U.S. insurer Prudential Financial Inc has agreed to acquire online insurance startup Assurance IQ Inc for $2.35 billion, as it looks to tap into a wider base of consumers who purchase policies online.

Assurance uses data science and machine learning to sell health, life, Medigap, home, and auto policies online and offers products from more than 20 providers, not including Prudential.

Prudential plans to make money initially from the commissions and other fees that Assurance receives from providers, while adding its own products, including life insurance and annuities, to the mix over time.

The deal is expected to add to Prudential’s earnings and return-on-equity from 2020 and generate cost savings of $50 million to $100 million, the companies said in a statement. (https://reut.rs/2kwiqNd)

Prudential plans to use a combination of cash, debt, and equity financing to fund the deal, expected to close in the fourth quarter.

The company would offer up to $1.15 billion in additional cash and equity if Assurance meets certain growth objectives.

Assurance will become a wholly owned subsidiary of Prudential under it U.S. businesses division, the companies said.

Assurance’s chief executive officer Michael Rowell to continue in his role.

Prudential’s board also increased the company’s share repurchase authorization for 2019 by $500 million to $2.5 billion.

Topics InsurTech