Life and supplemental health insurer, Torchmark Corp. (TMK) has issued notes worth $425 million. The issuance consists of $300 million of 3.58% Senior Notes that will mature in 2022 and 5.875% Junior Subordinated Debentures maturing in 2052.
Torchmark will use $200 million from the above proceeds to fund the proposed acquisition of Family Heritage Life Insurance Company. The company announced this acquisition last month and expects to close the purchase by the fourth quarter of 2012.
The remaining funds from the Senior Notes offering will be utilized for meeting the working capital requirements, which includes discharging of the $94.1 million in principal amount outstanding of the company’s 7.375% Notes that mature on August 1, 2013. On the other hand, the proceeds from the Junior Subordinated Notes will be used to redeem all of the $120 million of 7.10% Trust Originated Preferred Securities, due 2046.
The Senior as well as Junior Notes are carrying ratings from Standard & Poor's. The rating agency has assigned senior unsecured debt rating of 'A' to senior unsecured notes due in 2022, and 'BBB+' to junior subordinated debt due in 2052.
Though the company’s financial leverage will go northwards with the issue of the abovementioned notes, the rating agency observes that the new leverage position will remain appropriate for its ratings and risk profile. The company’s debt servicing capability as measured by its fixed-charge coverage ratio of 11.2x also remains very strong and in line with its ratings.
Another rating agency Moody’s has rated Torchmark’s senior debt with ‘Baa1’ and junior subordinated debt with ‘Baa2.'
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Torchmark competes with Assurant Inc.
) and currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on its shares.
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