The Allstate Corporation ALL has agreed to acquire National General Holdings Corporation, a specialty personal lines insurance holding company, for a deal value of approximately $4 billion in cash or $34.50 per share. This move is in line with the company’s long-term strategy to grow its personal lines business.
The transaction is expected to close in early 2021 and will be accretive to the company’s adjusted net income earnings per share and return on equity beginning the first year. The company will fund this acquisition by a mix of cash in hand ($2.2 billion) and debt ($1.5 billion).
Allstate, with a market capitalization of $30 billion, is one of the largest-publicly held personal lines insurers in the United States. Its personal property-liability policy is to increase the market share by providing auto insurance with a competitive value proposition and offering a circle of protection.
The company’s Personal Lines business provides Auto, Homewoners, Specialty auto (motorcycle, trailer, motor home and off road vehicle) and other personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and standalone, scheduled personal property).
The deal will be a perfect fit for Allstate and satisfy its zeal to expand its market share in the personal lines insurance business since it will increase personal lines premiums by $4 billion and market share above 1-10%. National General’s business and technology platforms will be utilized to further strengthen Allstate’s existing independent agent businesses.
National General is aptly suited to Allstate, given that the latter provides a wide range of property-liability products through independent agents with significant presence in non-standard auto insurance. National General also boasts an attractive portfolio of Accident and Health and Lender-Placed Insurance businesses. In 2019, the company wrote gross premiums worth $5.6 billion, which generated operating income of $319 million.
Allstate is one of the nation’s largest personal lines insurers with 145.9 million policies in force, protecting cars, homes, motorcycles, lives, personal devices and identities. Its products are sold through Allstate agents, independent agents, call centers, online, major retailers and voluntary benefits brokers. The company wrote $34.5 billion of premiums, which were up nearly 5% year over year.
In the personal Lines Insurance business, the company competes with Progressive Corp. PGR, Berkshire Hathaway Inc. BRK.B and The Travelers Companies Inc. TRV among others.
Year to date, the stock has lost 17.6% compared with the industry’s decline of 7.9%.
The stock carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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