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Torchmark's (TMK) CEO Gary Coleman on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 27, 2016 11:00 AM ET

Executives

Mike Majors - Vice President of Investor Relations

Gary Coleman - Co-Chief Executive Officer

Larry Hutchison - Co-Chief Executive Officer

Frank Svoboda - Chief Financial Officer

Brian Mitchell - General Counsel

Analysts

Erik Bass - Citigroup

Steven Schwartz - Raymond James

Bob Glasspiegel - Janney

Seth Weiss - Bank of America Merrill Lynch

Michael Kovac - Goldman Sachs

Jimmy Bhullar - JPMorgan

Operator

Good day and welcome to the Torchmark Corporation First Quarter 2016 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Majors, Vice President of Investor Relations. Please go ahead, sir.

Mike Majors

Thank you. Good morning. Joining the call today are Gary Coleman and Larry Hutchison, our Co-Chief Executive Officers; Frank Svoboda, our Chief Financial Officer; and Brian Mitchell, our General Counsel.

Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our 2015 10-K.

I'll now turn the call over to Gary Coleman.

Gary Coleman

Thank you, Mike, and good morning, everyone. In the first quarter, net operating income from continuing operations was $133 million, or $1.08 per share, a per share increase of 6% from a year ago.

Net income for the quarter was $124 million or $1.01 per share, also a 6% increase on a per share basis. With fixed maturities that amortized cost, our return on equity as of March 31, was 14.5% and our book value per share was $30.65, an 8% increase from a year ago. On a GAAP reported basis, with fixed maturities at market value, book value per share was $35.72, a decline of 6% from a year ago.

In our life insurance operations, premium revenue grew 6% to $544 million, while life underwriting margins was $144 million, up 2% from a year ago. Growth and underwriting margin lagged premium growth, due to higher claims, primarily in direct response. For the full-year, we expect life underwriting margin to increase 2% to 4% over 2015. Net life sales were $104 million flat compared to the year-ago quarter.

On the health side, premium revenue grew 3% to $236 million and health underwriting margin was $52 million approximately the same as a year ago. For the full-year, we expect health underwriting margin to grow 1% to 2%. Health sales declined 1% to $32 million due to the decline in group sales. Individual health sales were up 1% to $28 million.

Administrative expenses were $48 million for the quarter, up 5% from a year ago and in line with our expectations. The primary reasons for the increase in administrative expenses are higher information technology costs. As a percentage of premium from continuing operations, administrative expenses were 6.2% same as a year ago. For the full-year, we anticipate administrative expenses will also be around 6.2% of premium.

I will now turn the call over to Larry Hutchison for his comments on the marketing operations.

Larry Hutchison

Thank you, Gary. I'll now go over the results for each company. At American Income, life premiums were up 9% to $213 million and life underwriting margin was up 11% to $69 million. Net life sales were $50 million, up 7% due primarily to increased agent productivity. The average agent count for the first quarter was 6,206, down 2% over a year-ago and down 6% from the fourth quarter. The producing agent count at the end of the first quarter was 6,225. We expect 5% to 7% life sales growth for the full-year 2016.

In our direct response operation at Globe Life, life premiums were up 7% to $200 million. Life underwriting margin declined 13% to $37 million. Net life sales were down 8% to $41 million due primarily to decreases in circulation. We expect life sales to be flat to down 3% for the full-year 2016.