On Jun 19, 2013, shares of
) hit a 52-week high of $65.88. The momentum was driven by the
recently completed acquisition of Family Heritage and a favorable
outlook from rating agency.
Torchmark, to fortify its supplemental health insurance line
of business, acquired privately held supplemental health insurer
Family Heritage Life Insurance Company of America. The
acquisition has also been immediately accretive to the company's
Torchmark has also got its investment grade financial strength
as well as issuer credit ratings affirmed from the rating agency
A.M.Best, with a stable outlook. It also scores strongly with
other rating agencies.
Torchmark enjoys solid operating fundamentals. It boasts a
strong market presence with a broad product profile. The company
operates via its subsidiaries, which have been a favorable
contributor to the company's earnings.
American Income - Torchmark's most profitable distribution
system - has grown consistently over the past several years
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
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
Moreover, this Zacks Rank #3 (Hold) life insurer is
maintaining a strong capital position.
Valuation for Torchmark looks reasonable. While the shares are
trading at a premium to the peer group both on a forward
price-to-earnings basis and price-to-book basis, return on equity
is substantially higher than the peer group average. The 1-year
return from the stock came in at 34.1%, much above the S&P's
return of 21.3%.
While we remain cautious on Torchmark, other life insurers
StanCorp Financial Group Inc.
China Life Insurance Co. Ltd.
Reinsurance Group of America Inc.
) carrying favorable Zacks Rank #2 (Buy) are worth
CHINA LIFE INS (LFC): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
TORCHMARK CORP (TMK): Free Stock Analysis
To read this article on Zacks.com click here.