In its drive to expand its online presence, Allstate Corp. agreed to buy auto insurer Esurance and insurance agency Answer Financial from White Mountains Insurance Group Ltd. for about $1 billion.
The acquisition of Esurance gives Allstate, the nation's largest publicly traded home and auto insurer, traction in its fight against Progressive Corp. 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 the end of 2010, 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 price