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What Agents Need to Know About American Family Insurance's $9 Billion Merger with Main Street America

by Precise Leads

May 11, 2018

A combined American Family Insurance and Main Street America will give its agents more products to sell.

Wisconsin-based American Family Insurance and Main Street America Group of Jacksonville, Florida announced that they will merge later this year. The planned union will expand the geographic reach of both entities while also giving their agents the opportunity to sell a more diverse product offering.

The boards of directors of each company have ratified the merger, which now awaits approval by state insurance regulators and the mutual policyholder-members of both insurers. Targeted for a year-end closing, the deal will not involve any exchange of cash between the parties. Once completed, the merged company will hold more than $9 billion in equity.

Active M&A Market for Insurers

The American Family-Main Street American merger follows an M&A spree by U.S. insurance companies in 2017. Law firm Clyde & Co recorded 176 insurance mergers in the U.S. last year alone, besting all other regions around the globe. American Family may have signaled its own interest in pursuing mergers with other mutual insurance companies when it switched to a mutual holding company structure last year.

American Family currently employs roughly 11,300 full-time employees, while Main Street America has 900. No staffing or operational changes are expected due to the merger, according to their joint announcement. Main Street America will continue to operate as a separate branded entity within American Family Insurance Group, much as The General and Homesite did when American Family previously acquired those companies.

Merging Exclusive Agents with Independent Agents

The combined entity will unite an exclusive agent model with an independent agent format. For its part, American Family offers auto, homeowners, life, business, and farm/ranch insurance through a network of exclusive agents in 19 states. Last year, the company amassed $8.8 billion in written premiums. Three of its affiliates, The General, Homesite, and AssureStart, sell policies over the phone or internet to customers nationwide.

In contrast, Main Street America markets commercial and personal insurance lines in addition to surety bonds through independent agents in 37 states, with a heavy concentration along the Eastern Seaboard. Its 2017 written premium total exceeded $1 billion, with New York, Florida, Massachusetts, and Connecticut ranking as its top four states for sales. After the merger, Main Street America will continue to partner with Trusted Choice, the Independent Insurance Agents & Brokers of America’s global branding program.

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Forthcoming Changes

In announcing the merger, executives from both companies touted the ability to expand geographically and provide their agents with a more robust product mix as the basis for the deal. Some 70% of Main Street America’s premiums flow from commercial insurance products for small business owners and contractors and workers’ compensation policies. Consequently, the merger is expected to boost the combined company’s estimated share of direct written premiums from its commercial lines from 8% to 14%.

American Family, in particular, will gain a larger geographic footprint. Nearly 90% of Main Street America’s total premium revenue come from states where American Family does not have a presence.

For agents of both companies, the most significant news from the merger announcement was a pledge from each company to continue their operating model at this time. Executives emphasized the broader array of products its agents will be able to offer. In fact, Jack Salzwedel, Chairman and CEO of American Family Insurance group, said in a statement that “our commitment to our exclusive agency force has never been stronger.”

Tom Van Berkel, Main Street America’s Chairman, President, and CEO, echoed that statement, saying the merger “creates tremendous potential” for its “independent agent-customers.” He added that the ability to integrate with American Family’s technology platforms “will enable us to deploy products more rapidly and make it easier for agents and insureds to transact business with us.”

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