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Prudential Financial to acquire FinTech Assurance IQ, Inc. for $2.35 billion to tap digital consumers

Charles F Lowrey, Chairman, and CEO, Prudential Financial

In a bid to reach out to the digitally savvy retail investors, global investment manager Prudential Financial, Inc. is planning to acquire Assurance IQ, Inc., for $2.35 billion in a combination of current cash, debt, and equity.  The acquisition is expected to be closed by October this year.

As per the terms, the acquisition includes 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, Prudential said in a statement today.

The acquisition, which is expected to be modestly EPS accretive by 2020, is likely to generate cost savings of $50 million to $100 million, in addition to the $500 million of expected margin expansion by 2022 for Prudential.

The acquisition makes sense for Prudential as it plans to expand its growing direct-to-consumer channel. Assurance and Prudential would leverage their respective capabilities to create a new end-to-end engagement model. Besides, Prudential plans to offer its own financial wellness solutions on the Assurance platform alongside those of third-party providers.

“Assurance accelerates the strategy and growth potential of Prudential’s financial wellness businesses, bringing us closer to more people across the entire socioeconomic spectrum to better serve the full picture of their needs, ” said Prudential Chairman and CEO Charles Lowrey.

Founded in 2016, Assurance uses data analytics and human expertise, to match 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. Even as there has been an ongoing shift in the consumer behavior of seeking personalized financial services online, the Washington-based company’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.

Assurance’s technology-driven and on-demand service platform lower the cost of customer acquisition, allowing a 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.

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, makes 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.”

Once the acquisition is completed, Assurance will become a wholly-owned subsidiary of Prudential under the U.S. Businesses division and its 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.

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