Torchmark's Premiums Continue To Grow Despite Challenges
Zacks Investment Research | Dec 07, 2016 11:43PM ET
On Dec 8, 2016, we issued an updated research report on Torchmark Corporation (NYSE:TMK) .
Shares of Torchmark gained 28.2%, significantly outperforming the Zacks categorized Life Insurance industry’s increase 2.9% year to date. The share price gain is reflective of strong premium growth over the last several quarters. A robust liquidity position backed by strong cash flow generation has also helped the company to invest in strategic initiatives, which in turn, have accelerated its growth. It has also witnessed upward revision of its full-year 2016 estimates over the last 60 days.
Torchmark’s most important distribution channel, American Income Exclusive Agency, has been witnessing improved life premiums over the last several quarters. Notably, the momentum also retained through the first three quarters of 2016. In addition, the agency’s net sales are rising, mainly driven by increased agent count. The company projects life sales growth in the range of 7–8% for 2016 and 6–10% for 2017.
Moreover, the life insurer displayed stable operational performance at Global Life, pertaining to increased life premiums and better underwriting margins, over the years. The uptrend continued through the first nine months of 2016.
Also, the company’s sturdy capital position and robust capital management will enable it to engage in shareholder-friendly moves such as regular dividend payments and share buybacks.
However, higher administrative expenses, pension costs and further investments in IT systems will likely be a drag on earnings in the near term.
The long-term expected earnings growth of the Zacks Rank #3 (Hold) life insurer is pegged at 7.5%. Also, the price earnings growth ratio – which determines the relative trade-off – between the price of a stock, earnings generated per share and the company's expected growth – is 2.16. This is better than the industry average of 1.29. Prudential Financial (NYSE:PRU) has a trailing 12-month return on equity (ROE) of 11.8%, which is higher than the industry average of 7%.
Stocks to Consider
Some better-ranked stocks from the same space are Health Insurance Innovations, Inc. (NASDAQ:HIIQ) , Primerica, Inc. (NYSE:PRI) and Universal American Corp. (NYSE:UAM) .
Health Insurance Innovations operates as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S. The company delivered positive surprises in the last four quarters with an average beat of 270.84%. The company sports a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research
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