White Mountains Disputing $20M in Esurance Sale to Allstate

White Mountains Insurance Group says in its latest quarterly report that it is disputing about $20 million in its sale of Esurance and Answer Financial in an ongoing court case the insurance provider has filed against Allstate over the purchase last October.

In the ongoing federal lawsuit filed in September with the U.S. District Court for the Southern District of New York, White Mountains claims that Allstate broke contractual obligations and improperly adjusted the final purchase price.

An initial buy of $700 million was agreed upon, along with an additional amount to be based on Esurance’s book value, which was initially estimated and would be adjusted at a later date. That book value adjustment became the center of the dispute; White Mountains claimed that Allstate missed an auditing deadline and wrongly cut out some acquisition costs.

Allstate also proposed that its add-on payment to White Mountains be cut by $5.2 million, according to White Mountains, which took into consideration an unrelated settlement on Esurance’s books.

The post-tax amount “in dispute is approximately $20 million,” according to the financial report, which also states that White Mountains recognized a gain of $677.5 million on the Esurance sale.

Allstate sought the case’s dismissal early last month. The insurance company’s motion to dismiss the case is still being considered by the court, with Allstate filing the motion’s latest brief on Nov. 1.

In court documents submitted by Allstate, the insurance carrier states that White Mountains is simply seeking “a $5.2 million adjustment” that should not be decided in court.

“No matter how White Mountains tries to portray this action, it is a dispute about whether a $5.2 million adjustment was properly made,” it stated its initial dismissal motion, filed Oct. 5.

“But it is up to the independent accountant—not a court—to decide if Allstate is entitled to a purchase price adjustment,” Allstate stated.

In a brief from White Mountains responding to Allstate’s motion for dismissal, the insurer said that at issue is simply about adherence to contracts and deadlines set in them.

“That is the key issue at stake in this lawsuit: did the agreement set a 90-day deadline for preparation and audit of the closing statement and, if so, did Allstate comply?” litigators for White Mountains stated in the Oct. 22 brief.

According to documents setting court deadlines for next year, pleas will finalized by Jan. 8 while all discovery evidence will be submitted by March 5. A final pretrial conference is scheduled for May 7. Both parties should be ready for trial within two days of being notified any time on or after June 4, according to the documents.

Esurance Expands in Midwest

Late last month, Esurance announced that it had opened up for business in Iowa and Nebraska.

“Esurance has arrived in the land of corn!” Esurance blogger Matt Savener wrote on the insurer’s blog.

Esurance last expanded into Arkansas in September and Kansas in July and currently does business in 34 states nationwide.

Allstate reported a quarterly net income that was more than four times as high as income from the third quarter in 2011, and the parent company can thank Esurance for partly contributing to the third-quarter boost.

The 0.3 percent overall drop in insurance policies in force for Allstate was “offset somewhat” by a 7.8 percent increase of policies in force for Esurance. Allstate told investors in a quarterly report that its auto-related sectors are a priority for the year as the insurance giant seeks to “maintain auto profitability.”

However, Allstate has also seen a lot of expenditures stemming from Esurance. As part of a “regressive rebranding” of Esurance, with Allstate spending $45 million in advertising its recently purchased insurance carrier in the first quarter of 2012, according to a June report from SNL Financial.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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