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Torchmark (TMK) Tops Q1 Earnings & Revenues, Guides 2017

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Torchmark Corporation's (TMK - Free Report) first-quarter 2017 net operating income of $1.15 per share beat the Zacks Consensus Estimate by a penny.  Earnings also improved 6.5% 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 realized losses on investments from continuing operations of 1 cent, favorable Medicare Part D adjustment of 3 cents, net income grew 10% year over year to $1.11 per share.

Behind the Headlines

Torchmark reported total premium revenue of $821 million, up 5.3% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.

Net investment income increased 5.9% year over year to $208 million.

The company’s total revenue of $1.029 billion inched up 5.3% from the year-ago quarter. The top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. However, revenues surpassed the Zacks Consensus Estimate of $1.009 billion.

Excess investment income, a measure of profitability, grew 8% year over year to $59.3 million.

Torchmark’s total insurance underwriting income dipped 1% year over year to $148.6 million. Though Health and Annuity Insurance underwriting margins improved, higher administrative expenses resulted in lower total insurance underwriting income.

Administrative expenses increased 7% year over year to $51.9 million.

Total benefits and expenses rose 6.4% year over year to $832 million.

Torchmark Corporation Price, Consensus and EPS Surprise

 

Torchmark Corporation Price, Consensus and EPS Surprise | Torchmark Corporation Quote

Segment Update

Premium revenues at Torchmark's Life Insurance operations increased 5.9% year over year to $576 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency and Direct Response. While American Income Agency grew 9%, Direct Response increased up 5%. Life Insurance underwriting income was almost flat year over year at $144.1 million. Net sales at the life insurance segment was 2% higher on a year-over-year basis.

Health Insurance premium revenues rose 3.8% year over year to $245 million, while underwriting income of $53.4 million increased 3.7% year over year. Net health sales grew 21% year over year.

Annuity underwriting margins surged 63% year over year to $2.6 million.

Financial Update

Shareholders’ equity as of Mar 31, 2016 climbed 4.2% year over year to $3.9 billion.

Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $32.77, up 6.9% year over year.

As of Mar 31, 2017, operating return on equity was 14.2% compared with 14.5% as of Mar 31, 2016.

Share Repurchase and Dividend Update

In the quarter, Torchmark repurchased 1.1 million shares for a total cost of $82 million.

The company declared a dividend of 15 cents per share in the quarter, which marks a 7.1% hike from the year-ago quarter.

Guidance

Torchmark estimates net operating income from continuing operations between $4.63 and $4.77 per share in 2017.

Zacks Rank

Torchmark carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of other insurers

Among the other players from the insurance industry that have reported their first-quarter earnings so far, the bottom line at Brown & Brown Inc. (BRO - Free Report) beat Zacks Consensus Estimate but RLI Corp. (RLI - Free Report) and The Progressive Corporation (PGR - Free Report) missed expectations.

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