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Progressive Closes ARX Buyout, Boosts Bundled Offering - Analyst Blog

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As scheduled earlier, The Progressive Corporation PGR has closed the acquisition of a majority stake in ARX Holding Corp. – the parent company of American Strategic Insurance (ASI).  

The deal, announced in December last year was pending regulatory approvals and was scheduled to close on Apr 1, 2015. The purchase consideration of the deal was $875 million in cash.

The purchase will now increase Progressive’s stake at ARX Holding to 67% from 5% that it has held since 2012. ASI has been the provider of Progressive’s homeowners insurance in the Agency channel. Even after the acquisition, ASI will continue to operate as a separate company under its current management team. Progressive also intends to acquire the remaining 33% stake over the next six years.

Progressive has been focused to provide its customers with improved services and bundled products form an integral part of its customer offerings. The company increasing its stakes in ARX Holding hence testifies the strategy to cater to customers opting for a combination of home and auto insurance.

Lately, insurers have been witnessing a high demand for bundled product offerings. Progressive’s bundled product – Progressive Home Advantage (PHA), which combines auto and property insurance – is already available to direct customers in 49 states, agency customers in 26 states, and to both direct and agency customers in the District of Columbia. Having controlling interest in ARX should enhance its bundled product portfolio further, thereby making way for more premiums earned.

Last month, the company reported its monthly results for Feb 2015 that stated that premiums earned increased 6% year over year. We believe that Progressive’s incessant efforts to bring forward enhanced services for customers will bolster its premiums further.

Progressive currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the property and casualty space include Allied World Assurance Company Holdings, AG AWH, First American Financial Corp. FAF and Fidelity National Financial, Inc. FNF.


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