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Will Q1 Earnings Beat Drive Torchmark (TMK) Stock Higher?

Torchmark Corp. TMK reported first-quarter 2016 net operating income of $1.08 per share, beating the Zacks Consensus Estimate by a penny. Earnings improved 5.9% year over year on the back of higher premium contribution from life as well as insurance business. 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 9 cents, net income came in at $1.01 per share, up 6.3% year over year.

Share gained 0.5% in the after-market trading session to account for the outperformance and the company’s raised guidance. We wait to see how the share price reacts during trading session.

Behind Q1 Headlines

Torchmark reported total premium revenue of $779.9 million, up 5% year over year. The upside was primarily driven by higher premiums from life and health insurance businesses.

Net investment income increased 3% year over year to $197.1 million.

Excess investment income, a measure of profitability, decreased 0.4% year over year to $54.7 million.

Torchmark reported total insurance underwriting income of $149.4 million, which increased 0.4% year over year primarily on the back of higher underwriting income in life insurance.

Administrative expenses were $48.5 million, 5% lower than the year-ago quarter.

Segment Update

Torchmark's Life Insurance operations saw premium revenues increase 6% year over year to $544.2 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency (up 9%) and Direct Response (up 7%). Life Insurance underwriting income increased 2% year over year to $144.3 million. Net sales remained flat year over year.

Health Insurance premium revenues increased 3% year over year to $235.7 million, while underwriting income of $51 million was flat year over year. Net health sales decreased 1% year over year.

Share Repurchase Update

During the reported quarter, Torchmark repurchased 1.5 million shares for a total cost of $80 million.

Financial Update

Shareholders’ equity as of Mar 31, 2016 increased 5.5% year over year to $3.8 billion.

Torchmark reported book value per share of $30.65, up 7.7% year over year.

Return on equity was 14.5% as of Mar 31, 2016, down 20 basis points year over year.

Guidance Raised

Torchmark projects 2016 operating income per share in the range of $4.35 to $4.51. This reflects an increase of 5% over the prior guidance of $4.28–$4.48.

Zacks Rank

Torchmark presently carries a Zacks Rank #4 (Sell). Among the other insurers that recently released their first-quarter earnings results, The Travelers Companies, Inc. TRV missed the Zacks Consensus Estimate, First American Financial FAF and RLI Corp. RLI beat the same.
 

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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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