It has been about a month since the last earnings report for Torchmark . Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Torchmark due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Torchmark Q2 Earnings & Revenues Top Estimates, Up Y/Y
Torchmark Corporation’s second-quarter 2018 net operating income of $1.51 per share beat the Zacks Consensus Estimate by 1.3%. The bottom line also improved nearly 26.9% year over year on the back of higher premiums from the Life and Health segments. Lower share count on continuous buybacks also drove this uptick.
Including realized gains on investments of 8 cents, net income surged 34.7% year over year to $1.59 per share.
Behind the Headlines
Torchmark reported total premium revenues of $854 million, up 4.6% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income improved 2.8% year over year to $219 million.
The company’s total revenues of $1.1 billion grew 4.2% from the year-ago quarter. This top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. Moreover, the top line exceeded the Zacks Consensus Estimate by 0.8%.
Excess investment income, a measure of profitability, declined 2.6% year over year to $59.9 million.
Torchmark’s total insurance underwriting income grew 9.2% year over year to $168.4 million. Improvement in Life and Health Insurance underwriting margins resulted in this uptrend. However, higher administrative expenses partially offset this uptick.
Administrative expenses increased 8% year over year to $55 million.
Total benefits and expenses rose 3.7% year over year to $858 million.
Segment Update
Premium revenues at Torchmark’s Life Insurance operations increased 5% year over year to $602.5 million, banking on higher premiums written by the distribution channels like American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, Global Life Direct Response and LNL Agency rose 3% and 2%, respectively. Life Insurance underwriting income improved 9.4% year over year to $161.2 million. Net sales at the life insurance segment were 3% higher on a year-over-year basis.
Health Insurance premium revenues rose 3.5% year over year to $251.4 million while underwriting income of $59.5 million increased 7.6% year over year. Net health sales grew 7% year over year.
Annuity underwriting margins remained flat year over year at $2.6 million.
Financial Update
Shareholders’ equity as of Jun 30, 2018 rose 10.3% year over year to $5.6 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $42.08, up 25.6% year over year.
As of Jun 30, 2018, operating return on equity (excluding net unrealized gains on fixed maturities) was 14.6% compared with 14.3% as of Jun 30, 2017.
Share Repurchase and Dividend Update
In the quarter under review, Torchmark repurchased 1.0 million shares for a total cost of $88 million.
The company announced a dividend of 16 cents per share in the reported quarter, marking a 6.7% hike from the year-ago quarter.
2018 Guidance Revised
Torchmark estimates net operating income between $6.02 and $6.12 per share in place of the earlier guided range of $5.93-$6.07.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Torchmark has a poor Growth Score of F, however its momentum is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Torchmark has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Torchmark (TMK) Up 1.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Torchmark . Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Torchmark due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Torchmark Q2 Earnings & Revenues Top Estimates, Up Y/Y
Torchmark Corporation’s second-quarter 2018 net operating income of $1.51 per share beat the Zacks Consensus Estimate by 1.3%. The bottom line also improved nearly 26.9% year over year on the back of higher premiums from the Life and Health segments. Lower share count on continuous buybacks also drove this uptick.
Including realized gains on investments of 8 cents, net income surged 34.7% year over year to $1.59 per share.
Behind the Headlines
Torchmark reported total premium revenues of $854 million, up 4.6% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income improved 2.8% year over year to $219 million.
The company’s total revenues of $1.1 billion grew 4.2% from the year-ago quarter. This top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. Moreover, the top line exceeded the Zacks Consensus Estimate by 0.8%.
Excess investment income, a measure of profitability, declined 2.6% year over year to $59.9 million.
Torchmark’s total insurance underwriting income grew 9.2% year over year to $168.4 million. Improvement in Life and Health Insurance underwriting margins resulted in this uptrend. However, higher administrative expenses partially offset this uptick.
Administrative expenses increased 8% year over year to $55 million.
Total benefits and expenses rose 3.7% year over year to $858 million.
Segment Update
Premium revenues at Torchmark’s Life Insurance operations increased 5% year over year to $602.5 million, banking on higher premiums written by the distribution channels like American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, Global Life Direct Response and LNL Agency rose 3% and 2%, respectively. Life Insurance underwriting income improved 9.4% year over year to $161.2 million. Net sales at the life insurance segment were 3% higher on a year-over-year basis.
Health Insurance premium revenues rose 3.5% year over year to $251.4 million while underwriting income of $59.5 million increased 7.6% year over year. Net health sales grew 7% year over year.
Annuity underwriting margins remained flat year over year at $2.6 million.
Financial Update
Shareholders’ equity as of Jun 30, 2018 rose 10.3% year over year to $5.6 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $42.08, up 25.6% year over year.
As of Jun 30, 2018, operating return on equity (excluding net unrealized gains on fixed maturities) was 14.6% compared with 14.3% as of Jun 30, 2017.
Share Repurchase and Dividend Update
In the quarter under review, Torchmark repurchased 1.0 million shares for a total cost of $88 million.
The company announced a dividend of 16 cents per share in the reported quarter, marking a 6.7% hike from the year-ago quarter.
2018 Guidance Revised
Torchmark estimates net operating income between $6.02 and $6.12 per share in place of the earlier guided range of $5.93-$6.07.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Torchmark has a poor Growth Score of F, however its momentum is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Torchmark has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.