Welcome!

News Feed Item

Torchmark Corporation Reports Fourth Quarter 2013 Results

MCKINNEY, Texas, Feb. 3, 2014 /PRNewswire/ -- Torchmark Corporation (NYSE: TMK) reported today that for the quarter ended December 31, 2013, net income was $1.56 per share, compared with $1.58 per share for the year-ago quarter.  Net operating income for the quarter was $1.46 per share, compared with $1.33 per share for the year-ago quarter.

Net income for the year ended December 31, 2013, was $5.68 per share, compared with $5.41 per share for the year-ago period.  Net operating income for the year ended December 31, 2013, was $5.70 per share, compared with $5.18 per share for the prior year.

Reconciliations between net income and net operating income, GAAP ROE and management ROE, and GAAP book value and management book value are shown in the Financial Summary below.

HIGHLIGHTS:

  • Net operating income per share increased 10% over the year-ago quarter and for the year.
  • Book value per share (excluding net unrealized gains on fixed maturities) increased 10% over the year-ago quarter.
  • Direct Response net life sales were up 8% compared to the year-ago quarter.
  • Medicare Part D net sales were up 15% compared to the year-ago quarter.
  • 1.3 million shares of common stock were repurchased, bringing the total for the year to 5.5 million shares

FINANCIAL SUMMARY

Net operating income, a non-GAAP financial measure, has long been consistently used by Torchmark's management to evaluate the operating performance of the Company, and is a measure commonly used in the life insurance industry.  It differs from net income primarily because it excludes certain non-operating items such as realized investment gains and losses and certain nonrecurring items which are included in net income.  Management believes that an analysis of net operating income is important in understanding the profitability and operating trends of the Company's business.  



Financial Summary



(dollars in millions, except per share data)



Per Share









Quarter Ended




Quarter Ended





December 31,


%


December 31,


%



2013



2012


Chg.


2013



2012


Chg.

Insurance underwriting income* 


$1.66



$1.47


13


$152.0



$140.1


8

Excess investment income* 


0.60



0.58


3


54.8



55.8


(2)

Parent company expense


(0.02)



(0.02)




(1.8)



(2.0)



Income tax


(0.73)



(0.67)


9


(67.2)



(63.9)


5

Stock option expense, net of tax


(0.04)



(0.03)




(4.1)



(3.3)


















Net operating income 


$1.46



$1.33


10


$133.7



$ 126.6


6
















Reconciling items, net of tax:
















Realized gains on investments  


0.01



0.14




1.0



13.6




Medicare Part D adjustment


0.09



0.13




8.2



12.3




Family Heritage acquisition 


0.00



(0.02)




0.0



(1.5)



Net income


$1.56



$1.58




$142.8



$151.0


















Weighted average diluted shares outstanding (000)
















91,563



95,523










 




Per Share 











Year Ended




Year Ended





December 31,


%


December 31,


%



2013


2012


Chg.


2013


2012


Chg.














Insurance underwriting income*


$6.49


$5.59


16


$604.1

$546.8


10

Excess investment income*  


2.35


2.42


(3)


218.8

236.6


(8)

Parent company expense


(0.09)


(0.08)




(8.5)

(8.2)



Income tax


(2.87)


(2.60)


10


(267.1)

(254.5)


5

Stock option expense, net of tax


(0.18)


(0.14)




(16.7)

(14.0)















Net operating income 


$5.70


$5.18


10


$530.7

$506.6


5













Reconciling items, net of tax:













Realized gains on investments  


0.04


0.25




4.0

24.6




Legal settlements


(0.06)


0.00




(5.9)

0.0




Guaranty fund assessment


(0.01)


0.00




(0.8)

0.0




Family Heritage acquisition 


0.01


(0.02)




0.5

(1.9)















Net income


$5.68


$5.41




$528.5

$529.3















Weighted average diluted shares outstanding (000)














93,043


97,898










* See definitions in the following sections and in the Torchmark 2012 SEC Form 10-K

Note: Tables in this news release may not foot due to rounding.

 

Financial Summary, continued

Management vs. GAAP Measures

(dollars in millions, except per share data)





Management







(excluding the


Revaluation





Revaluation Adj.**)


Adjustment**


GAAP



at December 31,


at December 31,


at  December 31,



2013


2012


2013


2012


2013


2012














2013 Net income as a ROE***










13.2%


13.0%

2013 Net operating income as a ROE


15.5%


15.5%






















Shareholders' equity


$3,529


$3,353


$247


$1,009


$3,776


$4,362

Book value per share


$38.77


$35.24


$2.72


$10.61


$41.49


$45.85



** Accounting rules (ASC-820, which includes guidance formerly set forth in FAS 115) require a revaluation adjustment of fixed maturities available for sale to fair value.  Without the revaluation adjustment, these assets would be reported at amortized cost.


 ***ROE is calculated using average shareholders' equity for the measurement period.

    INSURANCE OPERATIONS – comparing the fourth quarter 2013 with fourth quarter 2012:

Life insurance accounted for 69% of the Company's insurance underwriting margin for the quarter and 62% of total premium revenue. 

Health insurance, excluding Medicare Part D, accounted for 25% of Torchmark's insurance underwriting margin for the quarter and 28% of total premium revenue.  Medicare Part D accounted for 5% of insurance underwriting margin and 10% of total premium revenue. 

Net sales of life insurance were flat, while health sales, excluding Medicare Part D, increased 13%, primarily due to the addition of Family Heritage.

Insurance Premium Revenue      



Insurance Premium Revenue



(dollars in millions)



Quarter Ended



Quarter Ended


%



Dec. 31, 2013



Dec. 31, 2012


Chg.









Life insurance


$468.5



$452.0


4

Health insurance - 









excluding Medicare Part D


214.9



203.0


6

Health - Medicare Part D


73.2



84.0


(13)

Annuity


0.1



0.1











Total


$756.7



$739.1


2

Insurance Underwriting Income

Insurance underwriting margin is management's measure of profitability of its life, health and annuity segments' underwriting performance, and consists of premiums less policy obligations, commissions and other acquisition expenses.

Insurance underwriting income is the sum of the insurance underwriting margins of the life, health and annuity segments, plus other income, less insurance administrative expenses.  It excludes the investment segment, parent company expense and income taxes.       



Insurance Underwriting Income



(dollars in millions, except per share data)



Quarter Ended


% of



Quarter Ended


% of


%



Dec. 31, 2013


Premium



Dec. 31, 2012


Premium


Chg.

Insurance underwriting margins:













Life


$137.2


29



$128.9


29


6


Health


49.4


23



44.5


22


11


Health - Medicare Part D


10.0


14



10.0


12


0


Annuity


0.9





0.8







197.5





184.1




7

Other income


0.2





0.4





Administrative expenses


(45.8)





(44.5)




3













Insurance underwriting income


$152.0





$140.1




8


Per share


$1.66





$1.47




13

Insurance Results by Distribution Channels

Total premium, underwriting margins, first-year collected premium and net sales by all distribution channels are shown at www.torchmarkcorp.com on the Investor Relations page at Financial Reports.

American Income Agency was Torchmark's leading contributor to total underwriting margin ($69 million), on premium revenue of $202 million.  Life premiums of $182 million were up 6% and life insurance underwriting margin of $59 million was up 4%.  As a percentage of life premium, life underwriting margin was 32%, down from 33% a year ago, but the highest of the major life distribution channels at Torchmark.   Producing agents grew to 5,302, up 2% from a year ago, and down 3% during the quarter.   Net life sales were $38 million, down 5%.

Direct Response was Torchmark's second leading contributor to total underwriting margin ($43 million), on premium revenue of $175 million.  Life premiums of $162 million were up 6% and the life underwriting margin was $41 million, up 19%.   As a percentage of life premium, life underwriting margin was 25%, up from 22% a year ago.   Net life sales were $34 million, up 8%.  

LNL Agency was Torchmark's third leading contributor to total underwriting margin ($32 million), on premium revenue of $126 million.  Life premiums of $68 million were down 2% and life underwriting margin of $19 million was down 6%.  As a percentage of life premiums, life underwriting margin was 28%, down from 29% a year ago.  Net life sales for the LNL Agency were $8 million, down 4%.         

LNL Agency was Torchmark's second leading contributor to health underwriting margin ($13 million), on health premium of $58 million.  Health underwriting margin as a percentage of health premium was 22%, up from 21%. Net health sales for the LNL Agency were $4 million, up 2%.

LNL Agency's producing agent count grew to 1,430, up 1% from a year ago, and up 8% during the quarter.

Family Heritage Agency was acquired by Torchmark on November 1, 2012.  FHL contributed health underwriting margin of $10 million on health premium of $49 million and health underwriting margin as a percentage of health premium was 20%. Net health sales were $11 million.  Producing agent count declined during the quarter to 695 from 717.

UA Independent Agency was Torchmark's leading contributor to health underwriting margin ($15 million), on health premium of $75 million.  Health underwriting margin as a percentage of premium was 20%, same as the year-ago quarter. Net health sales were $22 million, up 5%. 

Medicare Part D Prescription Drug Plan is distributed by Direct Response and the UA agency.  Fourth quarter 2013 premium revenue was $73 million, down 13%.  Underwriting margin for fourth quarter 2013 was $10 million, same as the year-ago quarter.  Net sales were $53 million, up 15%.

For GAAP reporting, Medicare Part D premiums are recognized evenly throughout the year when they become due, and benefit costs are recognized when the costs are incurred.   Due to the design of the product, premiums are evenly distributed throughout the year, but benefit costs are higher earlier in the year.   As a result, under GAAP, benefit costs can exceed premiums in the first part of the year but be less than premiums during the remainder of the year.  For net operating income purposes, Torchmark  defers excess benefits incurred in earlier interim periods to later periods in order to more closely match the benefit cost with the associated revenue.  For the full year, the total premiums and benefits are the same under this alternative method as they are under GAAP.  The Company reports this difference between GAAP and management's non-GAAP disclosures, net of tax, as a reconciling item for the interim periods   in the Financial Summary included in this release.   A chart reconciling the Company's non-GAAP financial presentation to a GAAP presentation may be viewed on the Company's website at www.torchmarkcorp.com on the Investor Relations page at Financial Reports.

Administrative Expenses were $46 million, up 3% from the year-ago quarter. The ratio of administrative expenses to premiums was 6.1% compared to 6.0% in the year-ago quarter.

INVESTMENTS

Excess Investment Income – comparing the fourth quarter 2013 with the fourth quarter 2012:

Management uses excess investment income as the measure to evaluate the performance of the investment segment.  It is net investment income reduced by required interest.  Required interest includes interest credited to net policy liabilities and interest on debt.



Quarter Ended



December 31,



(dollars in millions, except per share data)



2013



2012


% Chg.









Net investment income 


$184.6



$180.6


2









Required interest:









Interest on net policy liabilities


(110.8)



(103.5)


7


Interest on debt


(19.1)



(21.3)


(11)










Total required interest


(129.9)



(124.8)


4









Excess investment income 


$54.8



$55.8


(2)


Per share


$0.60



$0.58


3

Net investment income increased 2% while average invested assets increased 7%.  This is due primarily to lower new money yields and calls of hybrid bank securities early in 2013. Required interest on net policy liabilities increased 7%, while the average liabilities increased 8%. The weighted average discount rate for the net policy liabilities declined to 5.5% from 5.6% a year ago.

Investment Portfolio

The composition of the investment portfolio at December 31, 2013 is as follows:                     



Invested Assets



(dollars in millions)



$


% of Total






Fixed maturities (at amortized cost)


$12,489


96

Equities


1


0

Policy loans


449


3

Other long-term investments


13


0

Short-term investments


77


1






Total


$13,029


100%

Fixed maturities at amortized cost by asset class are as follows:



Fixed Maturities



(dollars in millions)





Below





Investment


Investment





Grade


Grade


Total








Corporate bonds


$9,777


$357


$10,134

Redeemable preferred stock: 








U.S.  


299


144


443


Foreign


60




60

Municipal


1,278




1,278

Government-sponsored enterprises


347




347

Government and agencies


122




122

Collateralized debt obligations




66


66

Residential mortgage-backed securities


8




8

Other asset-backed securities


31




31








Total


$11,923


$566


$12,489

The market value of Torchmark's fixed maturity portfolio was $12.9 billion; $390 million higher than amortized cost of $12.5 billion.  The $390 million of net unrealized gains was approximately $99 million lower than it was at September 30, 2013.  Net unrealized gains were comprised of gross unrealized gains of $801 million and gross unrealized losses of $411 million.

The investment portfolio contains no securities backed by sub-prime mortgages.   Torchmark has no counterparty risk as it is not a party to any credit default swaps or other derivatives contracts and does not participate in securities lending.

At amortized cost, 95.5% of fixed maturities (96% at market value) were rated "investment grade." 

The fixed maturity portfolio earned an annual effective yield of 5.90% during the fourth quarter of 2013, compared to 6.20% in the year-ago quarter, reflecting the effect of lower new money yields and calls of bank hybrid securities early in 2013.

Acquisitions of fixed maturity investments during the quarter totaled $319 million at cost.  Comparable information for acquisitions of fixed maturity investments is as follows:



Quarter Ended



December 31,



2013



2012







Average annual effective yield


5.4%



4.0%

Average rating


BBB+



BBB+

Average life (in years) to:







First call


24.9



27.0


Maturity


25.2



24.4

Realized Capital Gains on Investments

Torchmark had a net realized capital gain during the quarter of $1.5 million ($1.0 million after tax) resulting primarily from dispositions of fixed maturities.  For the year, net realized capital gains were $8.0 million.

SHARE REPURCHASE  

During the quarter, the Company repurchased 1.3 million shares of Torchmark Corporation common stock at a total cost of $94.9 million at an average share price of $74.45.  For the year, the Company repurchased 5.5 million shares at an average share price of $65.21.

LIQUIDITY/CAPITAL:

Torchmark's operations consist primarily of writing basic protection life and supplemental health insurance policies which generate strong and stable cash flows. 

Capital at the insurance companies is sufficient to support current operations.  In addition, the parent company had $60 million of liquid assets at December 31, 2013.

EARNINGS GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2014:

Torchmark projects that for the year ending December 31, 2014, net operating income per share will be in a range of $6.05 to $6.35

OTHER FINANCIAL INFORMATION:

More detailed financial information including various GAAP and Non-GAAP ratios and financial measurements are located at www.torchmarkcorp.com on the Investor Relations page under "Financial Reports and Other Financial Information." 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS:

This press release may contain forward-looking statements within the meaning of the federal securities laws.  These prospective statements reflect management's current expectations, but are not guarantees of future performance.  Accordingly, please refer to Torchmark's cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company's Form 10-K for the year ended December 31, 2012, and any subsequent Forms 10-Q on file with the Securities and Exchange Commission and on the Company's website at www.torchmarkcorp.com on the Investor Relations page.  Torchmark specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.

EARNINGS RELEASE CONFERENCE CALL WEBCAST:

Torchmark will provide a live audio webcast of its fourth quarter 2013 earnings release conference call with financial analysts at 11:30 a.m. (Eastern) tomorrow, February 4, 2014.  Access to the live webcast and replay will be available at www.torchmarkcorp.com on the Investor Relations page, at the Conference Calls on the Web icon.  Immediately following this press release, supplemental financial reports will be available before the conference call on the Investor Relations page menu of the Torchmark website at "Financial Reports and Other Financial Information."

SOURCE Torchmark Corporation

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and sh...
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
In IT, we sometimes coin terms for things before we know exactly what they are and how they’ll be used. The resulting terms may capture a common set of aspirations and goals – as “cloud” did broadly for on-demand, self-service, and flexible computing. But such a term can also lump together diverse and even competing practices, technologies, and priorities to the point where important distinctions are glossed over and lost.
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
All clouds are not equal. To succeed in a DevOps context, organizations should plan to develop/deploy apps across a choice of on-premise and public clouds simultaneously depending on the business needs. This is where the concept of the Lean Cloud comes in - resting on the idea that you often need to relocate your app modules over their life cycles for both innovation and operational efficiency in the cloud. In his session at @DevOpsSummit at19th Cloud Expo, Valentin (Val) Bercovici, CTO of Soli...
"Once customers get a year into their IoT deployments, they start to realize that they may have been shortsighted in the ways they built out their deployment and the key thing I see a lot of people looking at is - how can I take equipment data, pull it back in an IoT solution and show it in a dashboard," stated Dave McCarthy, Director of Products at Bsquare Corporation, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Everyone knows that truly innovative companies learn as they go along, pushing boundaries in response to market changes and demands. What's more of a mystery is how to balance innovation on a fresh platform built from scratch with the legacy tech stack, product suite and customers that continue to serve as the business' foundation. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, discussed why and how ReadyTalk diverted from healthy revenue and mor...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
The Internet of Things (IoT) promises to simplify and streamline our lives by automating routine tasks that distract us from our goals. This promise is based on the ubiquitous deployment of smart, connected devices that link everything from industrial control systems to automobiles to refrigerators. Unfortunately, comparatively few of the devices currently deployed have been developed with an eye toward security, and as the DDoS attacks of late October 2016 have demonstrated, this oversight can ...
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2017 New York. The 20th Cloud Expo and 7th @ThingsExpo will take place on June 6-8, 2017, at the Javits Center in New York City, NY. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Internet to enable us all to im...
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
"ReadyTalk is an audio and web video conferencing provider. We've really come to embrace WebRTC as the platform for our future of technology," explained Dan Cunningham, CTO of ReadyTalk, in this SYS-CON.tv interview at WebRTC Summit at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.