$1 billion deal struck by allstate as it will buy esurance to add online sales


shutterstock_20055367The largest auto insurer in the US, Allstate has struck a $1 billion deal and agreed to buy Esurance and Answer Financial from White Mountains Insurance Group Ltd and plans to expand the sales through the internet. Thomas Wilson, CEO is now seeking to add on more customers through other channels such as the internet since the younger generation simply shuns agents. Since most of the online shoppers are opting for insurance coverage from the smaller companies, Allstate has lost a lot of customers since the last three years.

Paul Newsome, analyst, Sandler O’Neill & Partners LP, states that these direct channels are going to be the growth engine for the entire industry in future and they wanted to do this as their core business had been affected.

The funding by Allstate would be done with the available cash as per the presentations made on their website. In a statement today, Allstate has stated that the entire transaction is most likely to be completed towards the year end. The deal will not decrease the insurer’s earning after a whole year of ownership, stated the company.

Esurance as well as Answer Financial will continue to maintain their brands, stated Wilson on a conference call with the analysts. Both Esurance as well as Answer Financial allowed their clients to make a comparison of quotes while purchasing auto insurance through their websites. He also stated that the Allstate brand would be appealing to the customers who would want an agent.

In the New York Stock Exchange composite trading, Allstate fell 17 cents to $32.25 in the morning at around 9:47 a.m., whereas White Mountains went up to $40.25.

The overall standard auto policy count at Allstate had dropped 0.7% in one year ending on March 31st, stated the insurer on the 27th of April, when the first-quarter results were announced.

The total personal auto insurance policies at Progressive had climbed to 11.9 million on the 31st of March which was a 5.8% increase compared to last year. These gains were predominantly due to the rise in the number of clients that had signed up using direct channels like the telephone and the internet.

The ability to serve their customers especially those that are self-directed will be possible with Esurance, stated Wilson in a statement made today. Goldman Sachs had advised Allstate as per the e-mail from Maryellen Thielen, spokeswoman for Allstate.