* ProAssurance to pay $32.50/shr; a 24 pct premium
* Says acquisition to boost presence in Texas
* Deal to add to ProAssurance's 2011 adj earnings
* American Physicians shares touch life high
(Adds byline, details, updates shares, trading volumes)
By Jochelle Mendonca
BANGALORE, Sept 1 Medical professional
liability insurer ProAssurance Corp (PRA.N) said it would buy
smaller rival American Physicians Service Group (AMPH.O) for
$233 million in cash to expand in the fast-growing Texas market
and adjoining states.
Cash-rich property and casualty insurers are expected to go
on a buying spree as they try to compensate for flagging
premium growth and pricing pressures amid strong competition.
ProAssurance will pay $32.50 a share, a 24 percent premium
to Austin, Texas-based American Physicians Service's Tuesday
"Completing this transaction will make ProAssurance the
second-largest writer of medical professional liability
business in Texas, one of the fastest, if not the fastest,
growing physician markets in the country," ProAssurance CEO
Stancil Starnes said on a conference call with analysts.
Stifel Nicolaus analyst Michael Paisan noted Texas is the
only state to have passed tort reform by constitutional
"It would be very difficult to overturn (that) even if the
environment were to change," he said. "So it's a good place to
write this insurance."
Texas tort reform clamps down on damages that can be
awarded in medical malpractice suits, making the state an
attractive place for doctors to practice medicine.
Paisan added he sees modest accretion from the deal and
thinks the valuation paid for American Physicians was "quite
Birmingham, Alabama-based ProAssurance said the acquisition
will add to its 2011 earnings, before one-time charges.
ProAssurance, which has $334.2 million in cash and
short-term investments, said it could afford to buy back shares
and fund the acquisition with its own cash.
The transaction, which has been approved by American
Physicians' board, should close this year, ProAssurance said.
ProAssurance is advised by Sandler O'Neill and American
Physicians is advised by Macquarie Capital (USA).
American Physicians stock rose 23 percent to a life high of
$32.25 on Nasdaq, with close to 600,000 shares traded, 26 times
the stock's normal volume.
ProAssurance shares were up 3 percent at $54.68 on the New
York Stock Exchange.
(Reporting by Jochelle Mendonca in Bangalore; Editing by Anne
Pallivathuckal and Ian Geoghegan)