Auto insurance major Allstate has struck a billion-dollar deal with plans to buy Esurance as well as Answer Financial from White Mountains Insurance Group Ltd as it has major expansion plans with regard to its online sales.
Thomas Wilson, CEO is now looking at ways and means to bring in more customers through the rest of the channels like the internet as the younger generation generally avoids insurance agents. Most often, online shoppers opt for insurance coverage from lesser known insurance companies. Allstate seems to have lost a lot of customers due to this since the last 3 years.
Paul Newsome who is the analyst with Sandler O’Neill & Partners LP stated that Allstate had wanted to do this because as their core business had been affected for quite a while. He also feels that these direct channels would act as a growth engine for the insurance industry in the future.
The available cash would be used for the funding by Allstate, according to the presentation that has been made on their website. According to a statement made today, Allstate has stated that the whole transaction would in all probability be completed towards the end of the year. This deal would in no way decrease the earnings of the insurer after a whole year’s ownership, stated Allstate.
Answer Financial and Esurance will continue to maintain their brands, stated Wilson while on a conference call with analysts. Clients from Esurance and Answer Financial were allowed to make comparisons of the quotes when they purchase auto insurance using their websites. Allstate as a brand would also be more appealing for those who wish to go through an agent.
Allstate fell 17 cents to $32.25 at morning trading at the New York Stock Exchange, while White Mountains climbed up to $40.25.
When the results of the first-quarter were announced, the overall standard auto policy had dropped at Allstate to 0.7% during the entire 12 months ending March 31.
The total personal auto insurance policies from Progressive had gone up to 11.9 million on March 31, which is an increase of 5.8% when compared to last year. These gains were mainly due to the increase in the number of clients who had signed up using these direct channels such as the internet and the telephone.
With Esurance, serving customers who are self-directed would become easier, stated Wilson in a statement he made today.
