Auto Club Is Acquiring Sister Affiliates in Texas, Hawaii, N.M.
The Auto Club of Southern California--the nation’s largest American Automobile Assn. affiliate--is in the process of acquiring sister auto clubs in Texas, New Mexico and Hawaii in what apparently would be the biggest consolidation move ever in the not-for-profit auto club arena.
Layna Browdy, a spokeswoman for the Los Angeles-based Auto Club, confirmed that the transaction has been approved by its board and by the board of the AAA national federation in Heathrow, Fla., which has run the Texas, New Mexico and Hawaii clubs in recent years. But she declined to discuss the terms of the deal.
The deal, which is expected to be completed by the end of May, would give the local Auto Club the potential to broadly expand its businesses--including insurance, travel and auto finance--into markets where AAA penetration is much less than in California.
For example, while AAA claims 40% of Southern California’s motoring households as members, the comparable market share in Texas is only 10%, Browdy said. Still, Texas is the largest of the three clubs, with 900,000 members. The three clubs together would add 1.3 million members to the Auto Club’s 4.2 million current members.
“This tells me they’re sitting on a lot of money that they probably should be returning to their policyholders” as dividends, insurance activist Harvey Rosenfield said.
The Auto Club has bolstered the surplus--or cushion against claims losses--of its insurance company over the last few years, Browdy said, but the purpose is to add protection in light of the Northridge earthquake rather than to prepare for expansion.