Allstate is currently the fifth largest P&C insurer in the U.S.
Allstate, the nation’s fifth largest Property & Casualty insurer is set to acquire National General Holdings Corporation in an all cash deal valued at approximately $4 billion or $34.50 per share. If approved by the appropriate regulatory bodies, the deal will close in early 2021.
“Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” said Tom Wilson, Chair, President and CEO. “The acquisition increases personal lines premiums by $4.0 billion and market share by over 1 percentage point to 10%. National General’s business and technology platforms will be utilized to further strengthen Allstate’s existing independent agent businesses. The transaction will be accretive to adjusted net income earnings per share and return on equity beginning in the first year.”
National General is a top 25 Private Passenger Auto Insurer in the U.S.
The insurer traces it roots to just over 80 years. In 1939, GMAC formed the entity as the Motor Insurance Corporation. As such, it is one of, if not the only, major auto insurance that can say it got its start within the automobile industry, essentially starting as a “…way to offer damage coverage to GM vehicles sold by dealers and financed by GMAC.”
In 2010, the company restructured the insurer into its current form and in 2013, it was re-branded from GMAC Insurance to National General. At the time, the announcement said the name change represented the “the culmination of three-plus years of transformation into a world-class insurer.” In 2014, Agency Checklists wrote about National General’s acquisition of Tower Group and what it might mean for Massachusetts. See Agency Checklists’ article of February 9, 2014, “With Its Purchase of Tower Group, Can GMAC Insurance Become A Market Factor In Massachusetts?“
“National General’s operating expertise has enabled us to serve customers and independent agents well as we have grown both organically and through acquisition,” said Barry Karfunkel, Co-Chairman, and CEO of the New York-based insurer. “We are excited about combining our team’s expertise and commitment with Allstate to become a top-five personal lines carrier for independent agents while offering a broader array of products. National General’s shareholders are also benefiting by unlocking the value created over the last decade.”
As a specialty personal lines insurance holding company, National General, or NatGen, sells a variety of personal lines products through eleven insurance subsidiaries. This includes private and commercial auto insurance as well as homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health, and ‘other niche insurance products’.
An acquisition allowing Allstate to tap into a ready-built independent insurance agency network
One of the unexpected results of the insurtech movement has been to show the enduring importance of the independent agent. While many insurtech platforms like Next Insurance and CoverWallet launched with lofty claims of replacing the independent agent, the end result has seen many of those same platforms quietly pivot into partnering with those same independent agents via dedicated agent-only platforms.
It could now be argued that captive insurers may also be beginning to follow suit. For example, on June 30, 2020 Nationwide announced that it had officially completed its transition to an independent insurance agency model.
As an A-rated carrier with approximately 42,300 independent agents selling its property-casualty products, National General is currently the 15th largest private passenger auto insurer in the nation. Approximately 60% of NatGen’s premiums are from auto insurance including a significant presence in the non-standard auto market. In terms of market share, this translates into a 1.24% market share with $3,151,375,481 in Direct Written Premiums.
While its commercial auto business did not place the insurer within the top 25 insurers, it is ranked as the 21st largest homeowners’ insurer in the U.S. with a 0.80% market share and approximately $829,999,348 in Direct Written Premiums. It, however, is not ranked as a top 25 national insurer for insurance for all lines. Net income in 2019 was up 79% over 2018 to $314 million while gross premiums written in 2019 were $5.6 billion. Based on that increase in net income NatGens’ margins generated on average equity were in excess of 16% in 2019.
NatGen also offers Allstate the ability to step in and take advantage of the insurer’s proprietary policy and claims management system which does not rely on third party technology. NatGen has previously said the decision to invest in its own technology and focusing on its own core competency within the P&C marketplace, has enabled the company to provide “…better risk segmentation” allowing it to be competitive within the nonstandard marketplace. In addition, the systems it has created are “also highly scalable, allowing us to grow without significant cost.”
Allstate”s acquisition of a major distribution channel through independent agencies seems counter-intuitive when measured against the accepted wisdom of self-proclaimed insurtech disruptors and their venture capitalist backers. These prognosticators herald a new technological age where independent insurance agencies will diminish, if not disappear. However, Allstate’s July 8 announcement overlapped the announcement of Nationwide Insurance that it had completed the elimination of its captive agency system in favor of one-hundred percent independent agency distribution. See Agency Checklists’ article of April 23, 2018, “Last, But Not Least: Nationwide Goes To Independent Agencies, TrustedChoice & Progressive, and III Fact Book.”
To Agency Checklists, the investments of Allstate and Nationwide in independent agencies as a favored distribution channel indicate the viability and sustainability of the American agency system notwithstanding the technological and sociological changes that are reshaping the insurance industry in Massachusetts and the country.
