Triggered in part by online vehicle retail sales activity gaining steady momentum, Assurant made a $2.5 billion acquisition of The Warranty Group, which works with more than 5,600 dealerships selling F&I products such as vehicle service contracts and GAP insurance.
Assurant highlighted in a news release announcing the move on Wednesday that The Warranty Group’s U.S. vehicle protection business brings new client partnerships and distribution channels including dealer networks and national accounts. The company said it positions Assurant to capitalize on emerging trends in the auto market such as digital retailers.
With annualized revenue greater than $1 billion as of June 30, officials highlighted The Warranty Group — which was a portfolio company of TPG Capital — will enhance Assurant’s scale and market presence in its vehicle protection, extended service contracts and financial services businesses across 35 countries.
Officials indicated the transaction is valued at approximately $2.5 billion and is expected to close in the first half of 2018, subject to shareholder and regulatory approvals, and other customary closing conditions.
“Assurant’s acquisition of The Warranty Group advances our position as a leading global provider in the vehicle protection business and aligns well with our lifestyle market growth strategy helping consumers protect their appliances, autos, mobile devices, and electronics,” Assurant president and chief executive officer Alan Colberg said.
“Together, we believe we can deepen our global footprint and accelerate profitable growth in key markets already on Assurant’s strategic roadmap, while realizing substantial operating synergies, generating more diversified and predictable earnings and furthering product innovation on a global scale,” Colberg continued.
Nelson Chai, The Warranty Group’s president and chief executive officer, added, “This transaction brings together two businesses with highly aligned expertise in markets across the world. We believe this combination enhances our ability to offer best-in-class products and services in addition to providing new opportunities to our clients, partners, employees and other key stakeholders.”
Eric Leathers, partner at TPG Capital, said: “This strategic partnership is an outstanding outcome for both Assurant and The Warranty Group, positioning the combined company for continued success. Since acquiring The Warranty Group, we have supported the company’s management team as they have expanded their global service contract business by pursuing attractive pathways for growth. This combination builds on these initiatives, and we at TPG are excited by the future value creation that will stem from this.”
The executives’ enthusiasm certainly is merited as Colonnade Advisors estimated 85 million vehicles in the U.S. had a VSC attached in 2016 with the penetration set to grow to 108 million vehicles by 2024.