April 28, 2010 / 3:52 PM / 7 years ago

UPDATE 1-Insurer IAG buys American-Amicable for C$145 mln

* Expands presence in U.S. middle-income market

* Industrial Alliance sees deal adding C$0.05 EPS

* Analysts say deal positive; shares up 0.9 pct

TORONTO, April 28 (Reuters) - Industrial Alliance Insurance and Financial Services Inc (IAG.TO) said on Wednesday it bought U.S. life insurer American-Amicable Holding Inc in a move that expands its presence in the U.S. insurance middle-income market.

Quebec-based IAG, Canada’s No. 4 life insurer, said the C$145 million ($144 million) acquisition, to be funded from cash on hand, will immediately add to earnings by 5 Canadian cents a share on an annual basis.

The purchase, foreshadowed by IAG’s February issuance of C$200 million in equity, lowers the insurer’s solvency ratio to 217 percent from 226 percent -- still high by international standards.

“IAG will remain well-capitalized post the transaction, as C$45 million of excess capital will be utilized to fund the purchase, with the remainder effectively being financed by cash on hand from IAG’s recent equity issuance,” RBC Dominion Securities analyst Andre-Philippe Hardy said in a note, calling the deal “slightly positive” on first impression.

Shares of IAG were up 0.9 percent at C$35.37 by late morning on the Toronto Stock Exchange, near their 52-week high set earlier in April.

Texas-based American-Amicable, licensed to sell life insurance in 49 states and territories, sells traditional life insurance products to mid-market customers through a national distribution network of more than 6,000 independent agents.

Primary markets include Texas, Puerto Rico, California, Illinois, Alabama and North Carolina.

Several Canadian insurers have targeted growth as economic uncertainty fades, either through expansion of operations or through acquisitions.

“This agreement with American-Amicable is an important milestone in our U.S. growth strategy,” IAG Chief Executive Yvon Charest said in a statement.

“Building on our local operations in Scottsdale, Arizona, it provides us with the scale and presence to accelerate our U.S. growth plan.”

IAG acquired closely held life and health insurance company MD Physician Services Inc in November for an undisclosed amount. MD, serving doctors and their businesses, had assets under management of more than C$24 billion as of Sept. 30, 2009.

$1=$1.01 Canadian Reporting by Andrea Hopkins

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