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TMK Grows Annually, Pares Guidance - Analyst Blog

Torchmark Corp. ( TMK ) 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 line.

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 Insurance business.

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.

Segment Update

At Life Insurance 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 million.

Health Insurance 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.

Looking Ahead

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.

Peer Assurant Inc. ( AIZ ) 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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