HomeServe Plc announces divestiture of Piedmont Policy Book
LONDON, UK: HomeServe USA Corp. (HSUSA) has entered into an agreement to sell to Piedmont Natural Gas Company, Inc. (“Piedmont”) the book of policies that HSUSA has built during the two companies’ affinity partner relationship (the “Piedmont Policy Book”), which will come to an end in April 2022.
HSUSA has decided to sell the Piedmont Policy Book to Piedmont, rather than continue to manage it in run-off.
In 2016, Piedmont was acquired by Duke Energy Corporation (“Duke”). Duke previously had an affinity partner relationship with HSUSA which ended in 2018, when Duke decided to manage its home assistance programmes internally.
Tom Rusin, CEO of HomeServe North America, said: “This agreement represents the anticipated conclusion to our relationship with Piedmont following its acquisition by Duke, which is one of a very small number of utilities to run its policy books internally. By the end of FY23 we expect to replace the customers we lose from this transaction by re-investing the sale proceeds in organic marketing. HomeServe has great momentum in North America, is delivering on a strong pipeline of new partnerships and is ahead of our plan to deliver our next milestone of $230m operating profit.”
HSUSA intends to re-invest the proceeds from the transaction into additional organic marketing activity across its other affinity partnerships and as a result does not expect any material impact on customer or policy numbers, profit or its net cash position as a result of this transaction.
Piedmont will acquire the Piedmont Policy Book in two tranches, with the first tranche expected to complete late in HomeServe’s financial year ending 31 March 2022 and the second due to complete early in the financial year ending 31 March 2023.
At the date of the first completion, the total policy book is expected to contain c.180k policies, held by c.140k customers. The consideration payable will be dependent on the precise number of policies transferred. Currently, HSUSA expects to receive gross transaction proceeds of c.$22m, which will be satisfied wholly in cash in two tranches, in line with the completion of each tranche as noted above.
As at 30 September 2021 the gross assets of the transaction comprise the book of renewable home assistance policies, which have a carrying value of $nil, outstanding customer premiums due of c.$9m, and the unamortized value of customer contract acquisition costs of c.$1m.
The affinity partnership has historically given HSUSA access to c.1m households (HSUSA HY22 total affinity partner households: 72m). In FY21, the Piedmont Policy Book contributed c.$3m to the statutory profit before tax of HSUSA (HSUSA FY21 statutory profit before tax: $114m). No employees of HSUSA will transfer to Piedmont under the terms of the transaction.
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