Prudential Financial is to acquire Assurance IQ, a direct-to-consumer platform for health insurance and financial wellness solutions launched in 2016, for $2.35bn.
The deal should mean Prudential can sell insurance products at lower customer acquisition costs, while maintaining high levels of service and with a high degree of scalability.
Prudential will fund the acquisition out of cash, debt and equity. An additional payment of up to $1.15bn in cash and equity is contingent upon Assurance achieving multi-year growth objectives.
The US insurer said Assurance uses advanced data science to match buyers with customised solutions spanning life, health, Medicare and vehicle insurance. Buyer can complete their purchase entirely online or with the help of a technology-assisted live agent.
Assurance’s model also matches consumers with the live agent or specific sales process that is best suited to their needs, resulting in better customer outcomes that drive higher levels of engagement and conversion, Prudential claimed.
Prudential plans to offer its own life insurance products on the Assurance IQ platform alongside those of roughly 20 third-party providers, including Humana and Chubb.
Prudential said it expects the deal to grow its annual revenues by roughly $700m by 2020 and $1bn by 2021, with a pre-tax operating margin of more than 20%.
As well as boosting sales, the acquisition is expected to generate cost savings for Prudential of $25m to $50m in 2020 and then $50m-$100m over the next three year period to 2022. A good portion of those savings will come from cancelling projects that Prudential was planning to develop the capabilities that Assurance IQ is now bringing.
“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 chief executive Charles Lowrey.
Bellevue, Washington-based Assurance will become a wholly owned subsidiary of Prudential under the US Businesses division.
Assurance co-founders Michael Rowell and Michael Paulus will remain with the business, with Rowell as chief executive and Paulus as president.
The deal is expected to close in the fourth quarter of 2019.