Ashleigh Rogers
Long/short equity, growth at reasonable price, value, banks

Torchmark's Headline Earnings Look Good, But There Are Some Underlying Concerns

Torchmark (NYSE:TMK) is a life insurance and supplemental health insurance company that sells to middle-income consumers through a captive distribution network. The company has been ripping higher over the last year as improving mortality trends, improving margins, and good cost controls have all benefited investors. Torchmark has historically generated fairly strong cash flows, and the company has been a reliable earnings and revenue grower over the last five years. Below the headline numbers though, I am starting to get a bit worried about competition, slowing sales growth, and the valuation on the firm.

McKinney, TX-based Torchmark is actually a holding company for several insurance companies that sell individual life (~50% of revenues) and supplemental health insurance (~30% of...

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