Torchmark's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Torchmark Corporation ( TMK)

Q4 2011 Earnings Call

February 7, 2012 11:00 a.m. ET

Executives

Mark McAndrew - Chairman and Chief Executive Officer

Gary Coleman - Executive Vice President and Chief Financial Officer

Larry Hutchison - Executive Vice President and General Counsel

Mike Majors - Vice President of Investor Relations

Analysts

Jimmy Bhullar - JPMorgan

Randy Binner - FBR Capital Markets

Sarah DeWitt - Barclays Capital

Paul Sarran - Evercore Partners

Jeffrey Schuman - Keefe, Bruyette & Woods

Christopher Giovanni - Goldman Sachs

Steven Schwartz - Raymond James

John Nadel - Sterne Agee

Robert Glasspiegel - Langen McAlenney

Mark Hughes - SunTrust Robinson Humphrey

Presentation

Operator

Good day and welcome to Torchmark Corporation’s Fourth Quarter 2011 Earnings Release Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mark McAndrew, Chairman and CEO of Torchmark Corporation. Please go ahead, sir.

Mark McAndrew

Thank you. Good morning, everyone. Joining me this morning is Gary Coleman, our Chief Financial Officer; Larry Hutchison, our General Counsel; and Mike Majors, Vice President of Investor Relations. Some of our comments or answers to your questions may contain forward-looking statements that are provided for general guidance purposes only. Accordingly, please refer to our 2010 10-K and any subsequent Forms 10-Q on file with the SEC.

Net operating income for the fourth quarter was $128 million or $1.25 per share. A per share increase of 12% from a year ago. Net income for the fourth quarter was $126 million or $1.23 per share, a 4% decline on a per share basis. For the full year, operating income per share grew 10% to $4.68 while net income per share increased 12% to $4.72. Excluding FAS 115, on return on equity 14.2% for the quarter and our book value per share was $35.59, a 9% increase from a year ago.

On a GAAP reported basis with fixed maturities carried at market value, book value grew 25% for the year to $41.54 per share. In our life insurance operations, premium revenue excluding United Investors grew 4% to $432 million and life underwriting margins increased 6% to $121 million. Net life sales for the quarter increased 5% to $81 million. At American Income, life premiums were up 9% to $157 million and life underwriting margin was up 5% to $51 million. Net life sales increased 11% for the quarter to $37 million. The producing agent count at year-end was 4381, up 12% from a year ago. I continue to be excited by the growth prospects of American Income.

While the agent count dipped slightly in the fourth quarter, it has rebounded strongly in January to over 4600. Our middle sales management ranks have grown 29% in the past year. As expected, we saw double digit life sales growth in the fourth quarter which we expect to continue throughout 2012. In our Direct Response operation at Globe Life, life premiums were up 6% to $146 million, and life underwriting margin was also up 6% to $36 million.

Net life sales were up 8% to $33 million. We are beginning to see the impact on the increase in certain media circulation which we began in the third quarter. We expect to see similar or better sales growth through at least the first three quarter of 2012. At Liberty National, life premiums declined 3% to $71 million and life underwriting margin was down 1% to $16 million. Net life sales declined 23% to $8 million while net health sales grew 43% to $5 million. The producing agent count at Liberty National at year-end was 1345, down 33% for the year.

Since our last call, we have made some management changes at Liberty National. Roger Smith, the CEO of American Income has also been appointed CEO of Liberty National, and Steve DiChiaro, a very successful SGA at American Income, was brought in as Chief Marketing Officer. These management changes have been very well received by the Liberty National sales force and I am optimistic that we will begin to see a turnaround at Liberty National in the next 6 to 9 months.

On the health side, premium revenue excluding Part D declined 5% to $179 million, and health underwriting margin also declined 5% to $34 million. Health net sales grew 7% in the quarter to $21 million. Premium revenue from Medicare Part D declined 5% to $48 million, while underwriting margin was down 23% to $7 million. Part D sales for the quarter increase to $97 million versus $14 million a year ago, primarily as a result of low income subsidized enrollees which we discussed on the last call.

The volume of business form new low income subsidized enrollees who turned 65, has been a positive development. While we expected to enroll roughly 2000 per month, for January and February we have averaged closer to 6000. We now expect to add 50,000 to 75000 additional enrollees turning 65 in 2012 versus our prior estimate of 24000. Administrative expenses were $41 million for the quarter, up 2% from a year ago and in line with our expectations.

I will now turn the call over to Gary Coleman, our Chief Financial Officer, for his comments.

Gary Coleman

Thanks, Mark. I want to spend a few minutes discussing our investment portfolio, capital and share repurchases. First, the investment portfolio. On our website are three schedules that provide summary information regarding our portfolio as of December 31, 2011. As indicated on these schedules, invested assets are $11.4 billion, including $10.9 billion of fixed maturities at amortized cost. There is no exposure to European sovereign debt and there are no commercial mortgage-backed securities or securities backed by subprime or Alt-A mortgages.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says