Citigroup Raises Price Target on Torchmark (TMK)

Citigroup is out with a research report this morning, where it reiterates its Buy/Low Risk rating on Torchmark Corp. TMK; it has a $65.00 price target on the stock, up from $60.00. The Citi analysts believe that the revised target and risk rating (was lowered to low) reflects TMK's improved earnings outlook as well as the steps management has taken to lower earnings volatility by re-balancing the investment portfolio and the pending sale of the discontinued variable annuity business. As for valuation, the analysts remarked, “When deriving valuations for life insurers we primarily utilize a peer comparison of P/B regressed against ROE. We derived our target based upon a valuation of 1.25x projected YE11 book value of $52.19 ex. OCI assuming a 13.7% ROE. It is above the peer group average P/B of 1.02x and range of 0.5x-2.12x, which is based on a median ROE of 11.1%, ranging from 5.8%- 26.4%.”