A.M. Best Assigns Rating to Torchmark Corporation’s New Junior Subordinated Notes

A.M. Best has assigned an issue rating of “bbb” to the newly issued $300 million 6.125% junior subordinated debentures due June 15, 2056 of Torchmark Corporation (Torchmark) (headquartered in McKinney, TX) [NYSE:TMK]. The outlook assigned to the rating is stable. The financial strength, issuer credit and existing issue ratings of Torchmark and its life/health companies are unchanged.

The net proceeds of the junior subordinated debenture offering are expected to be used to redeem all of the $250 million 6.375% senior notes due June 2016 and for general corporate purposes. The rating reflects the debentures’ deeply subordinated status within Torchmark’s capital structure. Specifically, these securities will be unsecured, subordinated and junior in right of payment and upon liquidation to all existing and future senior indebtedness. In addition, the debentures will be effectively subordinated to all existing and future indebtedness and other liabilities, including policyholder obligations, of its subsidiaries. A.M. Best notes that the newly issued subordinated notes may be redeemed on or after June 15, 2021, or at any time within 90 days after the occurrence of a “tax or rating agency event.”

The assigned rating reflects Torchmark’s status as a niche provider of life and supplemental health insurance and its consistently favorable earnings. The rating also is indicative of A.M. Best’s view of Torchmark’s risk-adjusted capitalization, which has recently dropped modestly below targeted levels. A.M. Best notes that Torchmark’s overall financial leverage, incorporating some equity credit for the new debentures, is currently approximately 22%. Financial leverage is expected to decline following the redemption of the 6.375% senior notes due June 2015, while interest coverage is expected to remain above 10 times. Both measures are well within A.M. Best's guidelines for Torchmark’s current ratings.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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