Torchmark Corp. (TMK, Financial) filed Quarterly Report for the period ended 2010-03-31.
Torchmark Corp. has a market cap of $4.21 billion; its shares were traded at around $50.77 with a P/E ratio of 8.5 and P/S ratio of 1.4. The dividend yield of Torchmark Corp. stocks is 1.1%. Torchmark Corp. had an annual average earning growth of 3.7% over the past 10 years. GuruFocus rated Torchmark Corp. the business predictability rank of 2.5-star.TMK is in the portfolios of Richard Pzena of Pzena Investment Management LLC, Tweedy Browne of Tweedy Browne CO LLC, RS Investment Management, Warren Buffett of Berkshire Hathaway, Jeremy Grantham of GMO LLC, David Dreman of Dreman Value Management, John Keeley of Keeley Fund Management.
As explained in Note GBusiness Segments, differences in our estimate of interim results for Medicare Part D as we view this product for segment purposes and GAAP resulted in a $10 million after-tax charge to 2010 earnings or $.12 per share, compared with a charge of $11 million after-tax or $.13 per share in the prior period. We expect our 2010 full year benefit ratios to be approximately the same as those for interim periods, as was the case in 2009 and prior years. For this reason, there should be no differences in segment versus GAAP reporting by year end 2010, as it relates to Medicare Part D.
Life insurance premium income grew 4% to $430 million. Life net sales increased 9% to $85 million, primarily as a result of an increase in American Incomes net sales of 25%. First-year collected life premium rose 13% to $62 million. Life underwriting margins increased 5% to $116 million.
Health insurance premium income, excluding Medicare Part D premium, declined 10% to $203 million. Health net sales, excluding Part D, declined 17% to $17 million and first-year collected health premium, excluding Part D, decreased 23% to $17 million. These declines resulted primarily from the increased turnover of agents in our United American (UA) Branch Office Agency. This Agency has historically been a key distributor of our health products, but has been facing increased competition in recent periods. We are addressing the turnover in the UA Branch Office Agency by offering the agents new lines of Liberty National life and health products to sell with new compensation incentives focused on marketing those products. Health underwriting income of $35 million, excluding Part D, was 18% of premium in both periods.
Excess investment income per diluted share decreased 3% to $.93, while excess investment income declined 4% to $77 million. Net investment income rose $8 million, or 5%. Our average investment portfolio at amortized cost grew 10%. We have held significantly more short-term investments in both periods to provide more flexibility in the uncertain economic environment, even though yields on short-terms were less than 20 basis points in both periods. The decline in excess investment income was due to the combination of the $8 million or 11% increase in interest cost on net insurance policy liabilities and the $3 million or 21% increased financing costs, which more than offset the increase in net investment income. Financing costs rose in the period primarily as a result of the increased interest expense from a new $300 million debt offering issued in June, 2009, replacing a $99 million debt issue that matured in August, 2009.
We have an on-going share repurchase program which began in 1986. During the first quarter of 2009, we temporarily suspended the program because of the uncertain economic environment. However, in the first quarter of 2010, we reactivated the program with a reaffirmation of the Board of Directors at their February 25, 2010 meeting. With no specified authorization amount, we determine the amount of repurchases based on the amount of our excess cash flow, general market conditions, and other alternative uses. In the first quarter of 2010, we acquired 256 thousand shares of the Companys common stock in the open market at a cost of $13.5 million ($52.78 average price per share). Of the $13.5 million, $11.6 million was from excess operating cash flow, which was used to repurchase 220 thousand shares, and $1.9 million was from the cash received from stock option exercises by current and former employees. Proceeds from these option exercises were used to repurchase 36 thousand shares in order to offset dilution from the exercises.
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Torchmark Corp. has a market cap of $4.21 billion; its shares were traded at around $50.77 with a P/E ratio of 8.5 and P/S ratio of 1.4. The dividend yield of Torchmark Corp. stocks is 1.1%. Torchmark Corp. had an annual average earning growth of 3.7% over the past 10 years. GuruFocus rated Torchmark Corp. the business predictability rank of 2.5-star.TMK is in the portfolios of Richard Pzena of Pzena Investment Management LLC, Tweedy Browne of Tweedy Browne CO LLC, RS Investment Management, Warren Buffett of Berkshire Hathaway, Jeremy Grantham of GMO LLC, David Dreman of Dreman Value Management, John Keeley of Keeley Fund Management.
Highlight of Business Operations:
Highlights, comparing the first three months of 2010 with the first three months of 2009. Net income per diluted share increased 60% to $1.46. Net income for the 2010 period reflects an after-tax benefit of $.06 per share for realized investment gains. Net income per share during the 2009 period reflected an after tax loss of $.49 per share for realized investment losses all of which was a result of other-than-temporary impairments of fixed maturities. The $.06 per share gain in 2010 was net of an impairment writedown of $.01 per share on fixed maturities. These writedowns of investments are discussed in detail in Note EInvestments under the caption Other-Than-Temporary Impairments in this report. Additionally, we benefited from tax settlements in 2009 as described in Note FIncome Taxes and Note GBusiness Segments. Net income was increased by $3 million or $.04 per share in 2009 as a result of these tax settlements.As explained in Note GBusiness Segments, differences in our estimate of interim results for Medicare Part D as we view this product for segment purposes and GAAP resulted in a $10 million after-tax charge to 2010 earnings or $.12 per share, compared with a charge of $11 million after-tax or $.13 per share in the prior period. We expect our 2010 full year benefit ratios to be approximately the same as those for interim periods, as was the case in 2009 and prior years. For this reason, there should be no differences in segment versus GAAP reporting by year end 2010, as it relates to Medicare Part D.
Life insurance premium income grew 4% to $430 million. Life net sales increased 9% to $85 million, primarily as a result of an increase in American Incomes net sales of 25%. First-year collected life premium rose 13% to $62 million. Life underwriting margins increased 5% to $116 million.
Health insurance premium income, excluding Medicare Part D premium, declined 10% to $203 million. Health net sales, excluding Part D, declined 17% to $17 million and first-year collected health premium, excluding Part D, decreased 23% to $17 million. These declines resulted primarily from the increased turnover of agents in our United American (UA) Branch Office Agency. This Agency has historically been a key distributor of our health products, but has been facing increased competition in recent periods. We are addressing the turnover in the UA Branch Office Agency by offering the agents new lines of Liberty National life and health products to sell with new compensation incentives focused on marketing those products. Health underwriting income of $35 million, excluding Part D, was 18% of premium in both periods.
Excess investment income per diluted share decreased 3% to $.93, while excess investment income declined 4% to $77 million. Net investment income rose $8 million, or 5%. Our average investment portfolio at amortized cost grew 10%. We have held significantly more short-term investments in both periods to provide more flexibility in the uncertain economic environment, even though yields on short-terms were less than 20 basis points in both periods. The decline in excess investment income was due to the combination of the $8 million or 11% increase in interest cost on net insurance policy liabilities and the $3 million or 21% increased financing costs, which more than offset the increase in net investment income. Financing costs rose in the period primarily as a result of the increased interest expense from a new $300 million debt offering issued in June, 2009, replacing a $99 million debt issue that matured in August, 2009.
We have an on-going share repurchase program which began in 1986. During the first quarter of 2009, we temporarily suspended the program because of the uncertain economic environment. However, in the first quarter of 2010, we reactivated the program with a reaffirmation of the Board of Directors at their February 25, 2010 meeting. With no specified authorization amount, we determine the amount of repurchases based on the amount of our excess cash flow, general market conditions, and other alternative uses. In the first quarter of 2010, we acquired 256 thousand shares of the Companys common stock in the open market at a cost of $13.5 million ($52.78 average price per share). Of the $13.5 million, $11.6 million was from excess operating cash flow, which was used to repurchase 220 thousand shares, and $1.9 million was from the cash received from stock option exercises by current and former employees. Proceeds from these option exercises were used to repurchase 36 thousand shares in order to offset dilution from the exercises.
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