Torchmark Corp. is a holding company, which engages in the provision of individual life and supplemental health insurance products and services. It operates through the following segments: Life Insurance, Supplemental Health Insurance, Annuities, and Investments. The Life Insurance segment includes traditional and interest-sensitive whole life insurance as well as term life insurances. The Supplement Health Insurance segment provides generally guaranteed-renewable and include medicare supplement, critical illness, accident, and limited-benefit supplemental hospital, and surgical coverage. The Annuities segment refers to fixed-benefit contracts. The Investments segment covers the investment portfolio. The company was founded on November 19, 1979 and is headquartered in McKinney, TX.
In addition, the Company recorded an adjustment of $874 million to net income during 2017. In 2018, the Company completed its analysis of the tax legislation and recorded an additional $798 thousand adjustment related to the remeasurement of the deferred tax assets and liabilities based on the 21% rate. As the impact of the tax legislation was treated as a non-operating event, it was excluded from net operating income.
Net operating income as an ROE, excluding net unrealized gains on the fixed maturity portfolio, is also considered a non-GAAP measure. Management utilizes this measure to view the business without the effect of the unrealized gains or losses, which are primarily attributable to fluctuation in interest rates on the available for sale portfolio.
Net income was $701 million in 2018, compared with $1.5 billion in 2017. This decrease was primarily due to an $874 million increase to net income in 2017, relating to new tax legislation as described above. Net income increased in 2017 from $550 million in 2016. On a diluted per common share basis, 2018 net income fell 50% to $6.09 after a 172% increase in 2017. Net income per diluted common share in 2017 rose to $12.22 from $4.49 in 2016. As previously noted, 2017 net income per diluted common share includes the effect of the adjustment to net income relating to new tax legislation. The percentage growth in net income per share results continues to exceed the growth in dollar amounts due to our share repurchase program. Each year’s net income per share was affected by realized gains (losses), which were $(0.01), $0.15, and $(0.06), in 2018, 2017 and 2016, respectively. More information concerning realized gains and losses can be found under the caption Realized Gains and Losses in this report.