) reported second-quarter 2012 net operating income of $1.30 per
share, up 19.3% year over year. The increase can be attributed to
higher insurance underwriting income coupled with increased
investment income. Lower share count compared with the year-ago
period, owing to share repurchases, also buoyed the bottom
Total insurance premium increased 6.0% year over year to $706.1
million, led by higher premium from the Life Insurance and Medicare
Part D business, partly offset by lower premium from the Health
Net investment income increased 2% year over year to $180.7
million on the back of higher invested assets. However, excess
investment income, a measure of the segment's profitability, went
down 5% to $62.5 million.
Underwriting income increased 8.0% year over year to $134.2
million, backed by higher margins at Life and Medicare Part D,
partially offset by a lower margin in the Health business.
operations, premium revenue increased 4% year over year to $451.0
million, led by higher premiums written by distribution channels -
American Income Agency up 9% and Direct Response up 5% - partly
offset by a 2% decrease in premiums written by Liberty National
Life Agency. Life underwriting margins increased 7% to $124.2
premium revenue declined 5% year over year to $176.9 million, while
underwriting margin was down 2% to $40.3 million.
Premium revenue from the
Medicare part D
business increased 60% year over year to $78.1 million, while
underwriting margin increased 47% to $8.2 million. This huge growth
in Part D business came on the back of the company's new lower cost
part D plan for 2012, which significantly increased the number of
low-income auto-enrollees. The product also enabled the company to
increase its individual sales.
Return on equity (ROE) was 15.7% for the quarter, compared with
14.4% in the year-ago quarter.
During the quarter, Torchmark repurchased 3.9 million shares at
a total cost of $184 million.
Management announced fiscal 2012 guidance for earnings per share
in the range of $5.08 - $5.26. This marked a reduction from the
earlier projected range of $5.10 - $5.40 per share.
) also reported earnings on the same day, substantially ahead
of the Zacks Consensus Estimate.
Torchmark currently retains a Zacks # 3 Rank, which translates
into a short-term 'Hold' rating. We are also maintaining our
long-term "Neutral" recommendation on its shares.
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