Why You Should Retain Torchmark (TMK) In Your Portfolio

Estimates for Torchmark Corporation (NYSE:TMK) have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 earnings being raised 0.2% to $6.04.

This provider of annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies carries a favorable VGM Score of B. Shares of this Zacks Rank #3 (Hold) insurer have gained 7% in a year against the industry’s 4.4% decline.

Let’s focus on the factors that make Torchmark a stock to retain for attractive returns.

Solid Performance at American Income: Torchmark’s most important distribution channel —American Income Exclusive Agency — has been witnessing higher net sales, driven by increased agent count. The company projects life sales growth between 5% and 9% in 2018. An estimated producing agent count between 7,000 and 7,400 in 2018 should drive premiums higher.

Consistent Operations at Global Life: Global Life operates in a relatively non-competitive market, selling basic life insurance products to middle and lower middle-income households and thus, staying beyond the purview of stiff competition. Focus on expanding margins rather than increasing sales or sales levels or margins as a percentage of premiums bearing fruit. Torchmark anticipates the underwriting margin to range between 15% and 17%.

Excess Investment Income: The company has been witnessing improved investment income since the third quarter of 2016, driven by a decline in the negative impact of the lengthy delays in receiving Part D reimbursements. In 2018, the company anticipates about 3% rise in excess investment income.

Effective Capital Management: Torchmark enjoys a solid cash flow, helping it effectively deploy capital. By virtue of its intelligent capital management strategy, the company generated more than 80% returns for investors over the past 10 years.

For 2018, Torchmark estimates free cash flow between $325 million and $335 million.

Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $6.04, representing a year-over-year increase of 25.3% on 3.3% higher revenues of $4.3 billion. For 2019, the consensus mark for the bottom line stands at $6.50, translating into a 7.5% year-over-year rise while the same for the top line is projected at $4.2 billion, up 3.6%.

Torchmark has expected long-term earnings per share growth of 12.9%.

Positive Earnings Surprise History: The company flaunts a stellar earnings surprise history, exceeding the Zacks Consensus Estimate in the last nine quarters. This outperformance in turn, underlines the company’s operational efficiency. The average seven-quarter positive earnings surprise is 1.78%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are GWG Holdings, Inc. (NASDAQ:GWGH) , American Equity Investment Life Holding Company (NYSE:AEL) and Alleghany Corporation (NYSE:Y) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GWG Holdings purchases life insurance policies in the secondary market in the United States. It pulled off an average four-quarter positive surprise of 195.14%.

American Equity Investment provides life insurance products and services in the United States. The company came up with four-quarter average positive surprises is 24.38%.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It delivered an average four-quarter earnings surprise of 17.61%.

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