Catholic Financial Life acquiring Minneapolis fraternal benefit society

Will bring Degree of Honor Protective Association work to Milwaukee


Milwaukee-based life insurance organization Catholic Financial Life is in the process of acquiring St. Paul, Minnesota-based Degree of Honor Protective Association.

Bill O'Toole, president and CEO of Catholic Financial Life.
Bill O’Toole, president and CEO of Catholic Financial Life.

The transaction is expected to close any day, said Bill O’Toole, president and chief executive officer of Catholic Financial Life. Both organizations’ boards and the CFL delegate members have approved the transaction, and it is just awaiting regulatory approval.

Most of the work completed at Degree of Honor will be shifted to CFL’s existing workforce in Milwaukee. CFL has about 86 employees spread among its Milwaukee headquarters and two smaller market offices, as well as locations in Green Bay, Madison, Wausau and Fond du Lac.

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“All the back office work, the underwriting and IT and all of that, that all comes to Milwaukee,” O’Toole said. “We may be adding a couple (employees) but we anticipate we have the capacity to absorb most of the business without much addition to our staff in Milwaukee.”

There are 22 employees at Degree of Honor, about half of whom will be laid off when the deal closes, O’Toole said. There will eventually be just four employees at the St. Paul office, and CFL will move the operations to a smaller space there.

Catholic Financial Life has about 108,000 members and Degree of Honor has about 40,000 members. The acquisition will increase CFL’s presence in the Minneapolis/St. Paul market, O’Toole said. It has salespeople there, but did not previously have a St. Paul office.

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Degree of Honor has about $570 million of life insurance in force and about $200 million in assets. Its 2016 net income was $236,809. CFL has about $5.1 billion of life insurance in force and $1.4 billion in assets.

This is a non-cash transaction in which Catholic Financial Life will assume the costs of integrating Degree of Honor, which will total about $2.4 million and include severance costs for the displaced employees and IT integration. The efficiencies realized by the transaction will add about $2 million to CFL’s annual net operating income beginning in 2018.

“I’d love to do a deal like that every year if I could,” O’Toole said. “It’s more than 1+1 equals 2. It’s much greater than.”

Degree of Honor had some challenges remaining profitable over the past few years because of persistently low interest rates and increasing competition in the life insurance space, like many fraternal benefits organizations, he said.

“We’re in a mature industry so growth is low,” O’Toole said. “And we’re also in an industry that is going through a digital transformation, and so the technology cost is very high.”

Catholic Financial Life reported net income of $11.6 million in 2016, up from $9.6 million in 2015.

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