We have reiterated our recommendation on the shares of
). 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 - 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
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.
) also continues to suffer from low interest rates.
Nevertheless, this Zacks Rank #3 (Hold) insurer is maintaining
a strong capital position.
Lincoln National Corp.
Reinsurance Group of America Inc.
) both with Zacks Rank #2 (Buy) are worth considering.
LINCOLN NATL-IN (LNC): Free Stock Analysis
MANULIFE FINL (MFC): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
TORCHMARK CORP (TMK): Free Stock Analysis
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