The Progressive Corporation 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. Progressive said that it would purchase the shares primarily from non-management shareholders and that the purchase would bring Progressive's interest in the company to approximately 67 percent, up from the five percent interest it has held since 2012. According to Progressive, ASI will continue to operate as a separate company under its current management team.
The transaction is expected to close by April 1, 2015, subject to closing conditions.
Progressive also said that it expects to purchase the remaining shares of the company over the next six years.
“This is a great opportunity for ASI, as our intention has long been to become the Progressive of home insurance,” said John Auer, ASI's chief executive officer. “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 underpenetrated 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.
“I can't think of a situation where the cultural fit could be any better,” continued Mr. Renwick. “The business accomplishments and management team of ASI in the homeowners' market are simply outstanding. With this move, we are taking an important step to ensure the sustainability of our 'destination' business strategy, which will still continue to invite and attract participation of other quality providers of products our consumers will want and need. This is also a significant investment in the products that our independent agents are asking for.
“We increased our economic interest for two simple reasons: the strategic fit with our direction as a company, and our unqualified respect for ASI's current operations and management,” Mr. Renwick said. “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. Any changes we contemplate with ASI's management team will be focused on increased product design integration and improvements to promote the bundled growth of our respective products.”
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].