Wisconsin-based American Family Insurance group and Florida-based The Main Street America Group will pursue a merger, the companies announced today.
The combined equity of the merged entities is expected to be more than $9 billion. Upon completion of the merger, Main Street America will operate as a stand-alone brand with its own name and marketing within American Family Insurance group, similar to The General and Homesite, which American Family acquired in 2012 and 2013 respectively.
American Family Insurance and Main Street America said the merger does not involve capital outlay by either.
The companies said the merger, approved by their boards of directors, will “improve diversity of risk, promote growth through geographic expansion and provide agents and policyholders broader product offerings.”
Both insurers have national distribution capabilities, but each has its own regional emphasis.
The merger, expected to close by year-end, will require approval by mutual policyholder-members of both companies and state insurance regulators.
“This merger will give policyholders – particularly small business owners – more insurance products to choose from and more ways to buy them,” said Jack Salzwedel, chairman and CEO of the American Family Insurance group. “Given our focus on policyholders and agents, that’s a win.”
“Both companies are able to immediately take advantage of our unique marketplace positions, as well as the ability to bring new value to each of our agency distribution systems,” said Tom Van Berkel, Main Street America’s chairman, president and CEO. “Our ability to sell new products through our independent agent-customers will help us and our agents profitably grow, while simultaneously bringing American Family enterprise products to a different policyholder base.”
Policyholder Equity Combined
Main Street America said it will retain its affiliation with Trusted Choice, the branding program of the Independent Insurance Agents & Brokers of America.
In 2017, the American Family group’s written premium was $8.8 billion. The company sells American Family-brand products, including auto, homeowners, life, business and farm/ranch insurance, primarily through exclusive agents in 19 states. American Family affiliates, The General, Homesite and AssureStart, also provide options nationally for consumers who want to buy insurance over the internet or by phone.
Main Street America wrote more than $1 billion in premium last year. The company sells commercial and personal insurance as well as surety bonds, all through independent agents. Main Street America has an “A” (Excellent) rating with a stable outlook for financial strength from A.M. Best, the same as American Family.
American Family became a mutual holding company in 2017, making mergers like this possible.
The American Family Insurance group ended 2017 with approximately 11,300 full-time equivalent employees and Main Street America has approximately 900. At this time, no major employee or operational changes are expected as a result of the merger, according to the announcement.
Geographic and Product Diversification
Commercial products for small business owners, artisan contractors, vehicles, workers’ compensation and agribusiness account for approximately 70 percent of Main Street America’s direct written premium, with 90 percent of their total premium coming from outside the 19 states where American Family sells through exclusive agents.
The companies said the merger includes plans to supplement American Family commercial products with Main Street America products, and for Main Street America to enhance its personal lines products with American Family enterprise products marketed to Main Street America customers under the Main Street America brand.
“Our commitment to our exclusive agency force has never been stronger,” said Salzwedel. “This merger will give our agents more products to offer policyholders while providing the American Family Insurance group another avenue through which to sell products – independent agents.”
“The partnership with American Family creates tremendous potential for Main Street America and our valued independent agent-customers,” added Van Berkel. “The ability to leverage American Family’s powerful technology platforms will enable us to deploy products more rapidly and make it easier for agents and insureds to transact business with us.”
The merger will diversify American Family’s product mix, increasing commercial lines from 8 percent to 14 percent of the combined entity’s direct written premium. It will also spread the geographic risk for both companies over a larger area.
“When you have a merger of this magnitude, you fear the process will be arduous. But, it’s been great working with Tom (Van Berkel) over the past six months. He’s been a visionary, identifying early on how a merger could enhance both companies,” said Salzwedel. “The benefits to policyholders and our companies became clear. With a heavy concentration on the East Coast, Main Street America will help extend the reach of the American Family group. American Family, in turn, will help bring new products and technology to Main Street America and its policyholders.
“We will continue to strategically expand our enterprise,” added Salzwedel. “When we see growth opportunities that provide more options and value for policyholders, we will pursue them.”
Rating agency A.M. Best said the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of the operating subsidiaries of Main Street America Group remain unchanged.
On March, 22 before the merger announcement, A.M. Best affirmed the “A” (Excellent) Financial Strength Ratings and stable outlooks of American Family Insurance Group (including Homesite and The General) and American Family Life Insurance Co.
Both companies were assisted in the transaction by third parties. Main Street America’s financial advisor was Keefe, Bruyette & Woods, a Stifel Company, and legal advisor was Greenberg Traurig law firm. American Family was assisted by legal advisor Foley & Lardner.
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