Assurant, a global leader in insurance coverage, covering things as diverse as appliances, autos, mobile devices, electronics, and funeral plans announced today that it will acquire The Warranty Group, a portfolio company of TPG Capital and restructure into a new organization still know as Assurant.  Assurant plans to spend about $2.5 billion in cash, stock, and assumed debt on the purchase.

According to a release in Insurance Journal, Assurant said that the acquisition will help it build a greater presence in their Global Lifestyle market.  The Warranty Group will compliment Assurant by its insurance products in consumer electronics, appliances, and automobiles, as well as adding marketing opportunities in credit card and membership benefit products.

According to the same release, Assurant President and CEO Alan Colbert said that the combined company will have substantial operating synergies, generating more diversified and predictable earnings and furthering product innovation on a global scale.

Plans call for the deal to close in the first half of 2018 and the company expects the deal to produce about $60 million pre-tax operating synergies to the bottom line by the end of 2018.

In a related move, Standard and Poor’s announced today that as a result of the announced plans they have put the long-term rating on Assurant on CreditWatch Negative.  They also announced that upon the close of the above transaction that they expect to lower their rating on Assurant by on notch to BBB.

Assurant stock closed today at $101.14 per share, down $0.66.  It traded as low as $87.25 on September 7.  As of today, Tip Ranks Analyst Consensus rates it as a “Moderate Buy” and the E-Trade Smart Consensus rates it as a “Sell”.

Funeral Director Daily take:  I’m certainly not close enough to this company to tell you that I would have any opinion on how this will actually affect operations.  Generally, however, when I hear an announcement that “Synergies” will provide additional funds to the bottom line I think of “cost cutting”.  From the release, it looks to me like the Global Lifestyle segment of Assurant and The Warranty Group, for the most part, offer the same type of products.  If that is so, then you certainly should be able to put the companies together and make some savings by eliminating duplication.  The old adage in business combinations is that 1 + 1 can sometimes equal 3 if done properly.

For the most part, it does not look like the Global Pre-Need segment of Assurant is at all affected here.  That is good for funeral service.  However, if the rest of the company is getting bigger, then the Pre-Need division will be a smaller percentage of the overall company.  A multi-million dollar question is, “Will it be a small enough part that Assurant may want to move that division?”  I’m guessing that pre-need companies are already asking that question.  This type of question is why I love the free market system!!

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