Torchmark (TMK) Q1 Earnings Top Estimates On Higher Premiums

Torchmark Corporation’s (NYSE:TMK) first-quarter 2018 net operating income of $1.47 per share beat the Zacks Consensus Estimate by 0.7%. The bottom line also improved nearly 27.8% year over year on the back of higher premiums from the Life and Health segments. Lower share count on continuous buybacks also drove the upside.

Including realized gains on investments of 1 cent, net income surged 34.2% year over year to $1.49 per share.

Behind the Headlines

Torchmark reported total premium revenues of $850.1 million, up 3.6% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.

Net investment income improved 4.8% year over year to $218 million.

The company’s total revenues of $1.1 billion grew 3.8% 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.

Excess investment income, a measure of profitability, rose 4.4% year over year to $61.9 million.

Torchmark’s total insurance underwriting income grew 7.9% year over year to $160.3 million. Improvement in Life and Health Insurance underwriting margins resulted in the upside. However, higher administrative expenses partially offset this improvement.

Administrative expenses increased 7% year over year to $55 million.

Total benefits and expenses increased 3.1% year over year to $858 million.

Segment Update

Premium revenues at Torchmark’s Life Insurance operations increased 3.9% year over year to $598.3 million, attributable to higher premiums written by the distribution channels like American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, both Global Life Direct Response and LNL Agency rose 1%. Life Insurance underwriting income improved 7.4% year over year to $154.8 million. Net sales at the life insurance segment were 4% lower on a year-over-year basis.

Health Insurance premium revenues rose 2.9% year over year to $251.8 million while underwriting income of $58 million increased 8.6% year over year. Net health sales grew 11% year over year.

Annuity underwriting margins remained flat year over year at $2.6 million.

Financial Update

Shareholders’ equity as of Mar 31, 2018 rose 22.7% year over year to $5.8 billion.

Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $40.94, up 24.9% year over year.

As of Mar 31, 2018, operating return on equity was 14.6% compared with 14.2% as of Mar 31, 2017.

Share Repurchase and Dividend Update

In the quarter under review, Torchmark repurchased 1.0 million shares for a total cost of $87 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 Firmer

Torchmark estimates net operating income between $5.93 and $6.07 per share from $5.90-$6.10, projected earlier.

Zacks Rank

Torchmark carries a Zacks Rank #3 (Hold). 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, which have already reported first-quarter earnings, the bottom line of The Progressive Corporation (NYSE:PGR) , MGIC Investment Corporation (NYSE:MTG) and RLI Corp. (NYSE:RLI) surpassed the respective Zacks Consensus Estimate.

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