First Horizon National Corp. (FHN) is shedding its Insurance unit. The company has announced its agreement to sell First Horizon Insurance Inc. to insurer Brown & Brown Inc. (BRO), through its principal subsidiary First Tennessee Bank. The move comes as part of its effort to improve its focus on banking and capital markets.

The deal is expected to close later in this month and following which, First Horizon Insurance Group Inc. will operate under its new name Brown & Brown of Tennessee Inc. However, finalization of the deal is subject to the satisfaction of certain customary conditions. Financial terms of the deal were not disclosed.

With annualized revenues of approximately $14.8 million, First Horizon Insurance is a property and casualty insurance agency providing risk management services, employee benefits, personal lines and bonding to commercial clients and individuals in 40 states.

First Horizon projects around $3 million positive impact on the net income available to common shareholders in the first quarter of 2011 from this insurance unit sale. Additional financial impacts may be seen in future as the transaction provides for a reconciliation process at and after closing.

First Horizon has undertaken several measures to reduce its exposure to problem loans, control costs and boost capital levels. It has executed several strategic repositioning efforts to improve long-term profitability by focusing on the growth of its core Tennessee banking franchise.

The company’s fourth quarter 2010 earnings results were below the Zacks Consensus Estimate as it primarily bore the burnt of the bailout repayment. Besides, the repayment results also suffered from lower-than-expected revenues in the quarter, driven by a fall in non-interest income. However, the decrease in loan loss provisions coupled with a drop in expenses, were encouraging.

Going forward, we believe that strategic initiatives to boost the company’s core business would position it well to generate profits. In the near term, shrinkingrevenue base, mortgage repurchase risk and regulatory issues remain our concern.

First Horizon currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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