Progressive Insurance Acquiring Homeowners Group ASI for $875M

December 16, 2014

Auto insurance giant Progressive Insurance is enhancing its homeowners insurance offerings by acquiring controlling interest in a Florida-based group of insurers now selling homeowners, renters, condo, umbrella, flood and other property/casualty coverages in about half the states nationwide.

The Progressive Corp. has agreed to acquire a controlling position in ARX Holding Corp., the parent company of American Strategic Insurance (ASI) and its affiliates, for approximately $875 million in cash.

The shares will be purchased primarily from non-management shareholders and will bring Progressive’s interest in the company to approximately 67 percent, up from the 5 percent interest it’s held since 2012.

Progressive also said it expects to purchase the remaining shares of the company over the next six years.

Progressive said the transaction supports its strategy to service more customers who bundle their home and auto insurance policies.

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Under the agreement, ASI will continue to operate as a separate company under its current management team. ASI has approximately 450 employees, primarily at the company’s St. Petersburg, Florida headquarters.

In 2013, ASI reported just over $1 billion in direct written premiums, up from $873 million in 2012. In 2013, it reported a combined ratio of 74.8. It has more than $550 million in surplus and is rated rated A (Excellent) by A.M. Best.

The transaction is expected to close by April 1, 2015, subject to closing conditions.

“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 under-penetrated 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.”

Renwick said the cultural fit between the two firms couldn’t be better.

He also said the deal is a “significant investment in the products that our independent agents are asking for.”

Renwick said that 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,” according to Renwick.

ASI functions as an insurance group with several separately incorporated companies under a common umbrella. The group of companies includes five Florida-domiciled insurance companies, a Texas-domiciled insurance company, a Delaware-domiciled insurance company and three managing general agencies.

The companies include: American Strategic Insurance Corp., ASI Lloyds, ASI Assurance Corp., ASI Preferred Insurance Corp., ASI Select Insurance Corp., American Capital Assurance Corp. and ACA Home Insurance Corp. The three managing general agencies are ASI Underwriters, ASI Underwriters of Texas, Inc. and Safe Harbour Underwriters, LLC.

Marc Fasteau, president of Fulcrum Partners, LLC, a venture capital firm, is the founder and chairman of the board of Arx Holding Corp. and of ASI.

ASI CEO Auer joined the firm in August of 1997 to lead the new insurer in providing a voluntary market for residential property insurance. Prior to joining ASI, he served as vice president of Product Management and Corporate Planning at Bankers Insurance Group and as a division controller at Crum and Forster Personal Insurance. He began his insurance career in 1976 as an internal auditor with State Farm Mutual Insurance Co.

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