UPDATE: Allstate To Buy Esurance, Answer Financial For $1 Billion
May 18 2011 - 9:45AM
Dow Jones News
Allstate Corp. (ALL) agreed Wednesday to buy auto insurer
Esurance and insurance agency Answer Financial from White Mountains
Insurance Group Ltd. (WTM) for about $1 billion to expand its
online presence.
The acquisition of Esurance gives Allstate, the nation's largest
publicly traded home and auto insurer, traction in its fight
against Progressive Corp. (PGR) and Geico Corp., the two leaders in
online car-insurance sales. A growing number of consumers are
buying car insurance online instead of turning to their local
insurance agents, and Allstate has steadily lost ground to its
online rivals in recent years.
Esurance is a smaller player in the online space, but has been
growing steadily.
Answer Financial, meanwhile, is an online agent that collects
commissions whenever it successfully matches an insurer with a
customer looking for home or auto insurance.
Together, the two White Mountains units had about 839,000
customers at yearend, an increase of about 8.4% from the prior
year.
The purchase price at closing will be $700 million plus the
tangible book value of the two units at the time the deal is
completed. Allstate said it expected to pay about $1 billion in
total.
Allstate will fund the acquisition entirely with cash, according
to a slideshow it prepared for an investor presentation about the
deal.
The transaction is expected to close in the fall. Allstate said
it expected the transaction to be "non-dilutive" to earnings in the
second full year of ownership.
Esurance sells coverage in 30 states, but gets about 50% of its
premium revenue from just four: California, Florida, New Jersey and
New York. Those states have presented challenges to auto insurers
in the past. Allstate has been raising prices in both Florida and
New York in response to what it says is mounting insurance
fraud.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
-Matt Jarzemsky contributed to this story
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