Online Insurer Esurance Acquired by Folksamerica Holding Co.

A majority interest in Esurance Inc., a direct-to-consumer online provider of personal lines insurance, was acquired by Folksamerica Holding Co. Inc.

It was just the right thing at the right time,” Jean-Bernard Duler, CEO of Esurance, told Insurance Journal. “We found the right partner and the right owner with Folksamerica.”

While financial terms of the transaction, which closed on Oct. 4, were not disclosed, Duler indicated that Esurance, which will become a subsidiary of Folksamerica, will continue to operate as an independent entity, offering personal auto coverages through its www.esurance.com service.

Folksamerica Holding Co. Inc., the parent of Folksamerica Reinsurance Co., is a wholly owned subsidiary of White Mountains Insurance Group Ltd. Just a few weeks ago, White Mountains agreed to buy the U.S. property casualty operations of British insurer CGNU Group for $2.1 billion. j15

“We were at the stage where we raised the first round last year,” Duler continued. “We raised the second round in November and we were at the…point where we were either going to raise money for a third round or eventually be acquired…You want to keep your company and your people intact. We found some potential buyers that were interested more by the technologies than the company as a whole. [With Folksamerica], nothing is going to change in terms of management. They are very interested by what we bring, and they bring things that are very complimentary to what we do here.”

On Sept. 18, Esurance, based in San Francisco, confirmed that it had cut approximately one-quarter of its staff. Company management indicated at the time they were in the process of seeking a buyer.

“As a reinsurer, we have had the opportunity to look at many of the startup companies as a capacity provider to them,” said Steven Fass, CEO of Folksamerica. “We have always felt that this is a great technology and will become a very important distribution system, but we have never found a company that actually combined the insurance skills and the technological skills.

“We would have been very interested in Esurance had they come to us for reinsurance support. As it worked out, it’s even better since they came to us at a time when they needed capital and we’re able to provide that. So this is not the first e-commerce venture that we’ve looked at, but this the first time we’ve gotten involved in it.”

Under the terms of a tri-party agreement signed in 1999, Esurance was set up to act as an MGA for Argonaut Insurance Co., which is responsible for the issuance of the policies and assumes 15 percent of the risk. The remaining 85 percent of the risk is assumed by General Re Corp.

When asked if the acquisition would have an affect on that original structure, Duler indicated that while there had been discussions with Argonaut and Gen Re during the past few weeks and there would be no changes in the short-term. Fass affirmed that there will eventually be some changes, as yet undetermined, with Folksamerica Reinsurance Co. taking a risk-bearing position of some significance in the venture. “There’s a lot of mechanics that need to be discussed. And I’m sure they’ll have some opinions about how it best should be structured We’ll work that out with our partners.”

For a more extensive story on the Esurance acquisition,visit our National news section.

Topics Mergers & Acquisitions Carriers Reinsurance