Prudential Financial (PRU) to acquire Assurance IQ for $2.35 billion

Prudential Financial, Inc. (NYSE: PRU) today announced that it has signed a definitive agreement to acquire Assurance IQ, Inc., “Assurance,” a profitable, fast-growing direct-to-consumer platform that transforms the buying experience for individuals seeking personalized health and financial wellness solutions.

Terms of the acquisition include a total upfront consideration of $2.35 billion, plus an additional earnout of up to $1.15 billion in cash and equity, contingent upon Assurance achieving multi-year growth objectives.

Using a combination of advanced data science and human expertise, Assurance matches buyers with customized solutions spanning life, health, Medicare and auto insurance, giving them options to purchase entirely online or with the help of a technology-assisted live agent. Assurance’s innovative model also matches consumers with the live agent or specific sales process that is best suited to their needs, resulting in better customer outcomes that drive higher levels of engagement and conversion. This approach is underpinned by an ongoing shift in consumer preferences, whereby individuals increasingly begin their research for personalized financial services online and then seek consultation with human experts to complete their purchase.

By eliminating the inefficiencies of conventional models, Assurance’s technology-driven, on-demand service platform lowers the cost of customer acquisition, allowing deeper reach into the mass market while maintaining a high level of service and product selection. Its rapid-growth model offers compelling economic advantages with low fixed costs and low capital requirements that produce high margins and a high degree of scalability.

“Assurance accelerates the strategy and growth potential of Prudential’s financial wellness businesses, bringing us closer to more people across the entire socio-economic spectrum to better serve the full picture of their needs,” said Prudential Chairman and CEO Charles Lowrey. “We look forward to working with Mike Rowell and his entire team to grow the Assurance business in the U.S., and, over time, to extend its unique approach to customers around the world.”

Michael Rowell, co-founder and CEO of Assurance, said, “Assurance was founded to protect and improve the personal and financial health of every individual. Prudential’s shared vision, coupled with the strength of its offering and capabilities, make it the ideal partner with which to begin our next chapter. We are excited to create an ecosystem that reaches more people and new markets with a more expansive suite of products to drive our combined growth.”

Assurance will add a large and rapidly growing direct-to-consumer channel to Prudential’s financial wellness businesses, significantly expanding the total addressable market of both companies. Assurance and Prudential will leverage their respective capabilities to create a new end-to-end engagement model: one that better serves customers who want to shop on their own terms, when, where and how they want.

Prudential also plans to offer its own financial wellness solutions on the Assurance platform alongside those of third-party providers.

Additional details of the transaction include:

• Under the terms of the agreement, Assurance will become a wholly owned subsidiary of Prudential under the U.S. Businesses division. Assurance co-founders Michael Rowell and Michael Paulus will continue to focus on the growth of Assurance. Rowell will remain CEO of Assurance and report to Andrew Sullivan, who will assume the role of executive vice president and head of U.S. Businesses as of December 1. Paulus will remain president of Assurance.

• The acquisition is expected to be modestly accretive to EPS and ROE starting in 2020. In addition to enhancing the growth of Prudential’s financial wellness businesses, the acquisition is expected to generate cost savings of $50 million to $100 million, in addition to the $500 million of expected margin expansion by 2022 discussed at Prudential’s June Investor Day.

• Prudential plans to use a combination of its current cash, debt financing and equity to fund the acquisition, which is expected to close early in the fourth quarter of 2019. Prudential’s Board of Directors unanimously approved the transaction.

• Prudential’s Board of Directors has authorized a $500 million increase to its share repurchase authorization for calendar year 2019. As a result, the share repurchase authorization for the full year 2019 is $2.5 billion. As of June 30, 2019, Prudential had repurchased $1.0 billion of shares of its common stock under this authorization. Prudential expects to fully utilize this increased share repurchase authorization by the end of 2019.

CONFERENCE CALL

Members of senior management of Prudential and Assurance will host a conference call on Thursday, September 5, 2019, at 8:00 a.m. ET, to discuss the transaction. The conference call will be broadcast live over Prudential’s Investor Relations website at investor.prudential.com. Please log on 15 minutes early in the event necessary software needs to be downloaded.

The call will remain on the Investor Relations website for replay through September 19. Institutional investors, analysts, and other members of the professional financial community are invited to listen to the call and participate in the Q&A by dialing one of the following numbers: (800) 230-1766 (domestic callers) or (612) 332-0932 (international callers). All others may join the conference call in listen-only mode by dialing one of the above numbers.

To listen to a replay of the conference call starting at 10:30 a.m. ET on September 5 through September 12, 2019, dial (800) 475-6701 (domestic callers) or (320) 365-3844 (international callers). The access code for the replay is 471350.

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