A.M. Best has given a Long-Term Issue Credit Rating of “a-” to Torchmark Corporation’s (TMK - Free Report) $550 million 4.55% senior unsecured notes. These notes are scheduled to mature on Sep 15, 2028. The outlook is negative.
The ratings came on the back of Torchmark’s multichannel distribution platform, diversified operations and a superior operational performance. The company sustainably has been generating solid revenues and delivering operating earnings across the majority of its core segments, thus leveraging its solid market position. These in turn, have been generating sufficient liquidity and supporting uninterrupted debt servicing, thereby retaining the company’s creditworthiness. Nonetheless, the rating giant noted that both risk-adjusted capitalization and the capital level have somewhat decreased at the insurance operating entities in recent times.
Torchmark intends to deploy net proceeds from the sale of these notes together with cash in hand to redeem its outstanding 9.25% senior notes totalling $293 million, which are set to mature in 2019. Also, the proceeds could be used as additional capital to its operating insurance entities.
Although it is a prudent approach to capitalise on the still-low interest rate environment for procuring funds to lower interest burden, yet issuance of debt will deteriorate the company’s leverage ratio. Per A.M. Best, financial leverage will increase to about 26% in the near term but will improve with the 2019 notes’ maturity. The rating agency also notes that Torchmark enjoys a solid financial flexibility and its interest coverage has remained just above 10 times in recent periods.
Earlier, another credit rating giant Moody’s Investors Service has assigned a Baa1 rating to the aforementioned senior notes with a stable outlook.
Shares of this Zacks Rank #3 (Hold) life insurer have gained 7.9% in a year against the industry’s decrease of 12.2%. We expect a consistent segmental performance, premium growth and a solid capital position to drive the stock higher in the near term.
Stocks to Consider
Some better-ranked life insurers are Athene Holding Ltd. (ATH - Free Report) , Primerica, Inc. (PRI - Free Report) and FGL Holdings (FG - Free Report) .
Athene Holding issues, reinsures and acquires retirement savings products in the United States, the District of Columbia and Germany. It came up with an average four-quarter positive surprise of 15.03%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Primerica distributes financial products to middle-income households in the United States and Canada. It delivered an average four-quarter beat of 5.89%. The stock sports a Zacks Rank of 1.
FGL Holdings sells individual life insurance products and annuities in the United States. It pulled off an average four-quarter earnings surprise of 7.93%. The stock carries a Zacks Rank #2 (Buy).
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