Torchmark Q4 Earnings Miss Estimates, Up Y/Y; Guides Up
Torchmark CorporationTMK reported fourth-quarter 2015 net operating income of $1.05 per share, missing the Zacks Consensus Estimate by a penny. Earnings improved 5% 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 realized losses on investments of 9 cents and a favorable Medicare Part D adjustment of 11 cents, net income came in at $1.07 per share, down 5.3% year over year.
Torchmark's full-year 2015 operating net income per share came in at $4.21, up 4.5% over 2014. Results however missed the Zacks Consensus Estimate by a couple of cents.
Behind the Q4 Headlines
Torchmark reported total premium revenue of $756.1 million, up 5% year over year. The upside was primarily driven by higher premiums from life and health insurance businesses.
Net investment income increased 2% year over year to $194.3 million.
Excess investment income, a measure of profitability, decreased 3% year over year to $53.8 million.
Torchmark reported total insurance underwriting income of $149.4 million, which increased 3.3% year over year primarily due to higher underwriting income in life insurance.
Administrative expenses were $47.6 million, 9.2% higher than the year-ago quarter.
Management decided to divest the Medicare Part D Prescription Drug Business during the fourth quarter of 2015 and added it to discontinued operations.
Torchmark's Life Insurance operations saw premium revenues increase 6% year over year to $520.8 million. The improvement can be attributed to higher premiums written by the distribution channels - American Income Agency (up 8%) and Direct Response (up 7%). Life Insurance underwriting income increased 6% year over year to $144.5 million. Net sales were up 9% year over year.
Health Insurance premium revenues increased 5% year over year to $235.3 million, while underwriting inched up 0.4% year over year to $51 million. Net health sales increased 17% year over year.
Share Repurchase Update
During the reported quarter, Torchmark repurchased 1.4 million shares for a total cost of $83 million, taking the full-year tally to 6.3 million shares repurchased for $359 million.
Shareholders' equity as of Dec 31, 2015 increased 2.8% year over year to $3.7 billion.
Torchmark reported book value per share of $30.09, up 7.8% year over year.
Return on equity was 14.5% as of Dec 31, 2015, down 40 basis points year over year.
Torchmark projects 2016 operating income per share in the range of $4.28-$4.48. The lower end is above the prior guidance of $4.25 to $4.55.
Torchmark presently carries a Zacks Rank #3 (Hold). The bottom line at The Travelers Companies, Inc. TRV and Aflac Incorporated AFL outperformed their respective Zacks Consensus Estimate in the fourth quarter. The same at RLI Corp. RLI missed our expectation.
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