We are reiterating Neutral recommendation on
). 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
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 is Torchmark's most profitable distribution
system and has grown consistently over the past several years. In
the last 10 years, the number of producing agents at American
Income have grown considerably, leading to an increase in net
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 operations 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
However, the underperforming Liberty National overshadows
Though growth initiatives have been undertaken, hindrances to
growth remain. In addition, a low interest rate environment
remains a headwind for Torchmark. Insurer
Manulife Financial Corp.
) also continues to suffer from low interest rates.
Nevertheless, this Zacks Rank #2 (Buy) insurer is maintaining
a strong capital position.
Lincoln National Corp.
) with Zacks Rank #1 (Strong Buy) and
StanCorp Financial Group Inc.
) with Zacks Rank #2 (Buy) are worth considering.
LINCOLN NATL-IN (LNC): Free Stock Analysis
MANULIFE FINL (MFC): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
TORCHMARK CORP (TMK): Free Stock Analysis
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