Regulators sign off on American Home Shield’s acquisition of HSA Home Warranty

American Home Shield says it has final regulatory approval to close its acquisition of HSA Home Warranty, and will “leverage the power” of both brands to accelerate growth in strategic markets by “increasing awareness about the value that home warranties provide.”

HSA Home Warranty founder and President Bob Lehmann will continue to lead the company from its headquarters in Madison, Wis., where it employs 200 workers who serve more than 125,000 customers.

American Home Shield employs 1,800 and a network of more than 45,000 service technicians who work for private contractors who provide services to 1.3 million customers.

“Like us, HSA Home Warranty is known for providing reliable, quality service to its customers, and for building strong relationships in the real estate community,” American Home Shield President Mark Barry said in a statement. “This acquisition will allow each brand to build on its strengths, and at the same time, share best practices in a way that will allow us to more effectively reach — and serve — even more homeowners.”

American Home Shield is a business unit of Memphis, Tenn.-based The ServiceMaster Company LLC, a provider of residential and commercial services  networks whose brands include Terminix, ServiceMaster Clean and Merry Maids.

According to ServiceMaster’s most recent annual report to investors, 69 percent of home warranties written by American Home Shield last year were renewals of existing contracts, 18 percent were derived from sales made in conjunction with existing-home resale transactions, and 13 percent were direct-to-consumer sales.

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While the company’s customer retention rate was 72.8 percent in 2013, that’s down from 75.1 percent in 2011. Growth in home warranties was flat in 2012, and 1 percent in 2013.

American Home Shield’s main competitors are regional providers, but its largest national competitor is First American Home Buyers Protection Corp., a subsidiary of title insurer First American Financial Corp.

With nearly 1 in 5 home warranties sold by American Home Shield connected to the sale of a home, real estate brokers and agents who can sell the company’s products to buyers and sellers are critical to its success.

The marketing of home warranties by real estate agents and others in a position to refer business is regulated by the Real Estate Settlement Procedures Act (RESPA).

In 2012, American Home Shield agreed to pay up to $26 million to settle allegations that the company violated RESPA by paying illegal kickbacks to real estate brokers and agents to market the company’s home warranties.

The settlement released brokers and agents from liability, and American Home Shield said its new broker compensation program, ProConnect, complied with RESPA guidelines and regulations.

Last year the company launched Real Estate Insider Magazine, an online publication offering business tips and marketing advice for real estate agents who can sell the company’s home warranties to buyers and sellers. Source: businesswire.com.


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