Torchmark Corporation Reports 11% Increase in Second Quarter 2001 Earnings Per Share From Operations
July 19, 2001
Torchmark Corporation (NYSE: TMK) reported today that net operating income for the second quarter, 2001 was $.78 per share ($98 million), compared with $.70 per share ($90 million) for the second quarter of 2000, an 11% per share increase. For the first six months of 2001, net operating income was $1.53 per share ($194 million) compared with $1.39 per share ($180 million) for the same period of 2000.
OPERATING HIGHLIGHTS - comparing second quarter 2001 with the second quarter of 2000:
- Total premium revenues increased 11%; 13% in health insurance and 7% in life insurance.
- Medicare supplement annualized premium in force grew 17% to $778 million.
- Direct Response life sales were less than the prior year period but premium and underwriting income grew as the focus is on writing more profitable business.
- American Income's agent count grew 15% during the first half of the year and is on track for double-digit life sales growth for the year.
- Financing cost declined $4 million (23%) due to lower short-term interest rates, reduction of debt and the Company's call of one-fourth of its Monthly Income Preferred Securities.
The following chart displays the key per share components of Torchmark's net operating income:
INSURANCE OPERATIONS - comparing the second quarter of 2001 with the second quarter of 2000:
Total premium revenue for the quarter increased 11% to $561 million. Life premium revenue increased 7% to $289 million. Health premium revenue increased 13% to $254 million.
Insurance net underwriting income increased 6% to $93 million. The life underwriting margin (before administrative expenses) was 24% of premium and the health underwriting margin was 18% of premium. Insurance underwriting results are summarized in the following chart:
| |
Insurance Net Underwriting Income |
| |
(dollars in millions) |
| |
|
Quarter Ended |
|
% of |
|
Quarter Ended |
|
% of |
|
% |
| |
|
June 30, 2001 |
|
Premium |
|
June 30, 2000 |
|
Premium |
|
Chg. |
| Underwriting Income before Administrative Expenses |
|
| Life |
|
$69.9 |
|
24 |
|
$66.7 |
|
25 |
|
5 |
| Health |
|
44.8 |
|
18 |
|
39.5 |
|
18 |
|
13 |
| Annuity |
|
6.8 |
|
7.8 |
|
(13) |
|
121.5 |
|
113.9 |
| |
| Other income |
|
1.1 |
|
1.2 |
|
| Administrative expenses |
|
(29.5) |
|
5 |
|
(27.7) |
|
5 |
|
7 |
| |
| Insurance Net Underwriting Income |
|
$93.1 |
|
$87.5 |
|
6 |
| |
Total insurance sales for the quarter were $124 million, a 1% decrease. Total life insurance sales of $75 million were unchanged. Life sales by Torchmark's largest life sales unit, Direct Response declined 3%; however, the decline was less than expected.
Total health insurance sales declined 3% to $50 million. Medicare supplement sales declined 2% to $37 million. Medicare supplement sales growth softened temporarily in part because of recent rate increases.
Sales by distribution channels are shown in the following chart:
| |
Annualized Life and Health Premium Issued |
| |
(dollars in millions) |
| |
| |
Life |
|
Health |
|
Total |
| |
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
| |
June 30, |
|
June 30, |
|
June 30, |
| |
2001 |
|
2000 |
|
% Chg. |
|
2001 |
|
2000 |
|
% Chg. |
|
2001 |
|
2000 |
|
% Chg. |
| |
| Direct Response |
|
$29.6 |
|
$30.7 |
|
(3) |
|
$.4 |
|
$.5 |
|
(25) |
|
$30.0 |
|
$31.2 |
|
(4) |
| |
| LNL Exclusive Agency |
|
14.2 |
|
13.6 |
|
5 |
|
2.6 |
|
2.6 |
|
0 |
|
16.8 |
|
16.2 |
|
4 |
| |
| American Income Agency |
|
15.3 |
|
14.2 |
|
8 |
|
2.5 |
|
2.3 |
|
10 |
|
17.9 |
|
16.5 |
|
8 |
| |
| United American Agencies |
|
| Branch Office Agency |
|
1.3 |
|
1.3 |
|
(3) |
|
27.7 |
|
28.8 |
|
(4) |
|
29.0 |
|
30.1 |
|
(4) |
| Independent Agency |
|
5.8 |
|
5.2 |
|
10 |
|
16.4 |
|
17.0 |
|
(4) |
|
22.1 |
|
22.2 |
|
0 |
| |
| Other |
|
8.5 |
|
9.6 |
|
(11) |
|
- |
|
- |
|
- |
|
8.5 |
|
9.6 |
|
(11) |
| |
| Total Premium Issued |
|
$74.7 |
|
$74.5 |
|
0 |
|
$49.6 |
|
$51.1 |
|
(3) |
|
$124.3 |
|
$125.7 |
|
(1) |
| |
INVESTMENTS - comparing the second quarter of 2001 to the second quarter of 2000:
Excess investment income (investment income less interest credited on net policy liabilities and less financing costs) was $63 million compared with $56 million, a 12% increase. Investment income increased 3% to $124 million. Financing costs decreased $4 million (23%) to $14 million because of lower short-term interest rates and the reduced amount of short-term debt and Monthly Income Preferred Securities (MIPS) outstanding. Outstanding shares of the Monthly Income Preferred Securities, paying a 9.18% dividend, were reduced by $50 million as a result of the previously announced call of 2 million shares on April 30, 2001.
SHARE REPURCHASE - second quarter of 2001:
In accordance with its ongoing share repurchase program, Torchmark repurchased 1.1 million shares of Torchmark Corporation common stock for a total cost of $39 million ($37.06 average cost per share). At June 30, 2001, there were 125.1 million Torchmark shares outstanding (126.2 million on a diluted basis).
TORCHMARK CONSOLIDATED
Total assets at June 30, 2001 were $12.5 billion and shareholders equity was $2.4 billion. The following are at June 30, 2001, and exclude the effect of SFAS 115:
| |
Net Operating Income as a return on equity year-to-date |
|
16.1% |
| |
Debt to capital ratio |
|
20.4% |
| |
Debt to capital ratio (with MIPS treated as debt rather than equity) |
|
24.9% |
| |
Book value per share |
|
$19.50 |
Torchmark's total operating revenues for the second quarter of 2001 increased 10% to $685 million. Net operating income for the second quarter of 2001 ($98 million) differs from net income by net realized investment gains and related DAC adjustment, a loss on the redemption of debt, and a $27 million charge due to a change in accounting principle (all items net of taxes). The change in accounting principle resulted from the required implementation of an accounting standard (EITF 99-20) that became effective at the beginning of the second quarter of 2001. The new standard governs the method of recognizing interest income and impairment on asset-backed securities. Under the new guidelines, Torchmark evaluated the expected future cash flow from its asset-back securities and determined that these assets were impaired by $41 million ($27 million after-tax). Subsequent to the writedown, Torchmark sold approximately $40 million of these assets during the second quarter. At June 30, 2001, asset-back securities subject to EITF 99-20 totaled $24 million or less than 1% of total invested assets. The effect of EITF 99-20 on Torchmark's future earnings is expected to be immaterial.
Net operating income for the second quarter of 2000 ($90 million) differs from net income for that quarter by net realized investment losses and related DAC adjustment (net of taxes).
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
Torchmark will provide a live audio webcast of its second quarter earnings release conference call with financial analysts at 10:00 a.m. (eastern time) today, July 19, 2001. Access to the live webcast and replays will be available at http://www.torchmarkcorp.com/ on the Investor Relations page, at the "Conference Call on the Web" icon, or at http://www.prnewswire.com/ . Supplemental financial reports for the quarter will be available July 19 on the Investor Relations page of the Torchmark website at the "Financial Reports" icon.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain forward-looking statements within the meaning of the federal securities laws. These prospective statements reflect management's current expectations, but are not guarantees of future performance. Accordingly, please refer to Torchmark's cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company's Form 10-K for the fiscal year ended December 31, 2000, and Form 10Q for the quarter ended March 31, 2001, on file with the Securities and Exchange Commission. Torchmark specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.
Torchmark Corporation is a financial services holding company specializing in life and supplemental health insurance for "middle income" Americans marketed through multiple distribution channels including direct response, and exclusive and independent agencies. Subsidiary Globe Life and Accident is a nationally recognized direct-response provider of life insurance known for its administrative efficiencies. United American has been a nationally recognized provider of Medicare supplement health insurance since 1966. Liberty National Life, one of the oldest traditional life insurers in the Southeast, is the largest life insurer in its home state of Alabama. American Income Life is nationally recognized for providing supplemental life insurance to labor union members.
| |
Summary of Financial Results |
| |
(in thousands, except per share data) |
| |
Quarter Ended June 30, |
| |
2001 |
|
2000 |
| |
| Total Revenue from Operations * |
|
$684,742 |
|
$624,972 |
| Net Operating Income ** |
|
$98,051 |
|
$89,690 |
| Per diluted share |
|
.78 |
|
.70 |
| Net Income |
|
$73,174 |
|
$83,294 |
| Per diluted share |
|
.58 |
|
.65 |
| Weighted Average Diluted Shares Outstanding |
|
126,131 |
|
128,260 |
| |
* Total revenue from operations excludes net realized investment gains and losses.
** Net operating income excludes net realized investment gains or losses net of the related DAC adjustment (net of taxes), and in the 2001 period, excludes a loss on redemption of debt and loss on a change in accounting principle (both net of taxes).
SOURCE Torchmark Corporation
CONTACT: Joyce Lane, Vice President, Investor Relations of Torchmark Corporation, +1-972-569-3627, or fax, +1-972-569-3282, or jlane@torchmarkcorp.com
Web site: http://www.torchmarkcorp.com/