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Fitch Affirms Torchmark Corporation Ratings; Outlook Stable
August 30, 2013 / 5:47 PM / 4 years ago

Fitch Affirms Torchmark Corporation Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO/BOGOTA, August 30 (Fitch) Fitch Ratings has affirmed the 'A-' Issuer Default Rating of Torchmark Corporation (TMK) and the 'A+' Insurer Financial Strength (IFS) ratings assigned to TMK's insurance subsidiaries. The Rating Outlook is Stable. A complete list of the ratings appears at the end of this release. 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 expectations. The Stable Outlook reflects Fitch's view that TMK has ample resources to return financial leverage to below 25% over the near term following the company's 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 mentioned prefunding and the acquisition of Family Heritage Life. Pro forma for the August pay-off, 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 consistently strong 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 earnings growth will be largely influenced by the dedication of cash flow to TMK's share repurchase program. 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 results. The company's pre-tax operating return on assets (ROA) of 3.9% and GAAP earnings-based interest coverage of 9.7x was down slightly from historical levels (ROA 4% - 5%, and interest coverage 10x-13x), but are better than similarly rated peers. Fitch views TMK's capital as adequate for its current 'A+' IFS rating. Fitch's 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 figures are slightly higher than year?end 2012. TMK reported $18.4 billion in assets and $3.8 billion in shareholders' equity on June 30, 2013. RATING SENSITIVITIES 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 commitments 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 commitments ratio above 0.55x; --GAAP earnings-based interest coverage ratio below 5x. Fitch affirms the following ratings with a Stable Outlook: Torchmark Corporation --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+'. Contact: Primary Analyst: Bruce Cox Director +1-312-606-2316 Fitch Ratings, Inc., 70 W. Madison, Chicago, IL 60602 Secondary Analyst: Bradley Ellis Director +1-312-368-2089 Committee Chairperson: Julie Burke Managing Director +1-312-368-3158 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Insurance Rating Methodology' (August 2013). Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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