State Farm buying a 15% stake in ADT with $1.2B investment
State Farm aims to bolster the use of smart home technology in home insurance through the investment.
In an effort better leverage smart home technology in its homeowners insurance lines, State Farm is making a $1.2 billion equity investment in ADT, Inc. in exchange for 133.3 billion shares of ADT (priced at $9 per share). The deal, which is expected to close in 2022’s final quarter, will give State Farm approximately 15% ownership in ADT.
The multiline insurer reported the move will allow it to potentially lower policyholder costs, reduce claims and mitigate losses from water, fire and intrusion.
As part of the transaction, State Farm now has a seat on ADT’s board, which will be filled by Paul Smith, executive vice president and COO of State Farm, ADT reported.
“This partnership with ADT gives State Farm the opportunity to provide smart home technology that takes us from our ‘repair and replace’ model to a ‘predict and prevent’ mindset,” Smith said in a release. “These innovations will help us take the next step into the future of home insurance and add more value for our customers.”
Reduce claims frequency and severity
At its investor conference earlier this year, ADT revealed a “customer-focused, safety and innovation strategy,” which it said could potentially reduce claims frequency and severity through proactive monitoring as well as other consumer-facing benefits such as lower premiums and discounts on smart home equipment.
Further, State Farm is committing up to $300 million to fund product and technology projects, customer growth and marketing programs at ADT.
“ADT’s partnership with State Farm creates the capability to drive innovation in homeowners insurance on a broad scale. By delivering a truly connected home, together we can improve the customer experience and provide more peace of mind,” Jim DeVries, ADT president and CEO, said in a release. “These new and expanded partnerships represent another bold step forward for our company and provide ADT more avenues to grow our customer base, strengthen brand loyalty and lower customer acquisition costs.”
Through an existing partnership with ADT, Google is committing an incremental $150 million, subject to certain milestones, to advance opportunities created by smart home innovations. The latest investment brings Google’s total commitment to $300 million.
“A smart home should take care of the people in it while also helping to make sure they are protected and safe,” Rishi Chandra, vice president and general manager of Google Nest, said in a release. “Our work with ADT is building the next generation of smart home security solutions.”
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