NEW YORK ( The Deal) -- Car insurance provider Progressive  (PGR - Get Report) announced on Tuesday that it has agreed to pay $875 million for a majority stake in home insurance provider ARX Holding, broadening the insurance company's offerings and adding a new set of prospective customers to its network.

The deal, which brings Progressive's ownership in ARX to 67% from 5%, gives the Mayfield Village, Ohio-based firm the right to acquire the remaining stake in ARX over the next six years.

ARX is the parent company of American Strategic Insurance.

Through the deal, ARX shareholder and fellow insurance provider XL Group  (XL) , based in Dublin, is selling its 39.7% in the company to Progressive immediately. It wasn't clear who is selling the remaining 27.3% stake to Progressive.

According to Meyer Shields, an analyst at Keefe, Bruyette & Woods Inc., the deal represented a rare acquisition for Progressive but highlights the company's desire to expand in the home insurance market, where competitors like AllState  (ALL - Get Report) and Berkshire Hathaway's (BRK.A - Get Report) GEICO already offer a range of services.

"Most of Progressive's competitors already have their own home brands," said Shields by phone on Tuesday. "I think really what's going on is that [Progressive is] acknowledging that their typical strengths just aren't as strong any more."

With the deal, Progressive is adding the 19th largest writer of home insurance in the country. The acquisition will allow the combined entities to offer more products and expanded geographic reach.

In fact, the two companies already partner on Progressive Home Advantage, Progressive's small home insurance product.

"As [Progressive] brings Homeowners onto their own balance sheet, it is likely that they will look to grow market share through bundling and standalone offerings," said Macquarie Capital Markets Inc. analyst Amit Kumar in a report on Tuesday.

ARX expects to add up to 10 states in 2015, according to Progressive's statement about the deal.

Kumar wrote in the report that the $875 million price tag for the 62% stake in ARX implies a deal valuation of about 2.6 times tangible book value, a price the analyst pegged as "rich."

However, Shields, the Keefe, Bruyette & Woods analyst, cautioned in an interview that the deal might seem expensive based on tangible book value of insurance policies issued by ARX (about $545 million), but that that metric does not include the portion of ARX's business that manages general insurance policies but does not actually underwrite them.

He said that business, which is fee-based, is tough to decipher in terms of size, but that it is a solid business insulated from many regulatory pressures and economic swings that burden typical insurance businesses.

Based in St. Petersburg, Fla., ARX was founded in 1997 and has grown its business over the years. The company was buoyed in the mid 2000s after a swath of hurricanes ravaged the east coast and currently operates in 26 states and Washington.

"A lot of companies did not want to invest in those regions that were really hit hard by hurricanes," said Shields. "Companies started scaling back their exposure in those states and [ARX's] growth was driven a lot by that."

The deal is expected to be completed by April 1.

A Willkie Farr & Gallagher LLP team of Rajab Abbassi and Bonnie Tice represented XL, the largest shareholder in ARX, in the sale of its 39.7% stake.

Progressive spokesman Brian Grace and ARX did not respond to request seeking comment.

XL Group could not be reached for comment.