Torchmark Corporation • Letter to Shareholders 10 2002 was a good year for Torchmark. Our net operating income increased 5% to $424 million. On a per share basis, our net operating income increased 9% to $3.51. Although our underwriting income declined 2% for the year, our excess investment income increased 15%. We managed our capital effectively, including the repurchasing of our stock, which enhances the current and future value of the investment of our shareholders. Life insurance annualized premium issued increased 13% to $334 million. Premium income increased 7% to $1,221 million. Underwriting margin, which is the premium income less the amounts required to (1) fund current and future benefits and (2) amortize acquisition expenses, increased 5% to $299 million. Health insurance annualized premium issued declined 5% to $202 million. Premium income increased 1% to $1,019 million. Underwriting margin declined 3% to $167 million. Annuity premiums declined 35% to $39 million, and the underwriting margin declined 46% to $13 million. Insurance underwriting income, which is the sum of the underwriting margins plus other income and less administrative expenses, declined 2% to $359 million. Net investment income increased 5% to $522 million. The required interest on our net policy liabilities increased 2% to $193 million, and our financing costs declined 33% to $35 million. Therefore, excess investment income increased 15% to $295 million. Assuming that our fixed maturity assets are reported at amortized costs instead of market, book value per share was $22.46, net operating income as a return on equity was 16.5% and our debt to capital ratio was 25.2% (including our preferred securities as debt). $ MILLIONS 2001 % 2002 PER DILUTED SHARE 2001 % 2002 INSURANCE UNDERWRITING INCOME  $359.4 $367.9 (2) $2.98 $2.92 2 EXCESS INVESTMENT INCOME 295.0 255.5 15 2.44 2.03 20 OTHER* (14.2) (14.5) (2) (.12) (.12) — INCOME TAX (216.6) (204.4) 6 (1.79) (1.62) 10 NET OPERATING INCOME $423.6 $404.6 5% $3.51 $3.21 9% LETTER TO SHAREHOLDERS FINANCIAL REVIEW KEY COMPONENTS OF NET OPERATING INCOME * In compliance with the Financial Accounting Standards Board, Goodwill was not amortized in 2002. For the sake of comparison, amortization of Goodwill has been removed from the 2001 financial data.