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We have reiterated our recommendation on the shares of Torchmark Corp. (TMK - Analyst Report). While we expect the company to perform favorably over the long term, near-term headwinds such as low interest rates and the underperforming Liberty National distribution agency keep us concerned. 
 
Why reiterate?
 
We are optimistic regarding Torchmark’s acquisition of privately held supplemental health insurer, Family Heritage Life Insurance Company of America, which was immediately accretive to the company’s earnings.
 
Torchmark operates its business via its subsidiaries – Liberty National Life, American Income Life Insurance, United Investors Life Insurance, United American Insurance, as well as Globe Life and Accident Insurance.
 
American Income – Torchmark’s most profitable distribution system – has grown consistently over the past several years. In the last 10 years, producing agents at American Income have grown considerably, leading to an increase in net sales.
 
Another distribution channel, Globe Life, which operates in a relatively non-competitive market, enjoys advantages such as an experienced workforce and better cost-control. The Direct response operation at Globe Life has also shown consistent growth over the past several years.
 
Torchmark has also undertaken restructuring efforts in an effort to do away with non-core businesses that will strengthen its capital and at the same time allow it to focus on core operations. 
 
However, the company’s Liberty National unit has been underperforming from a long time. Though growth initiatives have been undertaken, hindrances to growth remain. In addition, a low interest rate environment remains a headwind. Insurer Manulife Financial Corp. (MFC - Analyst Report) also continues to suffer from low interest rates.
 
Nevertheless, this Zacks Rank #3 (Hold) insurer is maintaining a strong capital position. 
 
Other stocks
 
Lincoln National Corp. (LNC - Analyst Report), Reinsurance Group of America Inc. (RGA - Analyst Report) both with Zacks Rank #2 (Buy) are worth considering. 

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