The Progressive Corporation announced that it has agreed to acquire a controlling position in ARX Holding Corp., the parent company of American Strategic Insurance (ASI) and its affiliates, for $875 million in cash
The transaction is designed to support Progressive’s strategy to service more customers who bundle home and auto insurance, according to the carrier.
ASI is a Florida-based firm whose affiliates offer homeowners, insurance, personal and commercial property insurance, personal umbrella insurance, and primary and excess flood insurance in 26 states, including the Mid-Atlantic.
The shares purchased by Mayfield Village, Ohio-based Progressive will be primarily from non-management shareholders and will bring Progressive’s interest in the company to approximately 67%, up from the 5% interest it’s held since 2012. ASI will continue to operate as a separate company under its current management team. The transaction is expected to close by April 1, 2015, subject to closing conditions.
Additionally, Progressive expects to purchase the remaining shares of the company over the next six years.
“This is a great opportunity for ASI, as our intention has long been to become the Progressive of home insurance,” said John Auer, CEO of ASI. “We’ve been working with Progressive for years and have achieved a great deal together. Now, this transaction will enhance our ability to design and distribute a product offering that will advance both companies and attract a market segment of bundled customers that remains underpenetrated by us both. It also creates a predictable and stable long-term outlook for ASI.”
“Progressive is committed to becoming the insurance destination brand for consumers,” said Progressive CEO Glenn Renwick. “As such, we need the reliable availability of many more products than we intend to manufacture. ASI provides a significant array of the most important products beyond auto. Together we can make our products an even more attractive bundle for consumers and agents.
“I can’t think of a situation where the cultural fit could be any better,” continued Renwick. “The business accomplishments and management team of ASI in the homeowners market are simply outstanding. With this move, we are taking an important step to ensure the sustainability of our ‘Destination’ business strategy, which will still continue to invite and attract participation of other quality providers of products our consumers will want and need. This is also a significant investment in the products that our independent agents are asking for.
“We increased our economic interest for two simple reasons: the strategic fit with our direction as a company, and our unqualified respect for ASI’s current operations and management,” Renwick said. “ASI has achieved double-digit growth in both premiums and return on equity over the last five years, and has been consistently profitable since its inception in 1997. It also has great potential for significant geographic expansion. Any changes we contemplate with ASI’s management team will be focused on increased product design integration and improvements to promote the bundled growth of our respective products.”