less.

(q) If the Participant dies before distribution of his or her interest in the Plan has commenced, the Participant's entire interest must be distributed within five years after the Participant's death; provided, however, that if any portion of the Participant's interest is payable to his Beneficiary, distributions may be made in substantially equal installments over the life or life expectancy of the Beneficiary, commencing (i) in the case of a Beneficiary other than a Surviving Spouse, no later than one year after the Participant's death; and (ii) in the case of a Surviving Spouse, no later than the later of one year after the Participant's death or the date on which the Participant would have attained age 70½. If the Surviving Spouse dies before payments to such Spouse begin, subsequent distributions shall be made as if the Surviving Spouse had been the Participant.

9.1.3 Any lump sum payment payable to a Spouse pursuant to this Section 9.1 shall be eligible for a direct rollover in accordance with Section 8.4.

Section 9.2 Beneficiaries .

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9.2.1 Subject to the spousal consent requirements of Section 8.1.2(a), a Participant may designate a Beneficiary for his Account.

9.2.2 If a Participant who is unmarried as of the date of his death has designated a Beneficiary and such Beneficiary predeceases the Participant, or if no Beneficiary has been designated by such Participant, the Participant's interest remaining in the Plan shall be paid to the estate of the Participant. If a Participant who is married as of the date of his death designates a Beneficiary pursuant to Section 8.1.2(a) and such Beneficiary predeceases the Participant, the Participant's interest remaining in the Plan shall be paid to the Participant's Surviving Spouse, or to the Participant's estate if such Spouse is no longer living. If two or more Beneficiaries are named, the interest of any Beneficiary, who does not survive the Participant, shall pass to the surviving Beneficiary or Beneficiaries in accordance with their respective interests unless otherwise agreed in writing between the Administrator and the Participant.

9.2.3 Subject to the consent requirements applicable with respect to a Spouse, any designation of a Beneficiary to whom amounts due after the Participant's death shall be paid must be filed with the Administrator, in a time and manner designated by the Administrator, in order to be effective. Any such designation of a Beneficiary may be revoked by filing a later designation or an instrument of revocation with the Administrator, in a time and manner designated by the Administrator. If a Beneficiary fails to survive a Participant for at least 30 days, it shall be presumed that the Participant survived the Beneficiary.

9.2.4 Effective November 28, 2011, if a Participant fails to designate a Beneficiary in accordance with Sections 9.2.1 through 9.2.3 and such Participant has benefits in the Merged Profit Sharing Account, then the Participant’s Beneficiary shall be determined under the most recent designation of beneficiary made by the Participant under the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company, if one. Absent a designation under this Plan or under the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company, the Participant’s Beneficiary shall be the Participant’s Surviving Spouse. If the Participant does not have a Surviving Spouse, then the Beneficiary shall be the Participant’s estate.

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ARTICLE 10
FIDUCIARIES

Section 10.1 Named Fiduciaries .

The Named Fiduciaries, who shall have authority to control and manage the operation and administration of the Plan, are as follows:

10.1.5 The Company, which shall have the sole right to (i) appoint and remove from office the members of the Administrative Committee, the Trustee and any investment manager; (ii) designate the Investment Companies for investment of contributions under the Plan; and (iii) amend or terminate the Plan;

10.1.6 The Administrative Committee, which shall have the authority and duties specified in ARTICLE 12 hereof;

10.1.7 The Trustee, which shall have the authority and duties specified in ARTICLE 11 hereof and the Trust Agreement; and, in addition, the authority and duties of the Administrative Committee in the event that no such Committee shall be appointed or constituted by the Company; and

10.1.8 Any investment manager or managers selected by the Company, who renders investment advice with respect to Plan assets.

Section 10.2 Employment of Advisers .

A "named fiduciary" with respect to the Plan (as defined in ERISA § 402(a)(2)) and any "fiduciary" (as defined in ERISA § 3(21)) appointed by such a "named fiduciary," may employ one or more persons to render advice with regard to any responsibility of such "named fiduciary" or "fiduciary" under the Plan.

Section 10.3 Multiple Fiduciary Capacities .

Section 10.4 Reliance .

Section 10.5 Scope of Authority and Responsibility .

The responsibilities of the Administrative Committee and the Trustee for the operation and administration of the Plan are allocated between them in accordance with the provisions of the Plan

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and the Trust Agreement wherein their respective duties are specified. Each fiduciary shall have only the authority and duties as are specifically given to it under this Plan, shall be responsible for the proper exercise of its own authorities and duties, and shall not be responsible for any act or failure to act of any other fiduciary.

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ARTICLE 11
TRUSTEE

Section 11.1 Trust Agreement .

Section 11.2 Assets in Trust .

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ARTICLE 12
ADMINISTRATIVE COMMITTEE

Section 12.1 Appointment and Removal of Administrative Committee .

The administration of the Plan shall be vested in an Administrative Committee of at least three (3) persons who shall be appointed by the Board, and may include persons who are not Participants in the Plan. A person appointed a member of the Committee shall signify his acceptance in writing. The Board may remove or replace any member of the Committee at any time in its sole discretion, and any Committee member may resign by delivering his written resignation to the Board, which resignation shall become effective upon its delivery or at any later date specified therein. If at any time there shall be a vacancy in the membership of the Committee, the remaining member or members of the Committee shall continue to act until such vacancy is filled by action of the Board.

Section 12.2 Officers of Administrative Committee .

The Committee shall appoint from among its members a chairman, and shall appoint as secretary a person who may be, but need not be, a member of the Committee or a Participant in the Plan.

Section 12.3 Action by Administrative Committee .

Section 12.4 Rules and Regulations .

Section 12.5 Powers .

The Committee shall have such powers as may be necessary to discharge its duties under the Plan, including the power:

12.5.1 To interpret and construe the Plan in its discretion, to determine all questions with regard to employment, eligibility, Years of Service, Compensation, benefits, and such factual matters as date of birth and marital status, and similarly related matters for the purpose of the Plan. The Committee's determination of all questions arising under the Plan shall be

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conclusive upon all Participants, the Board, the Company, Employers, the Trustee, and other interested parties;

12.5.2 To prescribe procedures to be followed by Participants and Beneficiaries filing application for benefits;

12.5.3 To prepare and distribute to Participants information explaining the Plan;

12.5.4 To appoint or employ individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal, accounting and actuarial counsel;

12.5.5 To instruct the Trustee to make benefit payments pursuant to the Plan;

12.5.6 To appoint an enrolled actuary and to receive and review the periodic valuation of the Plan made by such actuary;

12.5.7 To receive and review reports of disbursements from the Trust Fund made by the Trustees; and

12.5.8 To receive and review the periodic audit of the Plan made by a certified public accountant appointed by the Company.

Section 12.6 Information from Participants .

Section 12.7 Reports .

Section 12.8 Authority to Act .

Section 12.9 Liability for Acts .

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Participants and their Beneficiaries. No member of the Committee shall incur any liability for anything done or omitted by him except only liability for his own gross negligence or willful misconduct.

Section 12.10 Compensation and Expenses .

Section 12.11 Indemnity .

Section 12.12 Denied Claims .

The claims procedures set forth in ERISA Regulation § 2560.503-1 are hereby incorporated into the Plan except as otherwise provided in this Section 12.12.

If any application for payment of a benefit under the Plan shall be denied, the Committee shall with the denial write the claimant setting forth the specific reasons for the denial and explaining the Plan's claim review procedure. If a claimant whose claim has been denied wishes further consideration of his claim, he may appeal to the Committee to review his claim in a written statement of the claimant's position filed with the Committee no later than 60 days after the claimant receives such denial (180 days in the case of a Disability claim). The Committee shall make a full review of the claim and the denial, giving the claimant written notice of its decision within the next 60 days (45 days in the case of a Disability claim). Due to special circumstances, if no decision has been made within the first 60 days (45 days in the case of a Disability claim) and notice of the need for additional time has been furnished within such period, the decision may be made within the following 60 days (45 days in the case of a Disability claim). A claimant shall be required to exhaust the administrative remedies provided by this Section 12.12 prior to seeking any other form of relief including a civil action under ERISA, provided that any such action must be filed no later than the 180 ^th day after the date of the denial of the appeal.

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ARTICLE 13
PLAN AMENDMENT OR TERMINATION

Section 13.1 Plan Amendment or Termination .

Section 13.2 Limitations on Plan Amendment .

13.2.1 No Plan amendment shall:

(g) Authorize any part of the Trust Fund to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries;

(h) Decrease the accrued benefits of any Participant or his Beneficiary under the Plan (except to the extent permitted under Code § 412(c)(8)); or

(i) Change the vesting schedule, either directly or indirectly, unless each Participant having not less than three years of Vesting Service is permitted to elect, within a reasonable period specified by the Administrator after the adoption of such amendment, to have his vested percentage computed without regard to such amendment.

13.2.2 The period during which the election set forth in Section 13.2.1(c) may be made shall commence with the date the amendment is adopted and shall end as the later of:

(f) 60 days after the amendment is adopted;

(g) 60 days after the amendment becomes effective; or

(h) 60 days after the Participant is issued written notice by the Administrator.

13.2.3 Code §411(d)(6) Protected Benefits. An amendment adopted after August 9, 2006 (including the adoption of a restatement of an existing plan) may not decrease a Participant's accrued benefit, except to the extent permitted under Code §412(c)(8), and may not reduce or eliminate Code §411(d)(6) protected benefits determined immediately prior to the adoption date (or, if later, the effective date) of the amendment. An amendment reduces or eliminates Code §411(d)(6) protected benefits if the amendment has the effect of either (i) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in Treasury Regulations), or (ii) except as provided by Treasury Regulations, eliminating an optional form of benefit. The Administrator must disregard an amendment to the extent application of the amendment would fail to satisfy this paragraph. If the Plan Administrator must disregard an amendment because the amendment would violate clause (i) or clause

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(ii) of this Section 13.2.3, the Plan Administrator must maintain a schedule of the early retirement option or other optional forms of benefit the Plan must continue for the affected Participants.

Section 13.3 Right of Company to Terminate Plan or Discontinue Contributions .

The Company intends and expects that from year to year it will be able to and will deem it advisable to continue this Plan in effect and to make contributions as herein provided. The Company reserves the right, however, to terminate the Plan at any time or to completely discontinue its contributions thereto at any time, which termination or discontinuance shall be evidenced by an instrument in writing signed by an authorized officer of the Company delivered to the Administrator and the Trustee.

Section 13.4 Effect of Partial or Complete Termination or Complete Discontinuance of Contributions .

13.4.9 As of the date of a "partial termination" of the Plan:

(a) If not then fully vested, each affected Participant who is then an Employee shall become 100% vested in his or her Employer Contributions Account; and

(b) No further contributions or allocations of forfeitures shall be made after such date with respect to each affected Participant.

13.4.10 As of the date of the "complete termination" of the Plan, or the "complete discontinuance of contributions" under the Plan:

(c) If not then fully vested, each affected Participant who is then an Employee shall become 100% vested in his Employer Contributions Account;

(d) Any forfeitures which may have occurred prior to the termination of the Plan but which have not been applied to reduce Employer Contributions under Section 5.3 shall be allocated pro-rata to those Participants who were Eligible Employees on the effective date of the termination of the Plan;

(e) No further contributions shall be made after such date; and

(f) No Eligible Employee shall become a Participant after such date.

13.4.11 All other provisions of the Plan shall remain in effect unless otherwise amended.

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ARTICLE 14
MISCELLANEOUS PROVISIONS

Section 14.1 Exclusive Benefit of Participants .

The Trust Fund shall be held for the benefit of all persons who shall be entitled to receive payments under the Plan. It shall be prohibited at any time for any part of the Trust Fund (other than such part as is required to pay expenses) to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries.

Section 14.2 Plan Not a Contract of Employment .

The Plan is not a contract of Employment, and the terms of Employment of any Employee shall not be affected in any way by the Plan or related instruments except as specifically provided therein.

Section 14.3 Source of Benefits .

Benefits under the Plan shall be paid or provided for solely from the Trust, and neither the Company, an Employer, the Administrator, Trustee or investment manager shall assume any liability therefore.

Section 14.4 Benefits Not Assignable .

Section 14.5 Domestic Relations Orders .

Any other provision of the Plan to the contrary notwithstanding, the Administrator shall have all powers necessary with respect to the Plan for the proper operation of Code § 414(p) with respect to "qualified domestic relations orders" (or "domestic relations orders" treated as such) referred to in Section 14.4, including, but not limited to, the power to establish all necessary or appropriate procedures, to authorize the establishment of new accounts with such assets and subject to such restrictions as the Administrator may deem appropriate, and the Administrator may decide upon and direct appropriate distributions therefrom.

A domestic relations order that otherwise satisfies the requirements for a "qualified domestic relations order" (QDRO) will not fail to be a QDRO: (i) solely because the order is issued after, or

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revises, another domestic relations order or QDRO; or (ii) solely because of the time at which the order is issued, including issuance after the annuity starting date or after the Participant’s death.

Section 14.6 Benefits Payable to Minors, Incompetents and Others .

Section 14.7 Merger or Transfer of Assets .

14.7.1 The merger or consolidation of the Company with any other person, or the transfer of the assets of the Company to any other person, shall not constitute a termination of the Plan, if provision is made for the continuation of the Plan.

14.7.2 The Plan may not merge or consolidate with, or transfer any assets or liabilities to, any other plan, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated).

Section 14.8 Participation in the Plan by an Affiliate . Section 14.8 was amended effective January 1, 2012 to read as follows:

14.8.1 Subject to the approval of the Board of Directors of the Company, an Affiliate, by duly authorized action of its Board of Directors, may adopt the Plan and determine the classes of its Employees who shall be Eligible Employees. Such Affiliate shall make such contributions to the Plan on behalf of such Employees as is determined by the Company. If no such action is taken, the Eligible Employees and the amount of contribution shall be determined in accordance with the Plan provisions applicable to an Employer.

14.8.2 By duly authorized action of its Board of Directors, an Affiliate may terminate its participation in the Plan or withdraw from the Plan and the Trust.

14.8.3 An Employer other than the Company shall have no power with respect to the Plan except as specifically provided by this Section 14.8.

Section 14.9 Action by Employer .

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Section 14.10 Provision of Information .

Section 14.11 Controlling Law .

Section 14.12 Conditional Restatement .

Section 14.13 Rules of Construction .

Section 14.14 USERRA Model Amendment .

Effective as of December 12, 1994, and notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code §414(u).

Death benefits. In the case of a death occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code § 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant had resumed and then terminated employment on account of death.

Differential wage payments. For years beginning after December 31, 2008, (i) an individual receiving a differential wage payment, as defined by Code §3401(h)(2), is treated as an employee of the employer making the payment, (ii) the differential wage payment is treated as compensation,

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and (iii) the Plan is not treated as failing to meet the requirements of any provision described in Code §414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment.

Severance from employment. Notwithstanding clause (i) of the preceding paragraph, for purposes of Code §401(k)(2)(B)(i)(I), an individual is treated as having been severed from employment during any period the individual is performing service in the uniformed services described in Code §3401(h)(2)(A).

(a) Suspension of deferrals. If an individual elects to receive a distribution by reason of severance from employment, death or disability, the individual may not make an elective deferral or employee contribution during the 6-month period beginning on the date of the distribution.

(b) Nondiscrimination requirement. Clause (iii) above applies only if all employees of the Employer performing service in the uniformed services described in Code §3401(h)(2)(A) are entitled to receive differential wage payments (as defined in Code §3401(h)(2)) on reasonably equivalent terms and, if eligible to participate in a retirement plan maintained by the Employer, to make contributions based on the payments on reasonably equivalent terms (taking into account Code §§410(b)(3), (4), and (5)).

Section 14.15 Written Communications Required .

Any notice, request, instruction, or other communication to be given or made hereunder shall be in writing and either personally delivered to the addressee or deposited in the United States mail with full postage paid and properly addressed to such addressee at the last address for notice shown on the Administrative Committee’s records. The foregoing notwithstanding, the Administrative Committee may establish a procedure under which electronic notice will be deemed to constitute written notice for the purpose of providing certain notices to Participants or making certain Participant elections.

Section 14.16 Offset .

Effective November 28, 2011, the Merged Profit Sharing Account shall preserve the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company offset for purposes of calculating benefits under the Torchmark Corporation Pension Plan. The offset provided by the Profit Sharing and Retirement Plan of Liberty National Life Insurance Company benefit shall be provided by the Merged Profit Sharing Account benefit.

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ARTICLE 15
TOP-HEAVY PROVISIONS

Section 15.1 Top Heavy Plan Requirements .8.1 p.15-1

For any Top Heavy Plan Year, the Plan shall provide the special vesting requirements of Code § 416(b) and the special minimum allocation requirements of Code § 416(c).

Section 15.2 Determinations of Top Heavy Status .8.2 p.15-1

15.2.12 This Plan shall be a Top Heavy Plan for any Plan Year in which, as of the Determination Date, (i) the Present Value of Accrued Benefits of Key Employees and (ii) the sum of the Aggregate Accounts of Key Employees under this Plan and all plans of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all Key and Non‑Key Employees under this Plan and all plans of an Aggregation Group.8.2(a) p.15-1

If any Participant is a Non‑Key Employee for any Plan Year, but such Participant was a Key Employee for any prior Plan Year, such Participant's Present Value of Accrued Benefit and/or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top Heavy Group). In addition, if a Participant or Former Participant has not performed any services for any Employer maintaining the Plan at any time during the five year period ending on the Determination Date, any accrued benefit for such Participant or Former Participant shall not be taken into account for the purposes of determining whether this Plan is a Top Heavy Plan.

15.2.13 Aggregate Account: A Participant's Aggregate Account as of the Determination Date is the sum of:

(a) The Participant's Combined Account balance as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date;

(b) An adjustment for any contributions due as of the Determination Date. Such adjustment shall be the amount of any contributions actually made after the Valuation Date but due on or before the Determination Date, except for the first Plan Year when such adjustment shall also reflect the amount of any contributions made after the Determination Date that are allocated as of a date in that first Plan Year;

(c) Any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the Valuation Date and prior to the Determination Date, such distributions are not included as distributions for top heavy purposes to the extent that such distributions are already included in the Participant's Aggregate Account balance as of the Valuation Date. Notwithstanding anything herein to the

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contrary, all distributions, including distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. Further, distributions from the Plan (including the cash value of life insurance policies) of a Participant's account balance because of death shall be treated as a distribution for the purposes of this paragraph;

(d) Any Employee contributions, whether voluntary or mandatory. However, amounts attributable to tax deductible qualified voluntary employee contributions shall not be considered to be a part of the Participant's Aggregate Account balance;

(e) With respect to unrelated rollovers and plan‑to‑plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides the rollovers or plan‑to‑plan transfers, it shall always consider such rollovers or plan‑to‑plan transfers as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan‑to‑plan transfers, it shall not consider such rollovers or plan‑to‑plan transfers as part of the Participant's Aggregate Account balance; and

(f) With respect to related rollovers and plan‑to‑plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides the rollover or plan‑to‑plan transfer, it shall not be counted as a distribution for purposes of this Section 15.2.2. If this Plan is the plan accepting such rollover or plan‑to‑plan transfer, it shall consider such rollover or plan‑to‑plan transfer as part of the Participant's Aggregate Account balance, irrespective of the date on which such rollover or plan‑to‑plan transfer is accepted.

(g) For the purposes of determining whether two employers are to be treated as the same employer in (e) and (f) above, all employers aggregated under Code §§ 414(b), (c), (m) and (o) are treated as the same employer.

15.2.14 "Aggregation Group" means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.

(a) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant in the Plan Year containing the Determination Date or any of the four preceding Plan Years, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code §§ 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group.

In the case of a Required Aggregation Group, each plan in the group will be considered a Top Heavy Plan if the Required Aggregation Group is a Top Heavy

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Group. No plan in the Required Aggregation Group will be considered a Top Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.

(b) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code §§ 401(a)(4) and 410. Such group shall be known as a Permissive Aggregation Group.

In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top Heavy Group.

(c) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top Heavy Plans.

(d) An Aggregation Group shall include any terminated plan of the Employer if it was maintained within the last five (5) years ending on the Determination Date.

15.2.15 "Determination Date" means (i) the last day of the preceding Plan Year, or (ii) in the case of the first Plan Year, the last day of such Plan Year.

15.2.16 Present Value of Accrued Benefit: In the case of a defined benefit plan, the Present Value of Accrued Benefit for a Participant other than a Key Employee, shall be as determined using the single accrual method used for all plans of the Employer and Affiliated Employers, or if no such single method exists, using a method which results in benefits accruing not more rapidly than the slowest accrual rate permitted under Code § 411(b)(1)(C). The determination of the Present Value of Accrued Benefit shall be determined as of the most recent Valuation Date that falls within or ends with the 12‑month period ending on the Determination Date except as provided in Code § 416 and the Regulations thereunder for the first and second plan years of a defined benefit plan. Effective for Plan Years beginning on and after February 1, 2006 the following shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of Employees as of the determination date:

(a) Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of account balances of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code § 416(g)(2) during the 1‑year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under

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Code § 416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5‑year period" for "1‑year period."

(b) Employees not performing services during year ending on the determination date. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1‑year period ending on the determination date shall not be taken into account.

15.2.17 Key Employee. Key Employee means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the determination date was an officer of the Employer having "415 Compensation" greater than $130,000 (as adjusted under Code § 416(i)(1) for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employer, or a 1‑percent owner of the Employer having "415 Compensation" of more than $150,000. The determination of who is a Key Employee will be made in accordance with Code § 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

15.2.18 "Top Heavy Group" means an Aggregation Group in which, as of the Determination Date, the sum of:

(a) The Present Value of Accrued Benefits of Key Employees under all defined benefit plans included in the group; and

(b) The Aggregate Accounts of Key Employees under all defined contribution plans included in the group,

exceeds sixty percent (60%) of a similar sum determined for all Participants.

Section 15.3 Minimum Vesting . Beginning with the Plan Year in which this Plan is Top-Heavy, the following vesting schedule will apply:



Completed Years of Vesting Service		Vested Percentage

2		20%
3		40%
4		60%
5		100%

Section 15.4 Minimum Benefits .

15.4.1 Matching contributions. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code § 416(c)(2) and the Plan. The preceding sentence shall apply with respect to matching

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contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Code § 401(m).

15.4.2 Contributions under other plans. The minimum benefit requirement for any plan maintained by the Employer, shall be met in only one plan maintained by the Employer if the Employer maintains more than one tax-qualified plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Code § 401(k)(12) and matching contributions with respect to which the requirements of Code § 401(m)(11) are met).

Section 15.5 Applicability . The top-heavy requirement of Code § 416 shall not apply in any year in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of Code § 401(k)(12) and matching contributions with respect to which the requirements of Code § 401(m)(11) are met.

Section 15.6 Requirements . In the event that any provision of this ARTICLE 15 is no longer required to qualify the Plan under the Code, then such provision shall thereupon be void without the necessity of further amendment of the Plan.

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IN WITNESS WHEREOF, TORCHMARK CORPORATION has caused this Plan to be restated, on this the ________ day of _______________, 2015 effective generally as of January 1, 2014 (except as otherwise provided herein).

TORCHMARK CORPORATION

By:_________________________

Its: _________________________

Attest:

By:_________________________

Its:_________________________

24983590 v1

Exhibit 10.23

Payments to Directors

Non-employee directors of the Company are compensated on the following basis:

(1) Cash Compensation—(a) Directors are paid $90,000 of their annual retainer in cash in quarterly installments unless a timely election is made under the non-employee director sub-plan of the 2011 Plan to receive an equivalent amount of market value stock options, restricted stock or RSUs or to defer the cash to an interest-bearing account under the terms of that sub-plan of the 2011 Plan; (b) The Lead Director receives an additional $40,000 annual retainer in cash, payable in quarterly installments; (c) Annual Board committee chair retainers, payable in quarterly installments in cash, are $35,000 for the Audit Committee Chair and $12,500 for each of the Chairs of the Compensation Committee and the Governance and Nominating Committee; and (d) All members of the Audit Committee (excluding the Audit Committee Chair) receive an additional annual Audit Committee Member Retainer of $12,500, payable in quarterly installments; and

(2) Equity Compensation—Directors are paid $120,000 of their annual retainer in equity, either in the form of market value stock options, restricted stock or RSUs, based on the director’s timely election, with the equity issued on the first NYSE trading day of January of each calendar year valued at the NYSE market closing price of Company common stock on that date. If no timely election is made, the non-employee director receives his or her annual equity compensation in the form of $120,000 of market value stock options awarded on the first NYSE trading day of each year.

Directors do not receive meeting fees or fees for the execution of written consents in lieu of Board meetings or in lieu of Board committee meetings. They receive reimbursement for their travel and lodging expenses if they do not live in the area where a meeting is held.

Pursuant to the non-employee director sub-plan of the 2011 Plan, newly elected non-employee directors receive upon the date of their initial election to the Board $100,000 of restricted stock, valued at the market closing price of Company common stock on that date.

Non-employee directors may currently elect to defer all or a designated portion of their cash-based annual director compensation into an interest-bearing account pursuant to a timely election made under the non-employee director sub-plan of the 2011 Plan. These accounts bear interest at non-preferential rates set from time to time by the Compensation Committee. The amounts in such accounts are paid to the director in a lump sum or equal monthly installments for up to 120 months as elected by the director with payments commencing on the earliest of (a) December 31 of the fifth year after the year for which the deferral was made, (b) the first business day of the fourth month after the director’s death or (c) the director’s termination as a non-employee director of the Company or any of its subsidiaries for a reason other than death.

Directors who are employees of the Company or its subsidiaries receive no compensation for Board service.



Exhibit 12. Statement re computation of ratios

TORCHMARK CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)

	Year Ended December 31,
	2015		2014		2013		2012		2011
Earnings:
Pre-tax earnings ⁽¹⁾	$	766,187	$	784,677	$	755,315	$	757,670	$	716,435
Fixed charges	78,860		77,515		81,807		81,725		79,481
Earnings before fixed charges	$	845,047	$	862,192	$	837,122	$	839,395	$	795,916

Fixed charges:
Interest expense ⁽²⁾	$	75,286	$	74,862	$	79,187	$	79,449	$	76,980
Amortization of bond issue costs	1,356		1,264		1,274		1,063		928
Estimated interest factor of rental expense	2,218		1,389		1,346		1,213		1,573
Total fixed charges	$	78,860	$	77,515	$	81,807	$	81,725	$	79,481

Ratio of earnings to fixed charges	10.7		11.1		10.2		10.3		10.0

Earnings before fixed charges	$	845,047	$	862,192	$	837,122	$	839,395	$	795,916
Interest credited for deposit products	65,172		68,718		70,555		71,918		70,746
Adjusted earnings before fixed charges	$	910,219	$	930,910	$	907,677	$	911,313	$	866,662

Fixed charges	$	78,860	$	77,515	$	81,807	$	81,725	$	79,481
Interest credited for deposit products	65,172		68,718		70,555		71,918		70,746
Adjusted fixed charges	$	144,032	$	146,233	$	152,362	$	153,643	$	150,227

Ratio of earnings to fixed charges including interest credited on deposit products as a fixed charge	6.3		6.4		6.0		5.9		5.8

Rental expense	$	6,722	$	4,210	$	4,079	$	3,677	$	4,767

Estimated interest factor of rental expense (33%)	2,218		1,389		1,346		1,213		1,573

(1) Pre-tax earnings have been retrospectively adjusted to give effect to the adoption of new accounting guidance as described in Note 1-Significant Accounting Policies under the caption " Low-Income Housing Tax Credit Interests ." Amounts have been retrospectively adjusted for Discontinued Operations as described in Note 6- Discontinued Operations in the Notes to the Consolidated Financial Statements .

(2) There was no interest capitalized in any period indicated.

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos. 2-76378, 2-93760, 33-23580, 33-1032, 33-65507, 333-27111, 333-27137, 333-83317, 333-40604, 333-125409, 333-125400, 333-144554, 333-148244, 333-175185, 333-195314, 333-182473, 333-207130 on Form S-3, and 333-208999 on Form S-8 of our reports dated February 26, 2016, relating to the consolidated financial statements and financial statement schedules of Torchmark Corporation and subsidiaries (Torchmark Corporation) and the effectiveness of Torchmark Corporation's internal control over financial reporting, appearing in this Annual Report on Form 10-K of Torchmark Corporation for the year ended December 31, 2015.

/s/ Deloitte & Touche LLP

Dallas, Texas

February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned Director of Torchmark Corporation does hereby constitute and appoint Frank M. Svoboda, R. Brian Mitchell and Carol A. McCoy, and each of them severally, his lawful attorneys and agents, for him and in his name and in the capacity indicated below, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents determine may be necessary, advisable, or required to enable the said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, or requirements of the Securities and Exchange Commission in connection with the Form 10‑K for the fiscal year ended December 31, 2015. Without limiting the generality of the foregoing, the powers granted include the power and authority to execute and file the Form 10-K, any and all amendments to the Form 10‑K and any and all instruments or documents submitted as a part of or in conjunction with the Form 10‑K. The undersigned hereby ratifies and confirms his signature as it may be signed by said attorneys and all that said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Charles E. Adair
		Charles E. Adair, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Marilyn A. Alexander
		Marilyn A. Alexander, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ David L. Boren
		David L. Boren, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned Director of Torchmark Corporation does hereby constitute and appoint Frank M. Svoboda, R. Brian Mitchell and Carol A. McCoy, and each of them severally, his lawful attorneys and agents, for her and in her name and in the capacity indicated below, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents determine may be necessary, advisable, or required to enable the said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, or requirements of the Securities and Exchange Commission in connection with the Form 10‑K for the fiscal year ended December 31, 2015. Without limiting the generality of the foregoing, the powers granted include the power and authority to execute and file the Form 10-K, any and all amendments to the Form 10‑K and any and all instruments or documents submitted as a part of or in conjunction with the Form 10‑K. The undersigned hereby ratifies and confirms her signature as it may be signed by said attorneys and all that said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below her name.



		/s/ Jane M. Buchan
		Jane M. Buchan, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Robert W. Ingram
		Robert W. Ingram, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Lloyd W. Newton
		Lloyd W. Newton, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Darren M. Rebelez
		Darren M. Rebelez, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned Director of Torchmark Corporation does hereby constitute and appoint Frank M. Svoboda, R. Brian Mitchell and Carol A. McCoy, and each of them severally, his lawful attorneys and agents, for him and in his name and in the capacities indicated below, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents determine may be necessary, advisable, or required to enable the said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, or requirements of the Securities and Exchange Commission in connection with the Form 10‑K for the fiscal year ended December 31, 2015. Without limiting the generality of the foregoing, the powers granted include the power and authority to execute and file the Form 10-K, any and all amendments to the Form 10‑K and any and all instruments or documents submitted as a part of or in conjunction with the Form 10‑K. The undersigned hereby ratifies and confirms his signature as it may be signed by said attorneys and all that said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Lamar C. Smith
		Lamar C. Smith, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Paul J. Zucconi
		Paul J. Zucconi, Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned Officer and Director of Torchmark Corporation does hereby constitute and appoint Frank M. Svoboda, R. Brian Mitchell and Carol A. McCoy, and each of them severally, his lawful attorneys and agents, for him and in his name and in the capacity indicated below, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents determine may be necessary, advisable, or required to enable the said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, or requirements of the Securities and Exchange Commission in connection with the Form 10‑K for the fiscal year ended December 31, 2015. Without limiting the generality of the foregoing, the powers granted include the power and authority to execute and file the Form 10-K, any and all amendments to the Form 10‑K and any and all instruments or documents submitted as a part of or in conjunction with the Form 10‑K. The undersigned hereby ratifies and confirms his signature as it may be signed by said attorneys and all that said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Gary L. Coleman
		Gary L. Coleman
		Co-Chief Executive Officer and Director
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned Officer of Torchmark Corporation does hereby constitute and appoint R. Brian Mitchell and Carol A. McCoy, and each of them severally, his lawful attorneys and agents, for him and in his name and in the capacity indicated below, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents determine may be necessary, advisable, or required to enable the said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, or requirements of the Securities and Exchange Commission in connection with the Form 10‑K for the fiscal year ended December 31, 2015. Without limiting the generality of the foregoing, the powers granted include the power and authority to execute and file the Form 10-K, any and all amendments to the Form 10‑K and any and all instruments or documents submitted as a part of or in conjunction with the Form 10‑K. The undersigned hereby ratifies and confirms his signature as it may be signed by said attorneys and all that said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Frank M. Svoboda
		Executive Vice President and
		Chief Financial Officer
		(Chief Accounting Officer)
		Date: February 26, 2016

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the date indicated below his name.



		/s/ Larry M. Hutchison
		Larry M. Hutchison,
		Co-Chief Executive Officer and Director
		Date: February 26, 2016

Exhibit 31.1

CERTIFICATIONS

I, Gary L. Coleman, certify that:


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


2.	Based on my knowledge, this 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 report;


3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 26, 2016			/s/ Gary L. Coleman
			Gary L. Coleman Co-Chairman and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Larry M. Hutchison, certify that:

I have reviewed this annual report on Form 10-K of Torchmark Corporation;

Based on my knowledge, this 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 report;

Based on my knowledge, the financial statements, and other financial information included in this 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 report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision 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 report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 26, 2016			/s/ Larry M. Hutchison
			Larry M. Hutchison Co-Chairman and Chief Executive Officer

Exhibit 31.3

CERTIFICATIONS

I, Frank M. Svoboda, certify that:

I have reviewed this annual report on Form 10-K of Torchmark Corporation;


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision 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 report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 26, 2016			/s/ Frank M. Svoboda
			Frank M. Svoboda Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

We, Gary L. Coleman, Co-Chief Executive Officer, Larry M. Hutchison, Co-Chief Executive Officer and Frank M. Svoboda, Executive Vice President and Chief Financial Officer of Torchmark Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of our knowledge:


(1)	the Annual Report on Form 10-K of the Company for the period ended December 31, 2015 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 26, 2016			/s/ Gary L. Coleman
			Gary L. Coleman Co-Chairman and Chief Executive Officer

			/s/ Larry M. Hutchison
			Larry M. Hutchison Co-Chairman and Chief Executive Officer

			/s/ Frank M. Svoboda
			Frank M. Svoboda Executive Vice President and Chief Financial Officer