Torchmark Q3 Profit Rises; Trims FY09 EPS Outlook, Guides FY010

10/28/2009 6:45 PM ET

(RTTNews) - Wednesday, insurance provider Torchmark Corp. (TMK: News ) reported an increase in profit for the third quarter from a year ago, reflecting improved revenues. Net operating income, however, declined from last year, missing analysts estimate by a penny. Looking ahead, the company cut its fiscal 2009 earnings guidance, with net operating income indicated to come in below current Street estimate. The company also projected operating income for fiscal 2010.

The McKinney, Texas-based company's third quarter net income surged to $100.8 million or $1.22 per share from $63.15 million or $0.72 per share a year ago.

Net operating income for the quarter was $122.3 million or $1.48 per share, down from $132.3 million or $1.51 per share in the prior year period. On average, fifteen analysts polled by Thomson Reuters expected the company to earn $1.49 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter increased to $784.85 million from $753.35 million in the prior year period. Analysts estimated revenues of $812.23 million.

For the preceding second quarter, the company reported net income of $114.1 million or $1.38 per share, down from $133.7 million or $1.47 per share last year. Net operating income for the quarter dropped 3% to $126.2 million from $130.6 million in the prior-year quarter. Operating earnings on a per share basis, however, rose 6% to $1.53 from $1.44 last year due to lower share count.

Total premium for the quarter under review dipped to $657.77 million from $678.6 million a year ago.

Life premium rose to $414.39 million, while health premium declined to $241.05 million from last year. Other premiums amounted to $2.32 million, down from the previous year.

Net investment income for the quarter remained flat with last year at $169.61 million, even though average invested assets were up 6% over the year-ago quarter because the company held significantly more cash throughout the third quarter of 2009 than the year-ago quarter. Torchmark incurred a $51.4 million charge to earnings due to impairments and had $8.4 million of realized gains from dispositions during the quarter ended September 30, 2009.

Life insurance accounted for 72% of the company's insurance underwriting margin for the quarter and 62% of total premium revenue. Insurance underwriting income for the quarter was $117.3 million, down 2% from the prior year quarter.

Health insurance, excluding Medicare Part D, accounted for 23% of Torchmark's insurance underwriting margin for the quarter and 30% of total premium revenue. Medicare Part D accounted for 4% of insurance underwriting margin and 7% of total premium revenue.