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Torchmark (TMK) Q2 Earnings Beat Estimates, Improve Y/Y

Torchmark Corporation’s TMK second-quarter 2017 net operating income of $1.19 per share beat the Zacks Consensus Estimate by 1.7%.  Earnings improved 7.2% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buybacks also drove the upside.

Including administrative settlements of 1 cent, net income improved 4.4% year over year to $1.18 per share.

Torchmark Corporation Price, Consensus and EPS Surprise


Torchmark Corporation Price, Consensus and EPS Surprise | Torchmark Corporation Quote

Behind the Headlines

Torchmark reported total premium revenue of $817 million, up 3.9% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.

Net investment income increased 5.4% year over year to $213 million.

The company’s total revenue of $1.03 billion grew 4.3% from the year-ago quarter. The top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. Also, revenues beat the Zacks Consensus Estimate by 0.2%.

Excess investment income, a measure of profitability, climbed 12.6% year over year to $61.5 million.

Torchmark’s total insurance underwriting income grew 2.7% year over year to $154.2 million. Improvement in Health and Annuity Insurance underwriting margins resulted in the upside. However, higher administrative expenses partially offset this improvement.

Administrative expenses increased 6.2% year over year to $51.4 million.

Total benefits and expenses rose 4.3% year over year to $827 million.

Segment Update

Premium revenues at Torchmark’s Life Insurance operations increased 4.6% year over year to $573.8 million. This improvement can be attributed to higher premiums written by the distribution channels – American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, Global Life Direct Response increased 2% and LNL Agency rose 1%. Life Insurance underwriting income improved 2.6% year over year to $147.3 million. Net sales at the life insurance segment was 1% lower on a year-over-year basis.

Health Insurance premium revenues rose 2.3% year over year to $242.8 million, while underwriting income of $55.3 million increased 5.1% year over year. Net health sales grew 10% year over year.

Annuity underwriting margins jumped 36.8% year over year to $2.6 million.

Financial Update

Shareholders’ equity as of Jun 30, 2017 rose 3.6% year over year to $5.1 billion.

Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $33.49, up 7.7% year over year.

As of Jun 30, 2017, operating return on equity was 14.3% compared with 14.6% as of Jun 30, 2016.

Share Repurchase and Dividend Update

In the quarter, Torchmark repurchased 1.1 million shares for a total cost of $81 million.

The company declared a dividend of 15 cents per share in the quarter, marking a 7.1% hike from the year-ago quarter.

Guidance Revised

Torchmark estimates net operating income from continuing operations between $4.70 and $4.80 per share in 2017.

Zacks Rank

Torchmark carries a Zacks Rank #4 (Sell).

You can see _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at The Progressive Corporation PGR and The Travelers Companies, Inc. TRV missed their respective Zacks Consensus Estimate, while RLI Corp. RLI beat the same.

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