Judge Lets Torchmark Continue Insurance Proxy Fight
NASHVILLE, Tenn. (AP) _ A federal judge on Tuesday allowed Torchmark Inc. to continue a proxy fight aimed at gaining control of its bigger insurance rival, American General Corp.
U.S. District Judge Thomas A. Wiseman said a Tennessee state commissioner overreached his authority when he ordered an end to the proxy battle Monday. The state immediately appealed the ruling to the 6th U.S. Circuit Court of Appeals in Cincinnati.
The judge said the order by Revenue Commissioner Joe Huddleston interfered with the rights of stockholders to vote their shares at Houston-based American General’s annual meeting Wednesday.
″Regulating insurance companies is one thing, regulating how people vote their stock is quite another,″ Wiseman said in the ruling.
Representatives of Torchmark, based in Birmingham, Ala., also said an Indiana Superior Court judge, R.L. Milan, had delayed an administrative hearing on the proxy battle in that state until next Monday.
Huddleston said Torchmark violated state law by soliciting a majority of proxies designed to elect five new members of the 15-member American General board of directors.
Torchmark attorney William Leech said Torchmark wants five directors on the board who will listen to discussions about merging the two companies. He said election of one-third of the directors falls short of a takeover.
Tennessee is one of 10 states in which American General is considered domiciled because of operations there. Regulators in Texas and New York, as well as Tennessee, have questioned the legality of Torchmark’s proxy solicitation. Missouri, California and Virginia have approved the process.
American General has assets of $32 billion. Torchmark, with assets of $5 billion, has set aside $15 million for the proxy fight.
Testimony during the hearing showed the proxy strategy was adopted after American General directors rejected Torchmark’s offer of $50 in cash and $50 in Torchmark stock for each share of American General stock.
Huddleston was designated to hear the case for state Commerce Commissioner Elaine McReynolds, who recused herself because she is a former assistant vice president of American General Life & Accident Insurance Co., a subsidiary with 1,500 employees in Nashville.
Huddleston said state insurance law said no company or holding company can seek to control a Tennessee company without prior approval of the state Department of Commerce and Insurance.