Prudential Financial has reached an agreement to purchase Seattle-based online insurance start-up Assurance IQ in a transaction valued for $2.35bn.
As per terms of the pact, Prudential will also pay an additional $1.5bn earnout in a mixture of cash and equity, provided Assurance meets growth objectives in the future.
The takeover of a three-year-old insurance start-up will enable Prudential – the largest life insurance company in the US by assets – to leverage Assurance IQ disruptive models and expand its customer base in the underserved mass market.
Commenting on the deal, Prudential chairman and CEO Charles Lowrey said: “Assurance accelerates the strategy and growth potential of Prudential’s financial wellness businesses, bringing us closer to more people across the entire socio-economic spectrum to better serve the full picture of their needs.
“We look forward to working with Mike Rowell and his entire team to grow the Assurance business in the US, and, over time, to extend its unique approach to customers around the world.”
Assurance uses data science and human expertise to provide bespoke life, health, Medicare and auto insurance to its customers at the reduced cost compared to conventional models.
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The deal will provide Prudential’s financial wellness businesses access to Assurance’s large and fast-growing direct-to-consumer channel.
Also, combining their respective capabilities, both firms will develop a new end-to-end engagement model to target users who want to shop on as per their wish.
Additionally, the American insurer will provide its own financial wellness solutions on the Assurance platform together with those of third-party providers.
Upon completion of the deal, Assurance will operate as a wholly-owned subsidiary of Prudential under the US Businesses division.
Assurance co-founder Michael Rowell will continue to work as CEO of Assurance. He will report to Andrew Sullivan, who has been named the executive vice president and head of US Businesses.
Another Assurance co-founder Michael Paulus will remain president of Assurance.
The deal, which has already been approved by the Prudential’s board of directors, is scheduled to be completed in the fourth quarter of 2019, pending regulatory approvals.