Torchmark

Torchmark Corporation (nyse|TMK) based in McKinney, Texas is an S&P 500 holding company that specializes in life insurance, supplemental health insurance and financial services. The Company was founded in Birmingham, Alabama where it was headquartered until 2006 and where it still maintains its largest operations. Its core company, Liberty National, was formed in 1900, and after an acquisition it formed Torchmark as a holding company in the late 1970s.

ubsidiaries

*"Liberty National Life Insurance Company", Birmingham, Alabama, formed in 1900

*"Globe Life And Accident Insurance Company", Oklahoma City, Oklahoma, acquired in the late 1970s

*"United Investors Life Insurance Company", Birmingham, Alabama, acquired in 1981

*"United American Insurance Company", McKinney, Texas, acquired in 1982

*"First United American Life Insurance Company", Syracuse, New York, formed in 1984

*"American Income Life Insurance Company" (formerly nasdaq2|AINC), Waco, Texas, acquired in 1994

History

The original core of Torchmark, Liberty National, was founded in 1900 in Birmingham, Alabama. It expanded into supplemental health insurance for cancer coverage in the 1960s. [http://www.torchmarkcorp.com/reports/2002/AboutTorchmark.pdf Torchmark, About Us (pdf)] , Torchmark.com]

Liberty National began paying a cash dividend to shareholders in 1933, which it continued to pay without interruption every year since. When the company later became reorganized as a subsidiary of Torchmark, the dividend payment then continued annually under that parent's name.Standard & Poor's Stock Guide, various issues]

Globe Life and Accident was formed in 1951 in Oklahoma.

In the late 1970s, Liberty National acquired Globe Life and Accident, and formed the holding company, Torchmark Corporation. The company performed moderately well through the long secular bear market and economic malaise of the 1970s, during which time the stock price doubled in value from its low of that decade. The company continued to perform well through the early 1980s recession.

In 1981, Torchmark acquired United Investors Life Insurance Company. Under Torchmark that company was incorporated in Missouri on August 17, 1981. It had originally been been established in Missouri on September 27, 1961. [http://www.secinfo.com/dXmP9.bd.htm United Investors Life Variable Account · 497 · On 4/29/94] , SECInfo.com, Filed On 4/29/94, SEC File 33-11465, Accession Number 809766-94-2] In 1981, Torchmark earned almost US$65 million.

In April 1982, R.K. Richey became President of Torchmark for the next four years. Also in 1982, Torchmark acquired United American. It had been formed after World War II by Casey Dunlap in Texas. After the 1966 Medicare law was passed, United American had begun to focus on senior citizens with its Medicare supplement policy. Earnings for 1982 came in at over US$70 million.

By 1983, earnings reached over US$90 million, and by then the stock had tripled from its 1970s low. Also in 1984, Torchmark issued an adjustable rights preferred stock, which began paying dividends the next year, with an adjustable rate between 7% and 13%.

In 1981, Torchmark had incorporated Globe International Life Insurance Company in New York. On December 10, 1984, that subsidiary became licensed and began operating in that state. On October 1, 1985, it changed names to become First United American Life Insurance Company. [http://www.ins.state.ny.us/exam_rpt/74101c02.pdf STATE OF NEW YORK INSURANCE DEPARTMENT REPORT ON EXAMINATION OF THE FIRST UNITED AMERICAN LIFE INSURANCE COMPANY AS OF DECEMBER 31, 2002 (pdf)] ]

In December 1984, R.K. Richey was promoted to CEO of Torchmark, as well as retaining his position as President for two more years. For the year ending 1984, Torchmark earnings soared to nearly US$150 million. The stock price gained over 50% that year, and split two-for-one.

In July 1985, Torchmark's President and CEO, R.K. Richey, also became President of the subisidiary United Investors Management Company, the parent company of United Investors Life. That year Torchmark's earnings continued to rise, up to US$153 million. Long-term debt stood at US$161 million, but the company was well-positioned with a book value of US$773 million. The stock price split again two-for-one that year, and rose by another 50% from its 1984 high.

In August 1986, R.K. Richey retained his existing position as CEO of Torchmark Corporation, but relinquished his position as President, when he was elected to Chairman. In October 1986, Torchmark's new Chairman and CEO, R.K. Richey, also became Chairman of United Investors Management Company, after relinquishing his position as President of that subsidiary as well in August 1986. Earnings that year came in at US$167 million. The stock price reached an intermediate-term peak in 1986, up another 40% from its 1985 high.

In 1987, earnings came in at US$184 million. Long-term debt rose to US$298 million, but Torchmark's book value had also risen, to US$800 million. Through 1987, Torchmark bought back about 9% of its stock, including 4.5 million shares through January that year. The stock price came close to its 1986 high, but fell victim to the 1987 stock market crash later that year, and ended up near its prior year low by the end of 1987.

In 1990, Torchmark's earnings came in at US$204 million. The company continued to perform well through the 1990-1991 recession, and by 1991, earnings grew to US$224 million.

In 1992, Torchmark split its stock three-for-two, and it reached a new intermediate-term high for the next several years, up nearly 70% from its 1986 peak. By then the company had been added to the S&P 500 Index of the largest publicly-traded companies in the United States.

In 1993, Torchmark's earnings reached their intermediate-term peak for the next few years, at US$269 million. The stock price slid that year by 25% from its prior year high. 1994 earnings declined slightly to US$266 million, as the company managed through the 1994 economic soft landing. The company's long-term debt by then had grown to US$793 million, but its book value had dropped from 1980s levels, to only 674 million. In 1994 the stock price dropped to only half of its 1982 peak price.

In 1994, Torchmark acquired American Income Life Insurance Company. That subsidiary company had been founded in 1954 by Bernard Rapoport. It had begun marketing to labor unions in the early 1960s. That company provided life, accident and health insurance, and had traded on the NASDAQ OTC exchange, as it was then known, under the symbol AINC. it had also performed extremely well throughout the 1970s, gaining a 27-fold increase from its low of that decade. Its stock had split two-for-one and peaked in price in 1983, the year it began paying a dividend. Through the first half of the 1980s its earnings had doubled, but fell off by almost half in 1985 and succeeding years. American Income Life's stock price had also fallen back from its 1983 peak by half its value in 1984. Over the next few years the stock made a couple attempts back toward its old all-time high, but kept retreating back toward the 1984 lows, and also fell victim to the late 1987 stock market crash, ending that year near those same lows.

By 1995, Torchmark earnings continued their steady decline, down to US$143 million. However, the company's book value increased to over US$1 billion. The stock price continued in its low trading range through that year.

In 1999, Torchmark earned US$274 million. However, that included a realized loss of US$72 million from the sale of real estate investments. The company also wrote off a US$13 million charge from an aborted marketing agreement with Reader's Digest (nyse2|RDA). [http://www.fool.com/investing/value/2007/05/02/bend-it-like-buffett-dissecting-torchmark.aspx Bend It Like Buffett: Dissecting Torchmark] , Motley Fool, By Emil Lee May 2, 2007]

In early 2000, value investor Warren Buffett more than tripled his holdings in Torchmark to over 2 million shares. Torchmark's old economy stock had become undervalued during the late 1990s technology bubble. Over the next several years during and after the early 2000s bear market, Buffett's investment in Torchmark tripled in value.

References

External links

* [http://www.torchmarkcorp.com/ Torchmark Corporation]