A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of the major life/health subsidiaries of Torchmark Corporation (Torchmark) (McKinney, TX) [NYSE: TMK]. A.M. Best also has affirmed the FSR of A (Excellent) and ICR of “a” of United Investors Life Insurance Company (United Investors Life) (Birmingham, AL). Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of “a-”of Torchmark. (See link below for a detailed list of the companies and ratings.)

The rating actions primarily reflect the heightened risk within Torchmark’s investment portfolio due to the significant unrealized loss position within its fixed income portfolio and a substantial increase in below investment grade bonds over the most recent period. While the company generally maintains a favorable risk-adjusted capital position in each of its insurance operating entities, A.M. Best believes that the company’s risk-adjusted capital position may be strained if it were to experience significant asset impairments or further negative ratings migration within its fixed income portfolio during 2009. A.M. Best notes that the company’s investment concentration within the financial sector, as well as the relatively long average duration within its corporate bond portfolio, has contributed to significant declines in market values. However, A.M. Best believes that the company’s large reserve concentration within the ordinary life line will allow it to hold most of its investments to maturity, and that Torchmark has sufficient liquidity to cover its short-term debt obligations. Additionally, Torchmark continues to maintain financial leverage and fixed coverage ratios, which are well within the guidelines for its current ratings.

While competitive market conditions and a number of challenges in the company’s distribution channels have impacted premium growth in recent years, Torchmark continues to experience exceptional operating profitability due to strong earnings generated by its stable and highly profitable blocks of individual life and health products. In addition, the company has experienced a relatively modest amount of realized capital losses within its investment portfolio to date. Although Torchmark has experienced a significant decline in sales of its health insurance products, it has made a strategic decision to emphasize its core life product lines, and sales have increased noticeably in recent periods.