American Family Insurance Mutual has agreed to acquire Ameriprise Auto & Home (AAH), the auto and home insurance business of Ameriprise Financial, for about $1.05bn in an all-cash deal.
Based in Wisconsin, Ameriprise Auto & Home offers auto, homeowners, renters, umbrella and certain specialty insurance lines across 43 states and District of Columbia in the US through its partners.
In 2018, the business registered $789m of surplus, $1.8bn in assets and annual direct premium written of $1.1bn. Nearly, 70% of its premium comes from auto insurance sales.
A significant majority of the sales for the auto and home insurance provider is driven through a partnership with retailer Costco, which offers AAH policies to its members via its website. American Family Insurance has signed a letter of intent with Costco to continue that partnership.
Ameriprise Auto & Home’s products are also sold through referrals from Ameriprise Financial advisors.
Post-transaction, Ameriprise Auto & Home will become a subsidiary within the American Family Insurance group. It will continue to do business under its existing name until a new name is decided and approved by regulators.
American Family Insurance said that it will retain Ameriprise Auto & Home’s 1,800 employees, who will report to the subsidiary.
American Family Insurance, based in Wisconsin, said that the transaction diversifies its storm loss risk by decreasing its premium concentration in hail- and tornado-prone states.
American Family Insurance chair and CEO Jack Salzwedel said: “With this acquisition, we expand our efforts to reach customers who prefer to acquire insurance through relationships they have with other entities. By doing this and continuing to grow in our other channels, we build scale, capabilities and financial strength to provide greater value to our customers.”
For Ameriprise Financial, the decision to sell Ameriprise Auto & Home comes after a strategic review with the financial services company, which concluded that it is an appropriate time to exit the business. The sale is also in line with its strategic focus on its core growth areas of advice and wealth management, and asset management, said Ameriprise Financial.
Ameriprise Financial chairman and CEO Jim Cracchiolo said: “This transaction is consistent with our strategy to grow our less capital-intensive businesses and is expected to reduce our risk profile and increase capital flexibility.
“Given American Family’s financial strength and reputation for quality products and customer care, we are pleased to reach this agreement and feel confident that we will be leaving the business in good stead.”
The deal, which will be subject to customary conditions and regulatory approvals, is anticipated to be completed in the second half of 2019.