Allstate to Buy National General for $4 Billion, Growing Auto, Independent Agent Business

July 8, 2020

U.S. Insurer Allstate Corp. said on Tuesday it will buy National General Holdings Corp. for about $4 billion in cash, scaling up its auto insurance business at a time when the coronavirus has crushed traffic on roads and reduced claims.

National General’s shareholders will receive $32 per share in cash and closing dividends of $2.50 per share for each share held. This would imply a total deal value of $3.92 billion and a premium of about 69% to National General’s Tuesday close, Reuters calculations showed.

New York-based National General lists automobile insurance as its chief business, and offers services in personal auto, recreational vehicle, motorcycle and commercial auto businesses.

National General Profile
National General, headquartered in New York City, has a network of approximately 42,300 independent agents. National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health and other niche insurance products. Auto insurance represents approximately 60% of premium with a significant presence in the non-standard auto market. National General generated operating return on average equity in excess of 16% in 2019, with net income of $314 million, up 79% from the prior year. Gross premiums written in 2019 were $5.6 billion.

How Allstate Views Acquisition

  • Advances strategy to increase market share in personal property-liability with market share increasing by over 1 percentage point
  • Allstate becomes a top 5 personal lines carrier in the independent agent distribution channel by combining Encompass and Allstate’s Independent Agent businesses with National General. Only four insurers have more than 5% market share. The next 10 insurers combined have less than 30% market share. Allstate’s market share in 2019 was less than 1.5%, including both Encompass and Allstate Independent Agents.
  • National General also has a strong position in higher risk or “non-standard” auto insurance
  • Additional IA expansion opportunities exist in standard auto and homeowners insurance

Allstate, which is also one of the largest U.S. auto insurers, said in April that it would return more than $600 million in premiums to customers as many Americans were driving about 40% to 55% less due to stay-at-home orders.

Allstate said the deal is expected to close in early 2021 and will add to its adjusted earnings per share and return-on-equity beginning the first year.

The deal has been approved by National General’s board, the U.S. insurer said, adding that it included a breakup fee of $132.5 million.

“Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” Allstate Chief Executive Officer Tom Wilson said.

The deal comes as the coronavirus crisis caused asset stress among insurers in North America, with ratings agencies assessing that the adverse impact of the pandemic for insurers will take some time to manifest.

Ardea Partners was the financial adviser to Allstate, while J.P. Morgan Securities LLC advised National General.

(Reporting by Shubham Kalia and Kanishka Singh in Bengaluru, Editing by Sherry Jacob-Phillips)

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