TORCHMARK CORPORATION REPORTS Second Quarter 2019 Results
HIGHLIGHTS:
- Net income as an ROE was 12.3%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.6%.
- Life underwriting margin at
American Income Exclusive Agency and Globe Life Direct Response both increased over the year-ago quarter by 9%. - 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 health sales increased over the year-ago quarter by 14%.
- 979,215 shares of common stock were repurchased during the quarter.
RESULTS OF OPERATIONS
Net operating income, a non-GAAP(1) financial measure, has been used consistently by
The following table represents
Operating Summary |
|||||||||||||||||||
Per Share |
|||||||||||||||||||
Three Months Ended |
Three Months Ended |
||||||||||||||||||
2019 |
2018 |
% |
2019 |
2018 |
% |
||||||||||||||
Insurance underwriting income(2) |
$ |
1.60 |
$ |
1.46 |
10 |
$ |
178,556 |
$ |
168,446 |
6 |
|||||||||
Excess investment income(2) |
0.58 |
0.52 |
12 |
64,678 |
59,949 |
8 |
|||||||||||||
Parent company expense |
(0.03) |
(0.02) |
(2,872) |
(2,847) |
|||||||||||||||
Income tax |
(0.42) |
(0.38) |
11 |
(47,114) |
(44,251) |
6 |
|||||||||||||
Stock compensation benefit (expense), net of tax |
(0.06) |
(0.05) |
(6,366) |
(6,237) |
|||||||||||||||
Net operating income |
1.67 |
1.51 |
11 |
186,882 |
175,060 |
7 |
|||||||||||||
Reconciling items, net of tax: |
|||||||||||||||||||
Realized Gain (Loss)—Investments |
0.04 |
0.08 |
4,072 |
9,333 |
|||||||||||||||
Part D adjustments—Discontinued operations |
— |
— |
(43) |
32 |
|||||||||||||||
Legal proceedings |
(0.04) |
— |
(4,345) |
— |
|||||||||||||||
Net income(3) |
$ |
1.67 |
$ |
1.59 |
$ |
186,566 |
$ |
184,425 |
|||||||||||
Weighted average diluted shares outstanding |
111,586 |
115,651 |
(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 earnings release may not sum due to rounding. |
MANAGEMENT VS. GAAP MEASURES
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 a ROE(1) |
12.3 |
% |
12.2 |
% |
|||
Net operating income as a ROE (excluding net unrealized gains on fixed maturities) |
14.6 |
% |
14.6 |
% |
|||
Shareholders' equity |
$ |
6,700,398 |
$ |
5,571,609 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(1,533,945) |
(731,707) |
|||||
Shareholders' equity, excluding net unrealized gains on fixed maturities |
$ |
5,166,453 |
$ |
4,839,902 |
|||
Book value per share |
$ |
60.22 |
$ |
48.44 |
|||
Impact of adjustment to exclude net unrealized gains on fixed maturities |
(13.79) |
(6.36) |
|||||
Book value per share, excluding net unrealized gains on fixed maturities |
$ |
46.43 |
$ |
42.08 |
(1) |
Calculated using average shareholders' equity for the measurement period. |
INSURANCE OPERATIONS—comparing Q2 2019 with Q2 2018:
Life insurance accounted for 74% of the Company's insurance underwriting margin for the quarter and 70% of total premium revenue.
Health insurance accounted for 25% of
Net sales of life insurance increased 1%, while net health sales increased 14%.
The following table summarizes
Insurance Premium Revenue |
|||||||||
Quarter Ended |
|||||||||
|
|
% |
|||||||
Life insurance |
$ |
631,201 |
$ |
602,534 |
5 |
||||
Health insurance |
266,282 |
251,440 |
6 |
||||||
Annuity |
1 |
5 |
|||||||
Total |
$ |
897,484 |
$ |
853,979 |
5 |
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. 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 Results of Operations section above.
The following table summarizes
Insurance Underwriting Income |
|||||||||||||
Quarter Ended |
|||||||||||||
|
% of |
|
% of |
% |
|||||||||
Insurance underwriting margins: |
|||||||||||||
Life |
$ |
175,050 |
28 |
$ |
161,177 |
27 |
9 |
||||||
Health |
60,159 |
23 |
59,538 |
24 |
1 |
||||||||
Annuity |
2,365 |
2,566 |
|||||||||||
237,574 |
223,281 |
6 |
|||||||||||
Other income |
398 |
441 |
|||||||||||
Administrative expenses |
(59,416) |
(55,276) |
7 |
||||||||||
Insurance underwriting income |
$ |
178,556 |
$ |
168,446 |
6 |
||||||||
Per share |
$ |
1.60 |
$ |
1.46 |
10 |
Administrative Expenses were
LIFE INSURANCE RESULTS BY DISTRIBUTION CHANNEL
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 |
% |
|||||||||||
|
97,006 |
34 |
88,616 |
33 |
9 |
||||||||||
Globe Life Direct Response |
39,042 |
18 |
35,735 |
17 |
9 |
||||||||||
|
18,136 |
25 |
17,045 |
25 |
6 |
||||||||||
Other Agencies |
20,866 |
39 |
19,781 |
36 |
5 |
||||||||||
Total |
$ |
175,050 |
28 |
$ |
161,177 |
27 |
9 |
Life Premium |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
|
$ |
288,334 |
$ |
269,658 |
7 |
||||
Globe Life Direct Response |
217,278 |
209,021 |
4 |
||||||
|
71,478 |
69,456 |
3 |
||||||
Other Agencies |
54,111 |
54,399 |
(1) |
||||||
Total |
$ |
631,201 |
$ |
602,534 |
5 |
Life |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
|
$ |
61,048 |
$ |
59,670 |
2 |
||||
Globe Life Direct Response |
34,456 |
35,040 |
(2) |
||||||
|
13,428 |
12,869 |
4 |
||||||
Other Agencies |
3,207 |
3,678 |
(13) |
||||||
Total |
$ |
112,139 |
$ |
111,257 |
1 |
(1) |
Net sales is annualized premium issued (gross premium that would be received during the policies' first year in force and assuming that none of the policies lapsed or terminated), net of cancellations in the first thirty days after issue, except in the case of Globe Life Direct Response where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued. |
HEALTH INSURANCE RESULTS BY DISTRIBUTION CHANNEL
Health Underwriting Margin |
|||||||||||||||
Quarter Ended |
|||||||||||||||
|
|||||||||||||||
2019 |
2018 |
||||||||||||||
Amount |
% of |
Amount |
% of |
% |
|||||||||||
|
$ |
14,390 |
14 |
$ |
15,578 |
17 |
(8) |
||||||||
|
17,901 |
25 |
15,771 |
23 |
14 |
||||||||||
|
11,837 |
25 |
12,371 |
26 |
(4) |
||||||||||
|
13,040 |
53 |
12,682 |
54 |
3 |
||||||||||
Direct Response |
2,991 |
16 |
3,136 |
17 |
(5) |
||||||||||
Total |
$ |
60,159 |
23 |
$ |
59,538 |
24 |
1 |
Health Premium |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
|
$ |
102,254 |
$ |
93,555 |
9 |
||||
|
73,037 |
67,635 |
8 |
||||||
|
47,292 |
47,879 |
(1) |
||||||
|
24,450 |
23,372 |
5 |
||||||
Direct Response |
19,249 |
18,999 |
1 |
||||||
Total |
$ |
266,282 |
$ |
251,440 |
6 |
Health |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
|
$ |
16,587 |
$ |
13,410 |
24 |
||||
|
16,898 |
15,537 |
9 |
||||||
|
5,864 |
5,277 |
11 |
||||||
|
4,299 |
3,700 |
16 |
||||||
Direct Response |
582 |
986 |
(41) |
||||||
Total |
$ |
44,230 |
$ |
38,910 |
14 |
(1) |
Net sales is annualized premium issued (gross premium that would be received during the policies' first year in force and assuming that none of the policies lapsed or terminated), net of cancellations in the first thirty days after issue, except in the case of Globe Life Direct Response where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. We believe that net sales is a better indicator of the rate of premium growth than annualized premium issued. |
PRODUCING EXCLUSIVE AGENT COUNT RESULTS BY DISTRIBUTION CHANNEL
Quarterly Average |
End of Quarter |
||||||||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||||
2019 |
2018 |
% |
2019 |
% |
2019 |
2018 |
% |
2019 |
% |
||||||||||||||||||||
|
7,364 |
7,064 |
4 |
6,865 |
7 |
7,477 |
7,143 |
5 |
7,233 |
3 |
|||||||||||||||||||
|
2,290 |
2,185 |
5 |
2,179 |
5 |
2,390 |
2,198 |
9 |
2,297 |
4 |
|||||||||||||||||||
|
1,081 |
1,052 |
3 |
1,002 |
8 |
1,089 |
1,090 |
— |
1,020 |
7 |
(1) |
The quarterly average producing agent count is based on the actual count at the end of each week during the period. |
INVESTMENTS
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.
The following table summarizes
Excess Investment Income |
|||||||||
Quarter Ended |
|||||||||
|
|||||||||
2019 |
2018 |
% |
|||||||
Net investment income |
$ |
227,425 |
$ |
218,568 |
4 |
||||
Required interest: |
|||||||||
Interest on net policy liabilities(1) |
(141,315) |
(136,208) |
4 |
||||||
Interest on debt |
(21,432) |
(22,411) |
(4) |
||||||
Total required interest |
(162,747) |
(158,619) |
3 |
||||||
Excess investment income |
$ |
64,678 |
$ |
59,949 |
8 |
||||
Per share |
$ |
0.58 |
$ |
0.52 |
12 |
(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.
The composition of the investment portfolio at book value at
Investment Portfolio |
||||||
As of |
||||||
|
||||||
Amount |
% of Total |
|||||
Fixed maturities at fair value(1) |
$ |
17,934,274 |
95 |
% |
||
Policy loans |
560,469 |
3 |
||||
Other long-term investments(2) |
289,147 |
2 |
||||
Short-term investments |
74,116 |
— |
||||
Total |
$ |
18,858,006 |
100 |
% |
(1) |
Fixed maturities at amortized cost as of |
(2) |
Includes |
Fixed maturities at amortized cost by asset class as of
Fixed Maturity Portfolio by Sector |
|||||||||||
As of |
|||||||||||
|
|||||||||||
Investment |
Below |
Total |
|||||||||
Corporate bonds |
$ |
13,430,284 |
$ |
573,556 |
$ |
14,003,840 |
|||||
Municipal |
1,364,901 |
444 |
1,365,345 |
||||||||
Government-sponsored enterprises |
330,339 |
— |
330,339 |
||||||||
Government and agencies |
81,755 |
— |
81,755 |
||||||||
Collateralized debt obligations |
— |
57,172 |
57,172 |
||||||||
Other asset-backed securities |
131,421 |
14,400 |
145,821 |
||||||||
Total |
$ |
15,338,700 |
$ |
645,572 |
$ |
15,984,272 |
The market value of
At amortized cost, 96% of fixed maturities (97% at market value) were rated "investment grade." The fixed maturity portfolio earned an annual effective yield of 5.50% during the second quarter of 2019, compared with 5.57% in the year-ago quarter.
Comparable information for acquisitions of fixed maturity investments is as follows:
Fixed Maturity Acquisitions |
|||||||
Quarter Ended |
|||||||
|
|||||||
2019 |
2018 |
||||||
Amount |
$ |
252,742 |
$ |
181,688 |
|||
Average annual effective yield |
5.0 |
% |
5.2 |
% |
|||
Average rating |
A- |
BBB+ |
|||||
Average life (in years) to: |
|||||||
Next call |
23.7 |
16.0 |
|||||
Maturity |
29.2 |
18.4 |
SHARE REPURCHASE:
During the quarter, the Company repurchased 979,215 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 |
|||||||||||||||
|
|||||||||||||||
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
Revenue: |
|||||||||||||||
Life premium |
$ |
631,201 |
$ |
602,534 |
$ |
1,255,490 |
$ |
1,200,837 |
|||||||
Health premium |
266,282 |
251,440 |
532,966 |
503,238 |
|||||||||||
Other premium |
1 |
5 |
1 |
10 |
|||||||||||
Total premium |
897,484 |
853,979 |
1,788,457 |
1,704,085 |
|||||||||||
Net investment income |
227,425 |
218,568 |
454,098 |
436,652 |
|||||||||||
Realized gains (losses) |
5,154 |
11,813 |
6,483 |
13,764 |
|||||||||||
Other income |
398 |
416 |
639 |
711 |
|||||||||||
Total revenue |
1,130,461 |
1,084,776 |
2,249,677 |
2,155,212 |
|||||||||||
Benefits and expenses: |
|||||||||||||||
Life policyholder benefits |
410,961 |
399,334 |
820,653 |
799,915 |
|||||||||||
Health policyholder benefits |
170,511 |
160,461 |
340,528 |
321,080 |
|||||||||||
Other policyholder benefits |
7,890 |
8,582 |
15,938 |
17,271 |
|||||||||||
Total policyholder benefits |
589,362 |
568,377 |
1,177,119 |
1,138,266 |
|||||||||||
Amortization of deferred acquisition costs |
138,165 |
129,077 |
273,987 |
258,697 |
|||||||||||
Commissions, premium taxes, and non-deferred acquisition costs |
73,698 |
69,427 |
147,163 |
139,066 |
|||||||||||
Other operating expense |
79,044 |
68,620 |
151,837 |
135,444 |
|||||||||||
Interest expense |
21,432 |
22,411 |
42,710 |
44,033 |
|||||||||||
Total benefits and expenses |
901,701 |
857,912 |
1,792,816 |
1,715,506 |
|||||||||||
Income before income taxes |
228,760 |
226,864 |
456,861 |
439,706 |
|||||||||||
Income tax benefit (expense) |
(42,151) |
(42,471) |
(84,858) |
(81,602) |
|||||||||||
Income from continuing operations |
186,609 |
184,393 |
372,003 |
358,104 |
|||||||||||
Discontinued operations: |
|||||||||||||||
Income (loss) from discontinued operations, net of tax |
(43) |
32 |
(92) |
(79) |
|||||||||||
Net income |
$ |
186,566 |
$ |
184,425 |
$ |
371,911 |
$ |
358,025 |
|||||||
Total basic net income per common share |
$ |
1.70 |
$ |
1.63 |
$ |
3.38 |
$ |
3.15 |
|||||||
Total diluted net income per common share |
$ |
1.67 |
$ |
1.59 |
$ |
3.32 |
$ |
3.08 |
View original content:http://www.prnewswire.com/news-releases/torchmark-corporation-reports-second-quarter-2019-results-300890564.html
SOURCE
Health Care Service Corporation Announces Leadership Changes
North American Business Headlines at 4:17 p.m. EDT
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News