Back to top

Image: Bigstock

Torchmark (TMK) Poised to Grow on Strong Segmental Results

Read MoreHide Full Article

Torchmark Corporation is poised for growth, given strong performances across its distribution channels, driving premium growth. This, in turn, should continue to drive earnings. The company estimates operating income per share to be between $6.61 and $6.75 in 2019, up from $6.50 and $6.70 mentioned earlier.

The life insurer’s most important distribution channel — American Income Exclusive Agency — has been witnessing higher net sales, driven by an increased agent count. The company projects life sales to improve 5-9% in 2019 (up from 4-8% stated earlier).

Global Life, which is one of the distribution channels of Torchmark, operates in a relatively non-competitive market. Its focus on expanding margins rather than boosting sales or sales levels or margins as a percentage of premiums is yielding results. Life premiums have been improving over the past several years. For 2019, Torchmark anticipates life net sales to be flat to up 2%.

Moreover, the company continues to witness a substantial improvement in life premiums, Liberty National, another distributional channel. This
raises optimism for life premium growth in the future. It expects life net sales to grow 7-11% in 2019 (up from 2-10% estimated earlier). Health net sales growth is projected to be 6-10% (up from 4-8% mentioned earlier).

Life underwriting income is expected to grow around 4-6% (up from 3-5%) and health underwriting income is likely to increase 3-5% (up from 2-4%).

Rising interest rate environment and higher new money rates should favor improvement in excess investment income. In 2019, the company anticipates excess investment income to grow about 5% or 9% on a per share basis.

A robust capital position supports the company to engage in shareholder-friendly moves, raising optimism among investors. Torchmark expects to generate free cash flow of $365-$375 million in 2019, supporting effective capital deployment.

The Zacks Consensus Estimate for current-year earnings is pegged at $6.69, suggesting an increase of 9.1% from the year-ago quarter's reported figure. The consensus mark for revenues has risen 4.6% to $4.5 billion. The company's long-term earnings growth stands at 7.9%.

Notably, Torchmark has a VGM Score of B. This score helps to identify stocks with the most attractive value, growth, and momentum.

Torchmark currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 2.6% in a year against the industry’s decline of 10.8%. We expect that the aforementioned upsides will help the stock retain the momentum.



Stocks to Consider

Some better-ranked stocks from the insurance industry are Reinsurance Group of America, Incorporated (RGA - Free Report) , AMERISAFE, Inc. (AMSF - Free Report) and American Equity Investment Life Holding Company (AEL - Free Report) . Each of the stocks currently carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Reinsurance Group of America engages in reinsurance business. The company’s average four-quarter earnings surprise is 0.95%.

AMERISAFE is an insurance holding company, which underwrites workers' compensation insurance in the United States. The company’s average four-quarter positive surprise is 26.57%.

American Equity Investment provides life insurance products and services in the United States. The company’s average four-quarter beat is 10.54%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>