Global investment manager Prudential Financial, Inc. (NYSE: PRU) agreed on Thursday to buy Assurance IQ, Inc. in an effort to sell life-insurance to middle-class clients. Assurance, a three-year-old startup based in Bellevue, Washington, uses algorithm driven data analysis to match buyers with customized life, health, Medicare and auto insurance policies.
“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,” said Prudential Chairman and CEO Charles Lowrey.
Under the terms of the transaction, Prudential will pay a total of USD 2.35 Billion upfront, plus an added USD 1.15 Billion in cash and equity if Assurance reaches certain growth objectives. Prudential said it expects the acquisition to be “modestly” accretive to EPS and ROE beginning in 2020. The deal should also generate cost savings of USD 50 Million to USD 100 Million.
Prudential officials said its network of financial advisors will continue focusing on more affluent clients while Assurance boosts sales to a wider group of households.
“Assurance was founded to protect and improve the personal and financial health of every individual,” said Michael Rowell, Co-founder and CEO of Assurance. “Prudential’s shared vision, coupled with the strength of its offering and capabilities, make it the ideal partner with which to begin our next chapter. We are excited to create an ecosystem that reaches more people and new markets with a more expansive suite of products to drive our combined growth.”
The deal is part of a larger movement where traditional life insurers, like 144-year-old Prudential, are teaming up with what are known as insurtech firms to edge out the inefficiencies of traditional customer acquisition methods.
According to Research and Markets, the global insurtech market is expected to grow 41% annually between 2019 and 2023.