(The following statement was released by the rating agency)
CHICAGO/BOGOTA, August 30 (Fitch) Fitch Ratings has affirmed the
Default Rating of Torchmark Corporation (TMK) and the 'A+'
Strength (IFS) ratings assigned to TMK's insurance subsidiaries.
Outlook is Stable. A complete list of the ratings appears at the
end of this
KEY RATING DRIVERS
The affirmation of TMK's ratings reflects Fitch's view that
TMK's financial and
operating profiles continue to be consistent with rating
Stable Outlook reflects Fitch's view that TMK has ample
resources to return
financial leverage to below 25% over the near term following the
repayment of a $94 million prefunded security in August 2013.
TMK's financial leverage increased to its current level of 28%
at June 30, 2013
after the issuance of new debt in late 2012 for the above
and the acquisition of Family Heritage Life. Pro forma for the
financial leverage declines to 27%, but is still above TMK's
normal levels and
Fitch's expectations for the company's current rating.
The higher financial leverage is partially mitigated by the
earnings of TMK's insurance subsidiaries, which provide the
holding company with
robust cash flow. TMK uses these cash flows mainly for debt
service and share
repurchase. Fitch expects leverage to drop in the near term,
although the speed
and level of TMK's financial leverage reduction and retained
will be largely influenced by the dedication of cash flow to
Fitch estimates TMK's total financing and commitment (TFC) ratio
to be 0.45x at
June 30, 2013, which is in line with Fitch's expectation of less
than 0.55x and
is stronger than most peers.
TMK's overall profitability and interest coverage ratios for the
first half of
2013 remain consistent with rating guidelines and year-end 2012
company's pre-tax operating return on assets (ROA) of 3.9% and
earnings-based interest coverage of 9.7x was down slightly from
levels (ROA 4% - 5%, and interest coverage 10x-13x), but are
similarly rated peers.
Fitch views TMK's capital as adequate for its current 'A+' IFS
estimate of TMK's June 20, 2013 total adjusted capital (TAC) and
NAIC Risk Based
Capital (RBC) are $1.4 billion and 348%, respectively. These
slightly higher than year?end 2012.
TMK reported $18.4 billion in assets and $3.8 billion in
shareholders' equity on
June 30, 2013.
Key rating triggers that could lead to an upgrade include:
--A sustained statutory capital adequacy above 350% RBC;
--Sustained financial leverage 20% or below and total financings
ratio below 0.40x;
--GAAP earnings-based interest coverage ratio 13x or above.
Key rating triggers that could lead to a downgrade include:
--Investment losses beyond Fitch's expectations;
--A sustained statutory capital adequacy below 290% RBC;
--Sustained financial leverage above 25% or total financings
--GAAP earnings-based interest coverage ratio below 5x.
Fitch affirms the following ratings with a Stable Outlook:
--Long-term IDR at 'A-';
--Short-term IDR at 'F2';
--9.25% senior debentures due 2019 at 'BBB+';
--7.875% senior notes due 2023 at 'BBB+';
--3.8% senior notes due 2022 at 'BBB+';
--6.375% senior debentures due 2016 at 'BBB+';
--5.875% junior subordinated debentures due 2052 at 'BBB-'.
--Commercial paper rating at 'F2'.
Liberty National Life Insurance Company
United American Insurance Company
Globe Life & Accident Insurance Company
American Income Life Insurance Company
--IFS at 'A+'.
Fitch Ratings, Inc., 70 W. Madison, Chicago, IL 60602
Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (August 2013).
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