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Torchmark (TMK) Q2 Earnings Beat Estimates, Improve Y/Y

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Torchmark Corporation’s (TMK - Free Report) second-quarter 2017 net operating income of $1.19 per share beat the Zacks Consensus Estimate by 1.7%.  Earnings improved 7.2% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buybacks also drove the upside.

Including administrative settlements of 1 cent, net income improved 4.4% year over year to $1.18 per share.

Torchmark Corporation Price, Consensus and EPS Surprise


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

Behind the Headlines

Torchmark reported total premium revenue of $817 million, up 3.9% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.

Net investment income increased 5.4% year over year to $213 million.

The company’s total revenue of $1.03 billion grew 4.3% 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. Also, revenues beat the Zacks Consensus Estimate by 0.2%.

Excess investment income, a measure of profitability, climbed 12.6% year over year to $61.5 million.

Torchmark’s total insurance underwriting income grew 2.7% year over year to $154.2 million. Improvement in Health and Annuity Insurance underwriting margins resulted in the upside. However, higher administrative expenses partially offset this improvement.

Administrative expenses increased 6.2% year over year to $51.4 million.

Total benefits and expenses rose 4.3% year over year to $827 million.

Segment Update

Premium revenues at Torchmark’s Life Insurance operations increased 4.6% year over year to $573.8 million. This improvement can be attributed to higher premiums written by the distribution channels – American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, Global Life Direct Response increased 2% and LNL Agency rose 1%. Life Insurance underwriting income improved 2.6% year over year to $147.3 million. Net sales at the life insurance segment was 1% lower on a year-over-year basis.

Health Insurance premium revenues rose 2.3% year over year to $242.8 million, while underwriting income of $55.3 million increased 5.1% year over year. Net health sales grew 10% year over year.

Annuity underwriting margins jumped 36.8% year over year to $2.6 million.

Financial Update

Shareholders’ equity as of Jun 30, 2017 rose 3.6% year over year to $5.1 billion.

Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $33.49, up 7.7% year over year.

As of Jun 30, 2017, operating return on equity was 14.3% compared with 14.6% as of Jun 30, 2016.

Share Repurchase and Dividend Update

In the quarter, Torchmark repurchased 1.1 million shares for a total cost of $81 million.

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

Guidance Revised

Torchmark estimates net operating income from continuing operations between $4.70 and $4.80 per share in 2017.

Zacks Rank

Torchmark carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) missed their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) beat the same.

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