“Consumers today expect to have their specific needs met by their insurance companies. Our strategy is to focus on individual preferences and utilize different value propositions for distinct consumer segments,” said Thomas J. Wilson, Allstate’s president, chairman and chief executive officer.
Wilson said Allstate agencies do “an outstanding job of serving customers who want a local personal touch and prefer to purchase a branded product.” But Esurance will expand the company’s ability to serve customers who are “more self-directed but still prefer a branded product.” Wilson also said Answer Financial will strengthen Allstate’s offering to individuals who want to be offered a choice between insurance carriers and are brand-neutral.
The move has some Allstate agents concerned.
“Many Allstate agents are viewing the proposed acquisition suspiciously. The company has been hell-bent on growing its direct channel for years, but only recently has it had any success,” said Jim Fish, executive director of the National Association of Professional Allstate Agents, Inc. “Who knows, the success of the Esurance business model and technology platform could ultimately improve and transform Allstate’s direct channel into a powerhouse. Should this come to pass, Allstate agents would feel more expendable than ever.”
According to Fish, Allstate is shedding seasoned agencies in favor of larger agencies with more staff. “[S]o adding this acquisition to the agents’ woes, can only create more angst. Without a doubt, the agents want Allstate to be successful – but not at their expense,” he said.
Allstate said Esurance and Answer Financial will retain their brand names. Esurance has some 1,7000 employees and 14 regional offices.
Wilson said Allstate would now be the only company serving all of these consumer segments with unique insurance offerings.
“This transaction is also attractive for our shareholders. Association with Allstate will improve Esurance’s marketing effectiveness and it can leverage our world-class pricing and claim capabilities. This also offers us two additional sources of growth and an immediate increase in customer relationships,” Wilson said.
Premiums for policies sold by both Esurance and Answer Financial were $1.2 billion in 2010. Gross premiums written by Esurance were $839 million for the year. Esurance had 839,000 policies-in-force, including 328,000 policyholders at Answer Financial. The Esurance segment added approximately 65,000 policies-in-force during 2010, an increase of 8 percent, according to the company.
The transaction has been approved by both companies’ boards of directors and is expected to close in fall 2011. The transaction is subject to regulatory and other customary closing conditions, including review by antitrust authorities and state regulators.
White Mountains Chairman and CEO Raymond Barrette said the online insurance operation Allstate is acquiring has grown from a start-up to rank among the top online insurers in 10 years. “We have happily invested significant capital in what we believed was a unique business. Allstate agrees and can now take it to a new level,“ Barrette said.