Fitch Rates Torchmark's Junior Subordinated Debentures 'BBB-'

Fitch Ratings has assigned a 'BBB-' rating to Torchmark Corporation's (TMK) issuance of $300 million of junior subordinated debentures due 2056.

KEY RATING DRIVERS

The rating is equivalent to the ratings assigned to TMK's existing junior subordinated debentures and reflect standard notching for a hybrid with its risk characteristics. Based on Fitch's rating criteria, the securities are notched using a baseline recovery assumption of Poor and a non-performance risk assessment of Minimal.

Fitch expects that proceeds from the issuance will be used for general corporate purposes, including funding a $250 million debt maturity in June 2016. As a result of this 2016 maturity, Fitch views the new issuance as having a very modest effect on TMK's financial leverage, which stood at 25% at yearend 2015.

TMK's ratings were affirmed on Dec. 15, 2015, and continue to reflect the company's strong and stable operating profitability, strong competitive position in its niche small-face-amount life and supplemental health insurance markets, and below-average exposure to interest rate risk. The ratings also reflect the company's relatively aggressive capital management strategies, which have resulted in a risk-based capital (RBC) at the low end of rating guidelines. Furthermore, the quality of the statutory capitalization of TMK's insurance subsidiaries is negatively affected by the companies' investment in parent company senior debt and preferred stock.

RATING SENSITIVITIES

Key rating triggers that could lead to an upgrade include:

--Statutory capital adequacy above 350% RBC and sustained or improved capital quality;

--Financial leverage of 20% or below and total financings commitments ratio below 0.40x;

--GAAP earnings-based interest coverage ratio 13 times or above.

Key rating triggers that could lead to a downgrade include:

--Return on equity of 12% or less;

--Statutory capital adequacy below 290% RBC and sustained or worsened capital quality;

--Financial leverage above 30% or total financings commitments ratio above 0.55x;

--GAAP earnings-based interest coverage ratio below 8x.

FULL LIST OF RATING ACTIONS

Fitch assigns the following rating:

Torchmark Corporation

--Junior subordinated debentures due 2056 'BBB-'.

Last Relevant Committee Date: Dec. 14, 2015.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001690

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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