Torchmark CorporationTMK

Morningstar Rating

Stock Research and Analysis

by Alan Rambaldini

A lean cost structure and marketing niches put Torchmark in a unique position for a life insurer: It's able to earn a profit regardless of investment income. In our opinion, these advantages are in place for the long term, as management is willing and Read more

Bulls Say

Torchmark is one of the few life insurers to generate an underwriting profit, insulating it somewhat from interest rate and credit risk.

Niche distribution channels set Torchmark apart from peers, as policyholders are more likely to buy insurance from an agent with a common association or background.

Management has a record of accepting decreases in premium sales to maintain profitability. This profit focus is rare for an insurer and reinforces Torchmark's narrow moat.

Torchmark has a stamp of approval from famous investor Warren Buffett, as Berkshire Hathaway BRK.B has owned stock in the company since 1999.

Torchmark's sparse Web site demonstrates management's commitment to keep costs low in order to return as much as possible to shareholders. Read more

Bears Say

The company is at the mercy of regulators when it comes to winning rate increases in the competitive Medicare supplement business.

Although the labor union market is very profitable for Torchmark, it is declining. Management will continue to seek other affiliate relationships to augment growth.

Torchmark lacks the authority to make strategic or operating decisions related to First Command--its military distribution channel--because it is an independent unit.

The compensation overhaul at Liberty National could be more disruptive than predicted.

For regulatory reasons, the insurance subsidiaries are holding hundreds of millions of dollars of excess capital. This money drags down returns as it cannot be paid out to shareholders or reinvested. Read more

Strategy

Torchmark seeks to expand its life business via continued focus on disciplined underwriting and nominal client-acquisition costs. The firm continues to shift its focus away from Medicare supplement products Read more

Management

Mark McAndrew was elected chairman and CEO in 2005 after C.B. Hudson resigned. McAndrew has been with the insurer since 1980, filling managerial roles including chairman of insurance operations. McAndrew's stake in Torchmark stock is well above the Read more

Profile

Torchmark sells individual life and health insurance through niche distribution units. The life segment markets term and whole-life contracts. The health segment mainly Read more

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