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September 15, 2010
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The transaction, announced yesterday, will bring $648 million to Liberty. The breakup structure of this total consideration includes $316 million as purchase price from Protective and $332 million as pre-closing distributions from United.
The transaction will be completed tentatively by year-end 2010. Bank of America Merrill Lynch, a unit of Bank of America (BAC), will act as the financial advisor for the deal.
Torchmark is striving to axe United from its portfolio of companies as it is no longer involved in the lines of business offered by the company. Consequently, the funds released from this strategic sell-off will be pumped into its main line of operations like life and health insurance, thereby enhancing the insurer’s core efficiency.
As for Protective, the transaction will cost $316 million, and will be in sync with its experience of acquiring and integrating the closed block of businesses. Management is also shifting from reserve-intensive level premium life insurance products to universal life products (offered by United Investors) with lower reserve requirements. The acquisition is expected to accrue by 2011 and 2012 earnings of $0.15–$0.20 and $0.18–$0.22 per share, respectively.
Moreover, following the acquisition announcement, Protective witnessed a positive rating action by Fitch, which affirmed its Issuer Default Rating (IDR) at 'BBB+' and senior debt rating at 'BBB'. The rating agency also affirmed the company’s trust preferred rating at 'BB+' and primary life insurance subsidiaries' Insurer Financial Strength (IFS) rating at 'A'. The agency also revised the Rating Outlook to Stable from Negative.
The rating action acknowledges Protective’s sound liquidity position, continued profitability, declining investment impairments and improving unrealized investment losses, as well as modest financial leverage.
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