JPMorgan Sees Buying Opportunity In Torchmark

Torchmark Corporation (NYSE: TMK) shares have been under pressure over the past month due to concerns surrounding the company’s exposure to a deteriorating credit environment and a decline in union membership.

Although the concerns are valid, investors are “drastically overestimating” the life insurance company's vulnerability, according to JPMorgan.

The Analyst 

Analyst Jimmy Bhullar upgraded Torchmark from Neutral to Overweight with an unchanged $88 price target.

The Thesis

Although Torchmark has substantial exposure to BBB bonds, is has less exposure than its peers to a credit downturn, Bhullar said in the Wednesday upgrade note. (See his track record here.) 

Torchmark’s exposure to other risky assets — like collateralized loan obligations, alternatives and mortgage loans — is marginal, and its exposure to high-yield debt is below average, the analyst said. 

The company appears better-positioned than peers to ride out credit deterioration due to its below-average asset leverage and superior cash flow, Bhullar said. 

The concerns surrounding a union membership decline and its impact on American income seem overdone, he said, adding that income has steadily grown over the past decade despite a decline in organized labor.

Price Action

Torchmark shares were trading up by 0.56 percent at $74.95 at the time of publication Wednesday. 

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