Torchmark Corporation's (NYSE:TMK) second-quarter 2016 net operating income of $1.11 per share beat the Zacks Consensus Estimate by a penny. Earnings also improved 7.8% year over year on the back of higher premium contribution from Life as well as Health segments. Lower share count due to continuous buyback also drove the upside.
Including net income from discontinued operations of 2 cents and an unfavorable Medicare Part D adjustment of 2 cents, net income, grew 13% year over year to $1.13 per share.
Behind the Headlines
Torchmark reported total premium revenue of $785.9 million, up 4% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 4% year over year to $201.6 million.
The company reported total revenue of $992 million showing an increase of 4.3% compared to year ago quarter. Increase in revenue is driven by growth in Life and Health Insurance premium along with net investment income.
Excess investment income, a measure of profitability, dipped 4% year over year to $54.6 million.
Torchmark reported total insurance underwriting income of $150.2 million, up 2% year over year. Higher underwriting income in Life Insurance segment primarily drove the upside.
Administrative expenses increased 6% year over year to $48.4 million.
Total benefits and expenses stood at $793 million registering a growth of 5.2% compared to year ago quarter.
TORCHMARK CORP Price, Consensus and EPS Surprise
TORCHMARK CORP Price, Consensus and EPS Surprise | TORCHMARK CORP Quote
Segment Update
Torchmark's Life Insurance operations saw premium revenues increase 5% year over year to $548.6 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 was up 5%. Life Insurance underwriting income increased 3% year over year to $143.6 million. Net sales of life insurance segment increased 2% year over year.
Health Insurance premium revenues rose 2% year over year to $237.3 million, while underwriting income of $52.6 million increased 2% year over year. Net health sales jumped 6% year over year.
Financial Update
Shareholders’ equity as of Jun 30, 2016 climbed 14% year over year to $4.9 billion.
Torchmark reported book value per share of $31.11, up 7.6% year over year.
Return on equity was 14.6% as of Jun 30, 2016, down 10 basis points year over year.
Share Repurchase Update
During the reported quarter, Torchmark repurchased 1.4 million shares for a total cost of $83 million.
Guidance Raised
Torchmark projects full-year operating income per share in the range of $4.40–$4.50. This reflects an increase of 0.5% over the prior guidance of $4.35–$4.51.
Dividend Update
The company declared dividend of 14 cents per share in the quarter, same as the year-ago quarter.
We wait to see how the stock fares after the better-than-expected quarterly performance.
Zacks Rank and Other Stocks
Torchmark presently carries a Zacks Rank #4 (Sell). Among the other players in the insurance industry that have reported their earnings so far, the bottom line at The Travelers Companies, Inc. (NYSE:TRV) and First American Financial Corporation (NYSE:FAF) beat their respective Zacks Consensus Estimate, while earnings of RLI Corp. (NYSE:RLI) missed the same.
TORCHMARK CORP (TMK): Free Stock Analysis Report
RLI CORP (RLI): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
FIRST AMER FINL (FAF): Free Stock Analysis Report
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