Assurant, Inc. (NYSE:AIZ) acquired The Warranty Group from TPG Capital for an enterprise value of about $2.5 billion. With this, the company consolidates its presence as an ace provider in the vehicle protection business. The purchase consideration consists of 10.4 million Assurant shares and $1.5 billion in cash.
Commanding a lead position for more than five decades, The Warranty Group boasts being the world’s premier global providers of warranty solutions and related benefits. Thus, the company’s move to add Warranty Group to its portfolio is in tandem with the global lifestyle growth strategy of helping consumers protect their appliances, mobile devices and electronics.
With the acquirer’s annual revenues already exceeding $2 billion as of Mar 31, 2018, Warranty Group further expands its size and scale in vehicle protection as well as extends its service contracts and financial services businesses.
The buyout will also aid Assurant to penetrate in the Asia-Pacific mobile market with expanded capabilities.
The acquisitions will be moderately accretive to Assurant’s 2018 operating earnings per share and by 2019, the company estimates about $60 million of pre-tax operating synergies. Per Assurant President and Chief Executive Officer Alan Colberg, "The combination of our two companies will support ongoing product and service innovation for the consumer, while we expect to realize significant operating synergies and generate more diversified and predictable earnings over time.”
Assurant is directing its capabilities to targeted markets and enhancing its operating efficiency as well. It has intensified its focus on Specialty Property and Casualty and Lifestyle Protection businesses. In fact, to extend its housing and lifestyle businesses, Assurant intends to combine its e-commerce capabilities with its operations. The company envisions earnings growth and margin expansion at the Lifestyle segment through a combination of profitable growth and operating efficiencies, worldwide.
Strategic initiatives have been aiding Assurant’s top line via Global Lifestyle growth over a considerable period of time. For 2018, the company estimates revenues to improve from growth at Connected Living and vehicle protection, globally.
Shares of the company have outperformed the industry quarter to date. The Zacks Rank #4 (Sell) stock has gained 2.7% against the industry’s decline of 1.7%.
Assurant’s efforts to restructure its business for long-term growth and a strong capital management policy should help the stock retain its bull run. Given the insurance industry’s available capital resource remaining at an all-time high, there is a craze for consolidations in the space seeking attention of late. Recently, Arthur J. Gallagher & Co. (NYSE:AJG) acquired Thomas Costello Insurance Agency, Inc. to boost its retail property/casualty brokerage operations and employee benefits consulting services. Brown & Brown, Inc.’s (NYSE:BRO) unit Brown & Brown of Kentucky, Inc. purchased almost all the assets of Automotive Development Group, LLC. In April, White Mountains Insurance Group, Ltd. (NYSE:WTM) inked a deal to buy a majority equity stake in NSM Insurance.
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