Torchmark Corp acquires Family Heritage Life Insurance Company of America for $218.5 million

Notes:

Torchmark Corp. (NYSE: TMK) has signed a definitive agreement to acquire Cleveland-based Family Heritage Life Insurance Co. of America, a privately held provider of supplemental health insurance, in a deal valued at $218.5 million, subject to closing adjustments.


Torchmark, a holding company based in McKinney, Texas, that specializes in life and supplemental health insurance, expects the transaction to close early in the fourth quarter. Torchmark said the deal will be financed internally with cash from its insurance subsidiaries and is expected to be accretive to earnings per share with minimal impact, if any, on Torchmark's free cash flow available for stock repurchases.

Founded in 1989, Family Heritage is a specialty insurer focused primarily on selling individual supplemental health insurance products with a return-of-premium feature. Torchmark said Family Heritage has 1,200 captive sales agents, 41 sales directors and more than 223,000 policies in force.

Torchmark said net income last year at Family Heritage was approximately $21 million, and direct premiums written in 2011 were $162 million.

“We are excited about the addition of Family Heritage to the Torchmark family," said Torchmark co-CEOs Gary Coleman and Larry Hutchison. “This transaction meets the criteria we established when we began looking at possible acquisitions several years ago. Family Heritage offers protection-oriented insurance to middle-income families through a captive agency force that we believe we can help grow. The company has a track record of solid premium growth and strong underwriting margins with a business plan that incorporates a variable-cost marketing structure.”

Torchmark expects the transaction to add about one to three cents to net operating earnings per share in 2012 and approximately 13 to 17 cents per share in 2013.