Will Higher Premiums Drive Torchmark's (TMK) Q4 Earnings?

We expect Torchmark Corporation (NYSE:TMK) to surpass expectations in fourth-quarter 2017 results after the market closes on Feb 7.

Why a Likely Positive Surprise?

Our proven model shows that Torchmark has the right combination of the two key ingredients to beat estimates this quarter.

Zacks ESP: Torchmark has an Earnings ESP of +0.33%. The positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Torchmark holds a Zacks Rank #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) along with a positive Earnings ESP have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

Torchmark has likely witnessed noticeable improvement in premiums at its Life Insurance segment owing to better-than-expected results at American Income Exclusive Agency. The Zacks Consensus Estimate for premiums at the Life Insurance business for the soon-to-be-reported quarter is pegged at $578 million, representing a year-over-year increase of 5.1%.

Further, the life insurer is expected to have displayed premium growth at its Health segment with the consensus mark pegged at $244 million, reflecting a 2.5% rise year over year. As a result, Torchmark has probably experienced total premium growth, driven by a favorable performance at both its Life Insurance and Health segments. The Zacks Consensus Estimate for the same stands at $822 million, denoting an improvement of 4.3% on a year-over-year basis.

Moreover, higher number of agent count has likely driven an upside in net sales at American Income Exclusive Agency, which was the largest contributor to life premium and net sales plus Torchmark’s most important distribution channel.

On the back of an improving interest rate environment, the company is anticipated to have reported higher excess investment income in the yet-to-be-reported quarter. The Zacks Consensus Estimate for the metric is pegged at $217 million, translating to a 5.9% year-over-year increase.

Additionally, continued share buyback will likely boost the bottom line. The consensus mark for the company’s earnings per share in the to-be-reported period is pegged at $1.23, up 6% year over year.

However, higher administrative expenses are estimated to weigh on insurance underwriting income in the quarter to be reported.

Other Stocks to Consider

Some other stocks worth considering from the insurance industry with the right combination of elements to exceed estimates this time around are as follows:

CNA Financial Corporation (NYSE:CNA) is set to report fourth-quarter earnings on Feb 12. The stock has an Earnings ESP of +2.75% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNO Financial Group, Inc. (NYSE:CNO) has an Earnings ESP of +1.61% and a Zacks Rank of 2. The company is scheduled to announce fourth-quarter earnings on Feb 13.

Sun Life Financial Inc. (TO:SLF) has an Earnings ESP of +0.71% and a Zacks Rank #3. The company is slated to release fourth-quarter earnings on Feb 14.

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