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Ameriprise (AMP) to Sell Auto & Home Unit for $1.05B in Cash

Zacks Equity Research

As part of its efforts to remain profitable by focusing on the core growth businesses like the Advice & Wealth Management as well as Asset Management, Ameriprise Financial, Inc. AMP signed a definitive agreement to sell the Ameriprise Auto & Home (AAH) business to the subsidiary of American Family Insurance Mutual Holding Company. The deal is projected to be completed during the second half of this year.

Based in Madison, WI, American Family Insurance sells products like auto, homeowners, life, business and farm insurance primarily through exclusive independent contractor agents.

AAH is a business unit of Ameriprise, which is based in De Pere, WI. Ameriprise conducted a strategic review of the AAH business, following which it came to the conclusion that this is the perfect time to sell this business.

Per the terms of the agreement, American Family Insurance will pay $1.05 billion in cash. However, Ameriprise will receive net proceeds of $950 million after paying to an affinity partner. This is subject to certain post-closing financial adjustments.

Notably, even though Ameriprise Auto & Home legal entities are being sold, no contingent liability associated with this transaction will be there for Ameriprise except for some customary indemnification obligations.

Ameriprise’s chairman and CEO, Jim Cracchiolo stated, “This transaction is consistent with our strategy to grow our less capital-intensive businesses and is expected to reduce our risk profile and increase capital flexibility. Given American Family’s financial strength and reputation for quality products and customer care, we are pleased to reach this agreement and feel confident that we will be leaving the business in good stead.”

Notably, the company grew inorganically and restructured its business from time to time through acquisitions, sales and spin-offs. It is on track to convert its national trust bank to a federal savings bank and is targeting the launch in 2019, subject to regulatory approvals.

Moreover, the company looks forward to capitalize on acquisition opportunities. Over the past few years, it has acquired a couple of firms that significantly enhanced its capabilities. Given the strong liquidity position, the company is expected to continue growing inorganically.

Shares of Ameriprise have gained 22.9% over the past three months, outperforming the industry’s growth of 15.4%.

Currently, the company carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same space are Federated Investors, Inc. FII, Ares Management ARES and BlackRock, Inc. BLK.

Federated Investors currently sports a Zacks Rank #1 (Strong Buy). It has witnessed an upward earnings estimate revision of nearly 4.3% for the current year, over the past 60 days. Its shares have gained 14.5% over the past three months.

The Zacks Consensus Estimate for earnings for Ares Management has increased 6.2% over the past 60 days. Its shares have gained 31.4% over the past three months. The stock currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackRock’s earnings estimates for the current year have been revised upward by 2.1% over the past 60 days. Its shares have gained 11.4% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

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Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
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