In the industry’s first large business acquisition this year, American Family Insurance (AFI) recently announced the finalization of a multi-million dollar purchase of Permanent General Companies, widely known as The General.
The buy’s completion follows approval last month from the Ohio Department of Insurance, which had to greenlight the $239 million purchase because PGC Holdings, which has The General as a subsidiary, is located in the state.
AFI Executive Hails ‘Diversification’
Jack Salzwedel, AFI chairman and chief executive officer, hailed the purchase as an expansion of his company’s operations, which leans on a 3,500-agent network to offer coverage in 19 states while relying on “a small percentage” of sales through the insurer’s website and sales call centers.
On the other hand, Permanent General offers policies in 25 states through primarily direct-to-consumer methods like web-based sales.
“Permanent General reaches a different consumer segment than American Family, so in that sense we’re diversifying vertically,” Salzwedel said in a statement. “They also operate in states American Family doesn’t currently serve, and they have extensive experience in direct distribution, so those aspects bring additional diversification.”
According to AFI, Permanent General will remain a separate entity with “a completely separate brand,” preserving both employee positions along with keeping Randy Parker as Permanent General’s chief executive officer.
Parker called the acquisition’s finalization “an exciting time.”
AFI Seeking Market Lift with Buy
AFI’s purchase is likely a bid by the insurer to gain a bigger slice of the nation’s market share of auto insurance premiums.
According to the latest figures from the National Association of Insurance Commissioners (NAIC), American Family has the 10th-largest market share out of all of the nation’s auto coverage providers, with 1.8 percent of the market and $3 billion that leaves it trailing the next insurer, Travelers, by a slim margin.
The NAIC reported that Travelers wrote $3.5 billion in direct premiums and had nearly 2.1 percent of the auto coverage market in 2011, the last year in which NAIC made data was available.
In its recent release, however, AFI cited different amounts for direct written premiums, with the multi-line insurer saying it totaled $5.4 billion and Permanent General, which “specializes in serving the non-standard auto coverage market,” reporting $270 million in direct written premiums in 2011.
A gain in market share would also help American Family put distance between itself and The Hartford, Auto Club, Mercury and Metropolitan, which the NAIC reported were all insurers that wrote at least $2 billion in auto insurance premiums that year.