Fitch Assigns 'BBB+' Rating to Torchmark Corp.'s Senior Note Issuance.
Chicago: Fitch Ratings has assigned a 'BBB+' rating to the $550 million issuance of senior unsecured notes by Torchmark Corp. The existing ratings of Torchmark and its operating subsidiaries are unaffected by today's rating action.
Fitch last affirmed the ratings of Torchmark Corp. and its operating subsidiaries on Nov. 15, 2017.
KEY RATING DRIVERS
Torchmark's notes have been assigned a rating one notch below the company's Long-Term Issuer Default Rating (IDR), which reflects standard notching based on Fitch's rating criteria. The proceeds from this issuance are expected to be used to refinance $293 million in outstanding 9.25% senior notes due in 2019, including an $11 million make-whole premium to bond-holders, as well as, to fund $150 million of additional capital within its operating subsidiaries. Remaining proceeds are anticipated to be used for general corporate purposes or holding company liquidity.
In light of this issuance and the company's expected debt redemption activity, Fitch expects Torchmark to maintain financial leverage below 26% and fixed-charge coverage above 10x through year-end 2018. Additionally, we do not expect the increased debt service to hinder the company's strong operating performance metrics.
Key rating sensitivities that could lead to an upgrade include:
--Improved capital adequacy that results in a Prism score approaching 'Very Strong', or an RBC ratio above 350% with 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 sensitivities that could lead to a downgrade include:
--Return on equity of 12% or less;
--A reduction in capitalization that results in a Prism score of 'Adequate' or an RBC ratio below 290% with 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 has assigned the following rating:
--Senior unsecured notes 'BBB+'.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jan 7, 2019|
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