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Torchmark Corp (TMK - Analyst Report) reported first quarter 2013 net operating income of $1.39 per share which breezed past the Zacks Consensus Estimate by 1.5%. Results also improved 9.4% year over year.

Including realized losses on investments of 4 cents and Medicare Part D adjustments of 9 cents net income for Torchmark stood at $1.27 per share, up 8.5% year over year.

Total insurance premium increased 9% year over year to $769.2 million, led by higher premium from the Life, Health Insurance and Medicare Part D operations.

Net investment income increased 2% year over year to $183 million. Excess investment income, a measure of the segment’s profitability, was down 13% to $55.6 million.

Underwriting income increased 10.5% year over year to $148.6 million in the reported quarter, backed by higher margins at Life, Health and Medicare Part D segments.

Administrative expenses in the quarter increased 8.1% year over year to $43.9 million.

Segment Update

At Life Insurance operations, premium revenue increased 4% year over year to $470.8 million in the first quarter, attributable to higher premiums written by distribution channels – American Income Agency (up 9%) and Direct Response (up 4%), partially offset by a 2% decline in premiums written by Liberty National Life Agency. Life underwriting income increased 5.5% to $133.1 million. Net sales of life insurance decreased 4%.   

Health Insurance premium revenue increased 23% year over year to $221.5 million while underwriting income increased 25.5% year over year to $49.9 million. Net sales in Health Insurance increased 57%.

Premium Revenue from the Medicare Part D business increased 4% year over year to $76.7 million in the first quarter. Underwriting income increased 2% to $8 million. Net sales of Medicare part D insurance declined 65% year over year to $9 million.

Return on equity (ROE) was 15.6% for the first quarter, compared with 15.8% in the year-ago quarter.

Share Repurchase Update

During the quarter Torchmark repurchased 1.6 million shares at a total cost of $90 million.

Financial Update

As of Mar 31, 2013, Torchmark had assets worth $18.9 billion, up 12.8% year over year.    

Shareholders’ equity as of Mar 31, 2013 increased 12.3% year over year to $4.3 billion.

Long term debt of Torchmark increased 8.2% year over year to $990 million. The debt-to-capital ratio of Torchmark as of Mar 31, 2013 was 24%, up 9 basis points.

Book value per share increased 10% year over year to $35.98 as of Mar 31, 2013.

Guidance for 2013

Management expects 2013 net operating income per share to range from $5.50– $5.75.

Zacks Rank

Torchmark currently carries a Zacks Rank #3 (Hold). Among others in the industry, Protective Life Corporation (PL - Analyst Report) with Zacks Rank #1 (Strong Buy), and Lincoln National Corporation (LNC - Analyst Report) and Universal American Corp (UAM - Snapshot Report) with Zacks Rank # 2 (Buy) are expected to report their first quarter 2013 results shortly.

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