Torchmark Opens 3Q Earnings By Beating Expectations

Torchmark Corp. reported net income of $153 million in the third quarter, an increase of less than 1 percent compared to the year-ago period.

The McKinney, Texas-based company had net income of $1.29 per share. Earnings, adjusted for non-recurring gains, were $1.23 per share. Torchmark's report kicked off third-quarter earnings season for the life and annuity sector and beat analysts’ forecasts.

The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.20 per share.

A conference call with analysts is scheduled for Wednesday.

Torchmark’s subsidiaries specialize in life and supplemental health insurance for middle-income Americans and sell insurance contracts through direct response, exclusive and independent agency channels.

Torchmark shares have climbed 14 percent since the beginning of the year, the Associated Press reported.

Analysts Expect 'Solid' Quarter

Life insurance stocks are up more than 17 percent this year and have outperformed the Standard & Poor's 500 index 500 and other companies in the financial sector.

The Standard & Poor's 500 is up 15 percent year to date and short-term interest rates have gone up 75 basis points since December. Higher rates mean insurers generate more interest on fixed-income investments.

As a result, life insurers are expected to turn in “another solid quarter,” analysts with Keefe, Bruyette & Woods wrote in a research note.

Actuarial reviews, many of which are conducted in the third quarter, might pose some risk to insurance stocks, KBW analysts said.

KBW analysts declared Prudential Financial their top pick this earnings cycle due to the company’s capital position and to the company’s Individual Annuities and Retirement segment.

Prudential earlier this year announced a restructuring of its annuity unit, though the benefits were expected to begin in the fourth quarter.

Reading the Tea Leaves

Analysts will be looking this quarter for insurance managers to shed light on how the delay of the Department of Labor fiduciary rule will affect annuity sales and distribution.

Key elements of the rule are expected to be delayed until July 1, 2019, which will give the industry more time to adjust products and distribution strategies.

The rule makes it harder for advisors to sell variable annuities and fixed indexed annuities (FIA), so any delay would immediately benefit those product lines the most.

Overall, sales of FIAs seem to be recovering in the wake of the initial implementation phase of the DOL rule in June, SunTrust Robinson Humphrey analyst Mark Hughes wrote in an Aug. 24 note. Third-quarter FIA sales numbers are expected by the end of next month.

Market trackers like LIMRA Secure Retirement Institute have already revised upward their 2018 annuity sales forecasts in light of the rule delays.

Analyst are likely to pepper executives with questions about tax reform proposals to cut corporate tax rates, a move seen as favoring life and annuity companies.

“Tax reform is likely to be a modest positive for life insurers’ earnings and cash generation,” wrote Morgan Stanley analyst Nigel Dally in a research note earlier this month.

Tax reform is considered the GOP’s last chance to notch a legislative win. Former House Speaker John Boehner told life insurance company executives this week at LIMRA’s annual conference that the odds of success were “fifty-fifty.”

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].