A.M. Best Assigns Initial Debt Ratings to Torchmark Corp.; Affirms Financial Strength Ratings of Operating Subsidiaries.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 1, 2001

A.M. Best Co. has assigned an "a" rating to the existing senior debt of Torchmark Corp. (NYSE: TMK) and an "a-" rating to the preferred securities issued by Torchmark Capital L.L.C. In addition, the financial strength ratings on the group's life/health insurance subsidiaries have been affirmed.

The ratings reflect the group's robust earnings, strong debt service capacity, solid capital position and multiple channels of distribution. Torchmark's core life and health insurance businesses have produced strong and consistent earnings, which amply support fixed charges. A major portion of Torchmark's earnings is generated from its mature block of individual life insurance, which has experienced favorable mortality and persistency. The group's supplemental health business also produces significant underwriting income and cash flows. Recent health sales have been bolstered by strong producer recruiting as well as by the recent movement of HMOs out of Medicare. A.M. Best expects Torchmark to further capitalize on this trend and to continue to reap above-average returns and remain a major player in the senior market for supplemental health products. In addition, the low to middle income target market provides sufficient growth opportunity for the group's life insurance products.

The insurance subsidiaries maintain favorable risk-adjusted capitalization despite dividend requirements to the ultimate parent. Over the last several years, excess capital of the insurance operations has been used principally for stock repurchase. Additionally, Torchmark has recently paid down nearly $90 million of short-term debt. Given its moderate but declining financial leverage--debt plus preferreds to total capital at approximately 27%--A.M. Best believes Torchmark's debt service is adequately supported by the earnings and cash flow capabilities of its insurance operations. Furthermore, the proceeds from the recent divestiture of its asset management subsidiary, Waddell & Reed, and of other non-strategic subsidiaries were also used to retire debt, thus allowing Torchmark to focus on its core insurance operations.

Torchmark's organizational structure facilitates the sale of products through various distribution systems to underserved and niche markets. Exclusive agencies based in the southeastern United States sell life insurance to low and middle income consumers. Medicare supplement coverage is offered nationwide by exclusive agents targeting the senior market. The direct response operation

emphasizes the low to middle income and senior markets through a low expense, state-of-the-art operation center. These diverse distribution sources have contributed to favorable premium growth in core lines, allowing the group to realize expense savings as a result of economies of scale in its individual businesses and to operate profitably in its target markets.

Offsetting factors include the highly competitive conditions the company faces in the life insurance and health lines, regulatory pressures in the supplemental health business and the group's exposure to litigation. While Torchmark has been successful in growing both its life and health businesses, Medicare supplement sales have become an increasing proportion of revenue. This line is extremely susceptible to regulatory pressures on both the state and national level, which exposes the group to potential rate inadequacy, mandatory benefits and an evolving competitive landscape. Growth in both the life insurance and health businesses is also dependent upon increasing the number and productivity of its agents, particularly in the commodity-like businesses in which Torchmark operates. In addition, due to its target market, business lines and domiciliary exposure in the state of Alabama, the Torchmark companies have been party to numerous lawsuits regarding issues such as employment, market conduct, tax and rate adequacy. While the company actively defends these lawsuits, the potential exists for material adverse judgments.

Torchmark Corporation, headquartered in Birmingham, Alabama, is a financial services holding company which, through its subsidiaries, specializes in marketing life and supplemental health insurance to low and middle income Americans through multiple distribution channels including direct response, exclusive and independent agencies. As of December 31, 2000, Torchmark reported consolidated assets of $13.0 billion and shareholders' equity of $2.2 billion.

The following ratings are assigned to existing debt securities:

-- Torchmark Corp.--

-- "a" rating on $100 million 8.25% senior unsecured debentures, due August
2009

-- "a" rating on $200 million 7.875% senior unsecured notes, due May 2023

-- "a" rating on $100 million 7.375% senior unsecured notes, due August 2013

-- AMB-1 commercial paper rating

-- Torchmark Capital LLC--"a-" rating on $200 million 9.18% cumulative Monthly
Income Preferred Securities (MIPS), guaranteed by Torchmark Corp.

The following indicative ratings are assigned to debt securities available under shelf registration:

-- Torchmark Corp.--"a" senior debt rating

-- Torchmark Capital Trust I and II--"a-" preferred securities rating

The following financial strength ratings have been affirmed:

-- First United American Life Insurance Co., A+ (Superior)

-- Globe Life and Accident Insurance Co., A+

-- Liberty National Life Insurance Co., A+

-- United American Insurance Co., A+

-- United Investors Life Insurance Co., A+

-- American Income Life Insurance Co., A (Excellent)

-- American Life and Accident Insurance Co., B+ (Very Good)

A financial strength rating of A (Excellent) has been assigned to Torchmark's newly licensed New York subsidiary, National Income Life Insurance Co.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.