Torchmark Corporation (NYSE:TMK) Q4 2014 Earnings Conference Call - Final Transcript

Feb 03, 2015 • 11:00 am ET


Torchmark Corporation (NYSE:TMK) Q4 2014 Earnings Conference Call - Final Transcript


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Good day, and welcome to the Torchmark Corporation Fourth Quarter 2014 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Majors, Vice President of Investor Relations. Please go ahead, sir.

Mike Majors

Thank you. Good morning, everyone. Joining the call today are Gary Coleman and Larry Hutchison, our Co-CEO; Frank Svoboda, our CFO; and Brian Mitchell, our General Counsel.

(Forward-Looking Cautionary Statements)

I will now turn the call over to Gary Coleman.

Gary Coleman

Thank you, Mike and good morning everyone. Net operating income for the fourth quarter was $131 million or $1 per share, a per share increase of 30% from a year ago. Net income for the quarter was $147 million or $1.13 per share, a 9% increase on a per share basis. With fixed maturities and amortized cost, our return on equity as of December 31, was 14.9% and our book value per share was $27.91, an 8% increase from year ago. On a GAAP reported basis with fixed maturities and market value, book value per share increased 31% to $36.19. In our life insurance operations, premium revenue grew 5% to $494 million, while life underwriting margins were $136 million, down 1% from a year ago.

On the health side, premium revenue grew 5% to $225 million and health underwriting margin grew 3% to $51 million. Health sales increased from $40 million to $72 million, $25 million of the increase was due to group business and the remaining $7 million was related to individual business. Administrative expenses were $45 million for the quarter, down 2% from year ago. For the full year, administrative expenses were $180 million or 5.7% of premium. In 2015, we expect administrative expenses to grow approximately 6% to 7% and be approximately 5.8% of premium. The primary reasons for the increase in administrative expenses are higher pension costs resulting from the required implementation of a new mortality table and further investments in IT systems.

I will now turn the call over to Larry Hutchison for his comments on the marketing operations.

Larry Hutchison

Thank you, Gary. We are very pleased that we had strong sales growth in each of the distribution channels for both the quarter and the full year. Now, I would like to discuss results for each of those channels. At American Income, life premiums were up 8% to $196 million and life underwriting margin was up 6% to $62 million. Net life sales were $46 million, up 23% due primarily to increased agent counts. The producing agent count at the end of the fourth quarter was 6,434, up 21% from a year ago.

The average agent count the fourth quarter was 6,323, up 4% from the third quarter. We expect life sales growth in 2015 to be within a range of 6% to 10%. At our Direct Response operation at Globe Life, life premiums were up 7% to $174 million. But life underwriting margin declined 9% to $37 million. Net life sales were up