Torchmark Corporation has a market cap of $5.06 billion; its shares were traded at around $51.01 with a P/E ratio of 10.2 and P/S ratio of 1.5. The dividend yield of Torchmark Corporation stocks is 1.2%. Torchmark Corporation had an annual average earning growth of 8.7% over the past 10 years. GuruFocus rated Torchmark Corporation the business predictability rank of 4.5-star.
Highlight of Business Operations:We use three statistical measures as indicators of future premium growth: annualized premium in force, net sales, and first-year collected premium. Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve-month period. Annualized premium in force is an indicator of potential growth in premium revenue. Net sales is defined as annualized premium issued, net of cancellations in the first thirty days after issue, except for Direct Response, where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer has expired. Annualized premium issued is the gross premium that would be received during the policies first year in force, assuming that none of the policies lapsed or terminated. Although lapses and terminations will occur, we believe that net sales is a useful indicator of the rate of acceleration of premium growth. First-year collected premium is the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first policy year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future.
Health insurance premium income, excluding Medicare Part D, declined 5% to $358 million. Health net sales, excluding Part D, increased 3% to $28 million for the six months, as a result of increased sales of Medicare Supplement policies and sales of a new cancer product at Liberty. First-year collected health premium, excluding Part D, rose 4% to $30 million for the period. Health premium continued to be restrained by the decline in the in force balance of certain health products that we discontinued selling in 2010.
The Liberty National Exclusive Agency markets Medicare Supplement products and limited-benefit health products including cancer insurance. This agency represented 38% of Torchmarks non-Part D health premium income at $136 million in the 2012 six months. Net health sales in this agency were flat in the 2012 period at $7 million. However, limited-benefit product sales rose 9%.
Discussed under the Life Insurance caption, we noted the 24% decline in agent counts at Liberty over the prior twelve months. Declines in agent counts have also had a negative effect on health net sales and premium income. In the 2012 period, health premium income in the Liberty Agency declined 10% from the prior year premium of $151 million. However, first-year collected premium rose 29% to $7.5 million, due to the increase in cancer sales.
Investments (excess investment income), comparing the first six months of 2012 with the first six months of 2011. We manage our capital resources including investments, debt, and cash flow through the investment segment. Excess investment income represents the profit margin attributable to investment operations. It is the measure that we use to evaluate the performance of the investment segment as described in Note GBusiness Segments in the Notes to the Consolidated Financial Statements. It is defined as net investment income less the required interest on net policy liabilities and the interest cost associated with capital funding or financing costs. We also view excess investment income per diluted share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. Since implementing our share repurchase program in 1986, we have used $5.3 billion of cash flow to repurchase Torchmark shares after determining that the repurchases provided a greater return than other investment alternatives. Share repurchases reduce excess investment income because of the foregone earnings on the cash that would otherwise have been invested in interest-bearing assets, but they also reduce the number of shares outstanding. In order to put all capital resource uses on a comparable basis, we believe that excess investment income per diluted share is an appropriate measure of the investment segment.
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