Torchmark Plunges as More Holdings Are Cut to Junk (Update2)

By Cordell Eddings
Bloomberg News
April 23, 2009


April 23 (Bloomberg) -- Torchmark Corp., the McKinney, Texas-based seller of annuities and health insurance, fell the second-most in the Standard & Poor's 500 Index after more of the company's fixed-income holdings were lowered to junk status.

The insurer dropped $4.13, or 14 percent, to $26.28 at 4 p.m. in New York Stock Exchange composite trading, and earlier fell as much as 16 percent, the most in more than a quarter century.

More than $1.2 billion in securities were below investment grade as of March 31, compared with about $700 million three months earlier, the insurer said in a statement late yesterday. Most of the lower-rated securities are corporate debt. Torchmark also said first-quarter net income fell on investment writedowns to $76.7 million, or 91 cents a share, from $118.2 million, or $1.29, a year earlier.

"The real focus for us and investors will likely be the potential implications from the downgrade" of corporate bonds in the insurer's portfolio, said Randy Binner, an analyst with Friedman, Billings, Ramsey Group Inc., in an note to investors today.

Defaults on corporate debt and mortgage-linked securities have drained assets at insurers including Torchmark. The insurer has had more than $1 billion in writedowns and unrealized losses tied to the collapse of the subprime market since the beginning of 2007, most of it on corporate debt as the insurer marked down holdings in firms including Lehman Brothers Holdings Inc. and Washington Mutual Inc.

Chief Executive Officer Mark McAndrew, speaking on a conference call today, described the insurer's portfolio of corporate bonds as "good credits" that continue to pay interest.

Torchmark has plunged about 58 percent in the past 12 months, worse than the 38 percent decline in the Standard & Poor's 500 Index.

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