Torchmark Corporation Reports First Quarter 2019 Results
HIGHLIGHTS:
- Net income as an ROE was 12.9%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.7%.
- Life underwriting margin at Globe Life Direct Response increased over the year-ago quarter by 11% and
American Income Exclusive Agency andLiberty National Exclusive Agency both increased over the year-ago quarter by 10%. - Health underwriting margin at
Family Heritage Exclusive Agency increased over the year-ago quarter by 14%. - Life premiums increased over the year-ago quarter by 7% at
American Income Exclusive Agency and health premiums increased over the year-ago quarter by 8% atFamily Heritage Exclusive Agency . - Net life sales at
Liberty National Exclusive Agency increased over the year-ago quarter by 8% and net health sales atLiberty National Exclusive Agency increased over the year-ago quarter by 12%. - 1.1 million shares of common stock were repurchased during the quarter.
FINANCIAL SUMMARY
Quarter End
(Dollar amounts in millions, except per share data)
(Unaudited)
Net operating income, a non-GAAP(1) financial measure, has been used consistently by
Per Share |
Quarter Ended |
||||||||||||||||||||||
|
|
||||||||||||||||||||||
2019 |
2018 |
% |
2019 |
2018 |
% |
||||||||||||||||||
Insurance underwriting income(2) |
$ |
1.56 |
$ |
1.37 |
14 |
$ |
174.8 |
$ |
160.3 |
9 |
|||||||||||||
Excess investment income(2) |
0.58 |
0.53 |
9 |
65.6 |
61.9 |
6 |
|||||||||||||||||
Parent company expense |
(0.02) |
(0.02) |
(2.6) |
(2.3) |
|||||||||||||||||||
Income tax |
(0.41) |
(0.37) |
11 |
(46.6) |
(42.8) |
9 |
|||||||||||||||||
Stock compensation benefit (expense), net of tax |
(0.06) |
(0.04) |
(6.4) |
(5.0) |
|||||||||||||||||||
Net operating income |
1.64 |
1.47 |
12 |
184.7 |
172.2 |
7 |
|||||||||||||||||
Reconciliation to net income (GAAP): |
|||||||||||||||||||||||
Reconciling items, net of tax: |
|||||||||||||||||||||||
Realized Gain (Loss)—Investments |
0.01 |
0.01 |
1.1 |
1.5 |
|||||||||||||||||||
Part D adjustments—discontinued operations |
— |
— |
— |
(0.1) |
|||||||||||||||||||
Administrative settlements |
— |
— |
(0.4) |
— |
|||||||||||||||||||
Net income(3) |
$ |
1.65 |
$ |
1.49 |
$ |
185.3 |
$ |
173.6 |
|||||||||||||||
Weighted average diluted shares outstanding (in thousands)
|
112,329 |
116,750 |
|||||||||||||||||||||
(1) GAAP is defined as accounting principles generally accepted in |
(2) Definitions included within this document. |
(3) A GAAP-basis consolidated statement of operations is included in the appendix of this report. |
Note: Tables in this news release may not sum due to rounding. |
FINANCIAL SUMMARY, (continued)
Management vs. GAAP Measures
(Dollar amounts in millions, except per share data)
(Unaudited)
Shareholders' equity, excluding net unrealized gains on fixed maturities, and book value per share, excluding net unrealized gains on fixed maturities, are non-GAAP measures that are utilized by management to view the business without the effect of unrealized gains or losses which are primarily attributable to fluctuation in interest rates associated with the available-for-sale portfolio. Management views the business in this manner because the Company has the ability and generally, the intent, to hold investments to maturity and meaningful trends can more easily be identified without the fluctuations. Shareholders' equity and book value per share are the most directly comparable GAAP measures.
|
|||||||
2019 |
2018 |
||||||
Net income as an ROE(1) |
12.9 |
% |
11.5 |
% |
|||
Net operating income as an ROE (excluding net unrealized gains on fixed maturities) |
14.7 |
% |
14.6 |
% |
|||
Shareholders' equity |
$ |
6,043 |
$ |
5,820 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(969) |
(1,067) |
|||||
Shareholders' equity, excluding net unrealized gains on fixed maturities |
$ |
5,074 |
$ |
4,753 |
|||
Book value per share |
$ |
54.13 |
$ |
50.13 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(8.68) |
(9.19) |
|||||
Book value per share, excluding net unrealized gains on fixed maturities |
$ |
45.45 |
$ |
40.94 |
|||
(1) Calculated using average shareholders' equity for the measurement period. |
CONTINUING INSURANCE OPERATIONS—comparing Q1 2019 with Q1 2018:
Life insurance accounted for 73% of the Company's insurance underwriting margin for the quarter and 70% of total premium revenue.
Health insurance accounted for 26% of
Net sales of life insurance increased 4%, while net health sales increased 2%.
INSURANCE PREMIUM REVENUE |
|||||||||
Quarter Ended |
|||||||||
|
|
% |
|||||||
Life insurance |
$ |
624.3 |
$ |
598.3 |
4 |
||||
Health insurance |
266.7 |
251.8 |
6 |
||||||
Total |
$ |
891.0 |
$ |
850.1 |
5 |
INSURANCE UNDERWRITING INCOME
(Dollar amounts in millions, except per share data)
(Unaudited)
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. Management believes this information helps provide a better understanding of the business and a more meaningful analysis of underwriting results by distribution channel. Insurance underwriting income, a non-GAAP measure, is a component of net operating income, which is reconciled to net income in the Financial Summary section above.
Quarter Ended |
||||||||||||||
|
% of |
|
% of |
% |
||||||||||
Insurance underwriting margins: |
||||||||||||||
Life |
$ |
169.8 |
27 |
$ |
154.8 |
26 |
10 |
|||||||
Health |
61.5 |
23 |
58.0 |
23 |
6 |
|||||||||
Annuity |
2.4 |
2.6 |
||||||||||||
233.8 |
215.5 |
9 |
||||||||||||
Other income |
0.2 |
0.3 |
||||||||||||
Administrative expenses |
(59.2) |
(55.5) |
7 |
|||||||||||
Insurance underwriting income |
$ |
174.8 |
$ |
160.3 |
9 |
|||||||||
Per share |
$ |
1.56 |
$ |
1.37 |
14 |
Administrative Expenses were
Life Insurance Results by Distribution Channel
(Dollar amounts in millions)
(Unaudited)
Total premium, underwriting margins, first-year collected premium and net sales by all distribution channels are shown at www.torchmarkcorp.com on the Investors page at "Financial Reports."
Life Underwriting Margin |
||||||||||||||||
Quarter Ended |
||||||||||||||||
|
||||||||||||||||
2019 |
2018 |
|||||||||||||||
Amount |
% of |
Amount |
% of |
% |
||||||||||||
|
$ |
93.3 |
33 |
$ |
84.9 |
32 |
10 |
|||||||||
Globe Life Direct Response |
37.4 |
17 |
33.5 |
16 |
11 |
|||||||||||
|
18.0 |
25 |
16.4 |
24 |
10 |
|||||||||||
Other |
21.2 |
39 |
20.0 |
37 |
6 |
|||||||||||
Total |
$ |
169.8 |
27 |
$ |
154.8 |
26 |
10 |
|||||||||
Life Premium |
|||||||||||||||||
Quarter Ended |
|||||||||||||||||
|
|||||||||||||||||
2019 |
2018 |
% |
|||||||||||||||
|
$ |
281.8 |
$ |
262.5 |
7 |
||||||||||||
Globe Life Direct Response |
217.6 |
211.8 |
3 |
||||||||||||||
|
70.7 |
69.6 |
2 |
||||||||||||||
Other |
54.2 |
54.4 |
— |
||||||||||||||
Total |
$ |
624.3 |
$ |
598.3 |
4 |
||||||||||||
Life |
|||||||||||||||||
Quarter Ended |
|||||||||||||||||
|
|||||||||||||||||
2019 |
2018 |
% |
|||||||||||||||
|
$ |
57.6 |
$ |
55.1 |
4 |
||||||||||||
Globe Life Direct Response |
32.4 |
32.2 |
1 |
||||||||||||||
|
12.3 |
11.4 |
8 |
||||||||||||||
Other |
3.1 |
2.7 |
16 |
||||||||||||||
Total |
$ |
105.3 |
$ |
101.3 |
4 |
||||||||||||
(1) |
Health Insurance Results by Distribution Channel |
||||||||||||||||
Health Underwriting Margin |
||||||||||||||||
Quarter Ended |
||||||||||||||||
|
||||||||||||||||
2019 |
2018 |
|||||||||||||||
Amount |
% of |
Amount |
% of |
% |
||||||||||||
|
$ |
17.7 |
25 |
$ |
15.5 |
23 |
14 |
|||||||||
|
15.9 |
15 |
15.4 |
16 |
3 |
|||||||||||
|
12.8 |
53 |
11.8 |
52 |
8 |
|||||||||||
|
12.0 |
25 |
12.0 |
24 |
— |
|||||||||||
Direct Response |
3.2 |
16 |
3.2 |
17 |
(1) |
|||||||||||
Total |
$ |
61.5 |
23 |
$ |
58.0 |
23 |
6 |
|||||||||
Health Premium |
||||||||||
Quarter Ended |
||||||||||
|
||||||||||
2019 |
2018 |
% |
||||||||
|
$ |
71.3 |
$ |
66.2 |
8 |
|||||
|
102.9 |
94.3 |
9 |
|||||||
|
24.1 |
22.7 |
6 |
|||||||
|
48.2 |
49.2 |
(2) |
|||||||
Direct Response |
20.3 |
19.4 |
4 |
|||||||
Total |
$ |
266.7 |
$ |
251.8 |
6 |
|||||
Health |
||||||||||
Quarter Ended |
||||||||||
|
||||||||||
2019 |
2018 |
% |
||||||||
|
$ |
13.0 |
$ |
13.5 |
(3) |
|||||
|
14.9 |
14.2 |
5 |
|||||||
|
3.9 |
3.4 |
15 |
|||||||
|
5.6 |
5.0 |
12 |
|||||||
Direct Response |
1.1 |
1.6 |
(27) |
|||||||
Total |
$ |
38.5 |
$ |
37.6 |
2 |
|||||
(1) |
Agent Producing Count |
|||||||||||||||||||||||||||||
Average Producing Agent Count |
End of Quarter Agent Count |
||||||||||||||||||||||||||||
Quarter Ended |
Quarter Ended |
||||||||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||||
2019 |
2018 |
% |
2018 |
% |
2019 |
2018 |
% |
2018 |
% |
||||||||||||||||||||
|
6,865 |
6,780 |
1 |
6,936 |
(1) |
7,233 |
6,947 |
4 |
6,894 |
5 |
|||||||||||||||||||
|
2,179 |
2,087 |
4 |
2,172 |
— |
2,297 |
2,224 |
3 |
2,159 |
6 |
|||||||||||||||||||
|
1,002 |
988 |
1 |
1,129 |
(11) |
1,020 |
1,026 |
(1) |
1,097 |
(7) |
INVESTMENTS
EXCESS INVESTMENT INCOME
(Dollar amounts in millions, except per share data)
(Unaudited)
Management uses excess investment income as the measure to evaluate the performance of the investment segment. It is defined as net investment income less both the required interest attributable to net policy liabilities and the interest on debt. We also view excess investment income per diluted common share as an important and useful measure to evaluate performance of the investment segment as it takes into consideration our stock repurchase program.
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
Net investment income |
$ |
226.7 |
$ |
218.1 |
4 |
||||
Required interest: |
|||||||||
Interest on net policy liabilities(1) |
(139.8) |
(134.5) |
4 |
||||||
Interest on debt |
(21.3) |
(21.6) |
(2) |
||||||
Total required interest |
(161.1) |
(156.1) |
3 |
||||||
Excess investment income |
$ |
65.6 |
$ |
61.9 |
6 |
||||
Per share |
$ |
0.58 |
$ |
0.53 |
9 |
||||
(1) Interest on net policy liabilities is a component of total policyholder benefits (a GAAP measure). |
Net investment income increased 4%, while average invested assets increased 5%. Required interest on net policy liabilities increased 4%, while average net policy liabilities increased 3%. The weighted average discount rate for the net policy liabilities was 5.6% and in line with the year-ago quarter.
Investment Portfolio
The composition of the investment portfolio at book value at
$ |
% of Total |
|||||
Fixed maturities at fair value(1) |
$ |
17,224 |
95 |
% |
||
Policy loans |
555 |
3 |
||||
Other long-term investments(2) |
232 |
1 |
||||
Short-term investments |
126 |
1 |
||||
Total |
$ |
18,137 |
100 |
% |
||
(1) Fixed maturities at amortized cost as of |
(2) Includes investments accounted for under the fair value option at amortized cost of |
Fixed maturities at amortized cost by asset class as of
Investment |
Below |
Total |
|||||||||
Corporate bonds |
$ |
13,349 |
$ |
599 |
$ |
13,948 |
|||||
Municipals |
1,426 |
— |
1,426 |
||||||||
Government-sponsored enterprises |
328 |
— |
328 |
||||||||
Government and agencies |
82 |
— |
82 |
||||||||
Collateralized debt obligations |
— |
57 |
57 |
||||||||
Residential mortgage-backed securities |
1 |
— |
1 |
||||||||
Other asset-backed securities |
131 |
14 |
146 |
||||||||
Total |
$ |
15,317 |
$ |
671 |
$ |
15,988 |
The market value of
At amortized cost and market value, 96% of fixed maturities were rated "investment grade." The fixed maturity portfolio earned an annual effective yield of 5.53% during the first quarter of 2019, compared to 5.58% in the year-ago quarter.
Acquisitions of fixed maturity investments during the quarter totaled
Fixed Maturity Acquisitions |
|||
Quarter Ended |
|||
|
|||
2019 |
2018 |
||
Average annual effective yield |
4.9% |
4.5% |
|
Average rating |
A+ |
A |
|
Average life (in years) to: |
|||
Next call |
19.5 |
14.8 |
|
Maturity |
28.2 |
23.4 |
SHARE REPURCHASE:
During the quarter, the Company repurchased 1.1 million shares of
LIQUIDITY/CAPITAL:
EARNINGS GUIDANCE FOR THE YEAR ENDING
NON-GAAP MEASURES:
In this news release,
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
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
APPENDIX |
|||||||
|
|||||||
Three Months Ended |
|||||||
2019 |
2018 |
||||||
Revenue: |
|||||||
Life premium |
$ |
624 |
$ |
598 |
|||
Health premium |
267 |
252 |
|||||
Total premium |
891 |
850 |
|||||
Net investment income |
227 |
218 |
|||||
Realized gains (losses) |
1 |
2 |
|||||
Other income |
— |
— |
|||||
Total revenue |
1,119 |
1,070 |
|||||
Benefits and expenses: |
|||||||
Life policyholder benefits |
410 |
401 |
|||||
Health policyholder benefits |
170 |
161 |
|||||
Other policyholder benefits |
8 |
9 |
|||||
Total policyholder benefits |
588 |
570 |
|||||
Amortization of deferred acquisition costs |
136 |
130 |
|||||
Commissions, premium taxes, and non-deferred acquisition costs |
73 |
70 |
|||||
Other operating expense |
73 |
67 |
|||||
Interest expense |
21 |
22 |
|||||
Total benefits and expenses |
891 |
858 |
|||||
Income before income taxes |
228 |
213 |
|||||
Income tax benefit (expense) |
(43) |
(39) |
|||||
Income from continuing operations |
185 |
174 |
|||||
Income (loss) from discontinued operations, net of tax |
— |
— |
|||||
Net income |
$ |
185 |
$ |
174 |
|||
Basic net income per common share |
$ |
1.68 |
$ |
1.52 |
|||
Diluted net income per common share |
$ |
1.65 |
$ |
1.49 |
View original content:http://www.prnewswire.com/news-releases/torchmark-corporation-reports-first-quarter-2019-results-300834130.html
SOURCE
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