Strategy

Kemper to Buy Infinity Auto Insurer for $1.3B

The deal will create "a leader in nonstandard auto insurance" for drivers who may have been denied coverage by standard insurers.
Matthew HellerFebruary 13, 2018

Insurance company Kemper said Tuesday it will acquire Infinity Property and Casualty for about $1.3 billion in a move to strengthen its nonstandard auto policy business.

Infinity provides personal and commercial automobile insurance primarily for urban and Hispanic customers. Kemper has agreed to pay $129.00 per share for Infinity, a premium of 33% premium to the closing price on Monday.

“This compelling transaction combines two well-known brands with complementary strengths and cultures to form a leader in nonstandard auto insurance, and enhances Kemper’s overall growth opportunities, diversification, financial strength, and ability to serve policyholders,” Kemper CEO Joseph P. Lacher, Jr., said in a news release.

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According to Kemper, the combined company will have a more diversified portfolio with approximately $2.2 billion in nonstandard auto insurance premiums, an expanded customer reach through deeper agency relationships and greater efficiencies.

With 2,300 employees, 10,600 independent agents, and $1.4 billion in direct written premiums in 2017, Infinity is one of the largest nonstandard auto insurers in the country. Nonstandard premiums are typically higher as they are sold to drivers who may have been denied coverage by standard insurers for poor driving records.

“As part of a larger company, Infinity will have access to the capabilities and resources necessary to drive accelerated growth and better serve our policyholders and partner agents,” Infinity CEO Glen Godwin said.

The deal is also expected to result in annual pre-tax cost savings of approximately $55 million.

Kemper previously acquired Alliance United Group, a top five writer of nonstandard auto insurance in California, for about $70 million in 2014. Its other lines include home, life, health. and valuables and it is represented by 20,000 agents and brokers.

The company touted the performance of the nonstandard auto business on Tuesday, saying it showed earned premium growth of more than 20% — due to higher policies in force and higher premium rates — and improved profitability in the fourth quarter.

Kemper’s overall earned premiums from personal auto policies rose 14.8% to $364.3 million for the quarter and 10.6% for the full year to $1.38 billion.

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