Torchmark responds to Fitch downgrades

Life and health insurer Torchmark Corp. on Monday offered an update on the status of its capital situation and investment portfolio after last week's downgrade by Fitch Ratings.

Fitch on Friday lowered its ratings on senior debt and a range of senior notes and debentures to "BBB+" from "A." The commercial paper rating was cut to "F2" from "F1." Fitch maintained its negative outlook on Torchmark.

The downgrades were attributed to Torchmark's exposure to financial market turmoil and expected additional investment deterioration this year and next year.

The company responded in a statement Monday that said none of its bonds are in default. It said as of May 31 bonds at amortized cost were $9.4 billion, or 91 percent of invested assets. Net unrealized losses were about $1.7 billion, $500 million lower than they were at the end of the first quarter.

Torchmark said it has the capacity to absorb impairments at historically high default rates and still maintain adequate statutory capital, management does not expect to incur that level of impairment.

Fitch also cited Torchmark's $100 million of debt due in August and $274 million of commercial paper outstanding, saying the challenging conditions of the credit markets may create difficulty for the company in rolling over maturing commercial paper.

Torchmark responded by saying it has reduced commercial paper outstanding by $41 million to a total of $233 million as of June 5.

The company said it has ample liquidity to retire both the $233 million of commercial paper and the $99 million of debt maturing in August.

It offered reassurances on the level of free cash flow available, which it estimated at $242 million. Torchmark said $166 million of that cash was on hand at the parent company level.

Shares of Torchmark fell 28 cents to $39 in midday trading.