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Torchmark (TMK) Q4 Earnings Top, Revenues Lag Estimates
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Torchmark Corporation's fourth-quarter 2016 net operating income of $1.16 per share beat the Zacks Consensus Estimate of $1.12 by 3.6%. Earnings also improved 10.5% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buy backs also drove the upside.
Including net income from discontinued operations of 1 cent, realized losses on investments from continuing operations of 10 cents, favorable Medicare Part D adjustment of 7 cents and administrative settlements of 2 cents, net income grew 4.7% year over year to $1.12 per share.
Behind the Headlines
Torchmark reported total premium revenue of $788 million, up 4.2% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 6% year over year to $205.5 million.
The company’s total revenue of $993 million increased 4.5% from year-ago quarter. The increase in revenues was driven by growth in Life and Health Insurance premiums along with higher net investment income. However, the top line missed the Zacks Consensus Estimate of $996 million.
Excess investment income, a measure of profitability, grew 8% year over year to $58 million.
Torchmark’s total insurance underwriting income was down 0.4% year over year to $148.7 million. Lower underwriting income in the Life segment primarily resulted in the downside.
Administrative expenses increased 6% year over year to $50 million.
Total benefits and expenses rose 5.4% year over year to $799 million.
2016 Highlights
Operating income was $4.49 per share, up 8.7% from 2015. Operating revenues of $3.9 billion increased 2.6% year over year.
Segment Update
Premium revenues at Torchmark's Life Insurance operations increased 6% year over year to $550.2 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency and Direct Response. American Income Agency grew 10%, while Direct Response inched up 4%. Life Insurance underwriting income, however, dipped 1% year over year to $142.7 million. Net sales at the life insurance segment was flat year over year.
Health Insurance premium revenues rose 1% year over year to $237.7 million, while underwriting income of $52.8 million increased 4% year over year. Net health decreased 21% year over year.
Financial Update
Shareholders’ equity as of Dec 31, 2016 climbed 4.1% year over year to $3.9 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $32.13, up 6.8% year over year.
As of Dec 31, 2016, return on equity was 14.6% compared with 14.5% as of Dec 31, 2015.
Share Repurchase and Dividend Update
In 2016, Torchmark repurchased 5.2 million shares for a total cost of $311 million.
The company declared a dividend of 14 cents per share in the quarter, up by a cent from year-ago quarter.
Torchmark Corporation Price, Consensus and EPS Surprise
Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at Progressive Corp. (PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat their respective Zacks Consensus Estimate.
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Torchmark (TMK) Q4 Earnings Top, Revenues Lag Estimates
Torchmark Corporation's fourth-quarter 2016 net operating income of $1.16 per share beat the Zacks Consensus Estimate of $1.12 by 3.6%. Earnings also improved 10.5% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buy backs also drove the upside.
Including net income from discontinued operations of 1 cent, realized losses on investments from continuing operations of 10 cents, favorable Medicare Part D adjustment of 7 cents and administrative settlements of 2 cents, net income grew 4.7% year over year to $1.12 per share.
Behind the Headlines
Torchmark reported total premium revenue of $788 million, up 4.2% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 6% year over year to $205.5 million.
The company’s total revenue of $993 million increased 4.5% from year-ago quarter. The increase in revenues was driven by growth in Life and Health Insurance premiums along with higher net investment income. However, the top line missed the Zacks Consensus Estimate of $996 million.
Excess investment income, a measure of profitability, grew 8% year over year to $58 million.
Torchmark’s total insurance underwriting income was down 0.4% year over year to $148.7 million. Lower underwriting income in the Life segment primarily resulted in the downside.
Administrative expenses increased 6% year over year to $50 million.
Total benefits and expenses rose 5.4% year over year to $799 million.
2016 Highlights
Operating income was $4.49 per share, up 8.7% from 2015. Operating revenues of $3.9 billion increased 2.6% year over year.
Segment Update
Premium revenues at Torchmark's Life Insurance operations increased 6% year over year to $550.2 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency and Direct Response. American Income Agency grew 10%, while Direct Response inched up 4%. Life Insurance underwriting income, however, dipped 1% year over year to $142.7 million. Net sales at the life insurance segment was flat year over year.
Health Insurance premium revenues rose 1% year over year to $237.7 million, while underwriting income of $52.8 million increased 4% year over year. Net health decreased 21% year over year.
Financial Update
Shareholders’ equity as of Dec 31, 2016 climbed 4.1% year over year to $3.9 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $32.13, up 6.8% year over year.
As of Dec 31, 2016, return on equity was 14.6% compared with 14.5% as of Dec 31, 2015.
Share Repurchase and Dividend Update
In 2016, Torchmark repurchased 5.2 million shares for a total cost of $311 million.
The company declared a dividend of 14 cents per share in the quarter, up by a cent from year-ago quarter.
Torchmark Corporation Price, Consensus and EPS Surprise
Torchmark Corporation Price, Consensus and EPS Surprise | Torchmark Corporation Quote
Guidance
Torchmark projects full-year 2017 operating income per share in the range of $4.57–$4.77.
Zacks Rank
Currently, Torchmark carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Performance of Other Insurers
Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at Progressive Corp. (PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat their respective Zacks Consensus Estimate.
Zacks’ Best Private Investment IdeasIn addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time? Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>