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Torchmark's Q4 Earnings In Line, Up Y/Y

Zacks Equity Research

Torchmark Corporation (TMK) reported fourth quarter-2013 operating net income of $1.46 per share, in line with the Zacks Consensus Estimate. However, the number increased 9.8% year over year.

Thre upside came on the back of higher insurance underwriting income and higher excess investment income.

Including net realized investment gains of 1 cent a share and Medicare Part D adjustment of 9 cents a share, the life insurer reported net income of $1.56 per share for fourth quarter-2013. The results declined 1.3% from the prior-year quarter number.

Net investment income during the reported quarter grossed $184.6 million, up 2.2% year over year.

Torchmark reported administrative expenses of $46 million, up 3% year over year.

Segment Result

Life Insurance segment reported premium revenues of $468.5 million, up 3.7% year-over–year. The increase was primarily attributable to higher premiums written by distribution channels – American Income Agency (up 6%) and Direct Response (up 6%), partially offset by a 2% decline in premiums written by Liberty National Life Agency.

Underwriting margin increased 6.4% year over year to $137.2 million. Additionally, net sales of this segment at Torchmark was flat with the year-ago quarter level.

Health Insurance premium revenues (excluding Medicare Part D) increased 5.9% year over year to $214.9 million while underwriting income increased 11% year over year to $49.4 million. Also, the addition of Family Heritage led to 13% increase in health net sales.

Premium revenue from the Medicare Part D business decreased 12.9% year over year to $73.2 million. Underwriting income of $10 million was flat on a year-over-year basis.

Full Year 2013 Highlights

For full year 2013, Torchmark’s operating net income came in at $5.70 per share, exceeding the prior-year quarter number by 10%.

Including net realized investment gains, legal settlements, guarantee fund assessment and family heritage acquisition, Torchmark reported net income of $5.68 per share, up 5% year over year.

Share Repurchase Update

Torchmark repurchased 1.3 million of its shares during the fourth quarter of 2013 for $94.9 million taking full year tally to 5.5 million shares bought back at an average price of $65.21 per share.

Financial Update
Shareholders’ equity as of 2013-end increased 5.2% from 2012-end to $3.53 billion.
Torchmark reported book value per share of $38.77 which was up 10% year over year.
For the reported quarter, return on equity was 15.5%, unchanged year over year.

Earnings Guidance
Management expects full year 2014 earnings in the range of $6.05 to $6.35 per share.
Zacks Rank

Torchmark carries a Zacks Rank #4 (Sell).Other better-ranked life insurers worth considering include China Life Insurance Co. Ltd. (LFC), Lincoln national corporation (LNC) and Protective Life Corp. (PL). All these stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on TMK
Read the Full Research Report on LNC
Read the Full Research Report on LFC
Read the Full Research Report on PL

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