Torchmark's Reliance On Solid Premiums Bodes Well For Growth
Zacks Investment Research | Feb 27, 2019 09:43PM ET
Torchmark Corporation (NYSE:TMK) has been witnessing substantial growth in premium revenues, driven by higher premiums from Life and Health Insurance businesses. This in turn, should continue to drive earnings.
The life insurer’s most important distribution channel — American Income Exclusive Agency — has been witnessing higher net sales, driven by an increased agent count. The company projects life sales to grow in the range of 4-8%. Further, producing agent count, which is estimated to increase in the 2-4% band during 2019, is likely to lead to higher premiums.
Global Life operates in a relatively non-competitive market and focus on expanding margins rather than boosting sales or sales levels or margins as a percentage of premiums is yielding results. Torchmark anticipates the underwriting margin to range between 3% and 5% for 2019.
The insurer has been witnessing improved investment income over the past few years on the back of a gradual rise in interest rates and a decline in the negative impact of lengthy delays in receiving Part D reimbursements. The momentum should continue driven by a better interest rate environment and higher new money rates. In 2019, the company forecasts a rough 5% rise in excess investment income and the same to grow about 9% on a per share basis.
A robust capital position supports the company to engage in shareholder friendly moves raising optimism among investors on the stock. The company expects to generate free cash flow of $350-$375 million in 2019, supporting effective capital deployment.
The consensus mark for current-year earnings per share is pegged at $6.61, representing a year-over-year increase of nearly 7.8% on 3.4% rise in revenues of $4.5 billion. The company's long-term growth stands at 7.5%.
Notably, Torchmark has a favorable Zacks Investment Research
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