On May 12, 2014, Torchmark Corp. (TMK) hit a 52-week high of $81.65.
The momentum was spurred by first-quarter earnings, which included a 1.32% positive surprise. Earnings also improved 9.4% year over year. The outperformance came on the back of higher premium revenues and improved investment income.
Torchmark is a life insurer with a niche presence in the middle-income market, which is huge and underpenetrated in the United States and Canada, and thereby present attractive business opportunities. Moreover, the company’s captive distribution, offering a more conservative product profile than most competitors, and unwavering focus on costs have enabled it to achieve strong profitability in the underserved middle-market segment.
Moreover, the acquisition of Family Health also fits Torchmark’s strategic long-term growth plan.
Torchmark operates its business via its subsidiaries – Liberty National Life, American Income Life Insurance, United Investors Life Insurance, United American Insurance, and Globe Life and Accident Insurance.
American Income is Torchmark’s most profitable distribution system that is likely to enjoy growth that it has seen over several years.
Another distribution channel, Globe Life, which operates in a relatively non-competitive market, enjoys advantages such as an experienced workforce and better cost control. The Direct response operation at Globe Life has also shown consistent growth over the past several years.
However, the underperforming Liberty National overshadows these positives. Though growth initiatives have been undertaken, hindrances to growth remain. In addition, a low interest rate environment remains a headwind.
Nevertheless, this Zacks Rank #3 (Hold) insurer is maintaining a strong capital position.
Better-ranked stocks – Symetra Financial Corp. (SYA), Prudential plc (PUK) and Horace Mann Educators Corp. (HMN) – all with a Zacks Rank #1 (Strong Buy) are good investment options.
Read the Full Research Report on PUK
Read the Full Research Report on SYA
Read the Full Research Report on HMN
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