Allstate auto insurance announced earlier this week that they are purchasing Esurance and Answer Financial from White Mountains Insurance Group according to the article found on USAToday.com. Allstate is purchasing the companies for about $1 billion and they said the deal will help them obtain customers who prefer certain brands and value choices.
White Mountains Insurance is based in Hanover, New Hampshire and they expect to see an increase in their book value by $80 per share. Esurance sells auto insurance directly to drivers through the internet as well as through extensive call centers. Answer Financial is the independent insurance agency.
This is a big deal and both parties will be affected. Allstate has agreed to pay $700 million plus the net value of the companies. The price altogether will be around $1 billion. Spokeswoman Maryellen Thielen says Allstate expects the deal to reduce earnings the first year or so after the deal closes, but after the first year earning should not drop. Allstate’s first quarter profit more than quadrupled because it paid out less money for claims. This profit was way above Wall Street’s expectations. All in all this is a good step for Allstate who expects to see this acquisition benefit the company in the long term.