Allstate to Buy CNA’s Personal Insurance Unit

NORTHBROOK, Ill. —  Allstate Corp. said Wednesday it will buy the personal insurance division of CNA Financial Corp. for $1.2 billion, as part of a strategy to revive growth by expanding sales of home and auto policies by independent agents.

Buying the CNA business would more than double Allstate’s sales through independent agents--who represent more than one insurer--to about $3 billion and make it third-largest, up from ninth, in that market. Allstate previously turned to independents to reach customers in rural areas where setting up an Allstate-only agent was too costly.

The Northbrook, Ill.-based company said it will pay CNA $140 million cash and provide $950 million to back the division’s policies. It also agreed to give CNA about $110 million to use its name for six years.

Allstate, the largest publicly traded insurer of U.S. homes and autos overall, also said it hired Bruce W. Marlow, who worked at rival Progressive Corp. for 18 years through 1996, to run its independent-agent group. Marlow, 50, helped make Progressive the top personal insurer in the independent-agent market.

Expanding the number of agents who sell Allstate policies could help the company boost sales growth. Net premiums rose 4.8% in 1997, down from 5.8% in 1996 and 7.6% in 1995, according to A.M. Best Co.

Allstate Chairman and Chief Executive Edward M. Liddy said in an interview that the company was responding to the one-fifth of insurance customers who prefer independent agents.

“There are segments of the insurance-buying public that really only want to buy through an independent agent,” he said. “Career agents will continue to be absolutely the backbone of our company.”

The $45-billion independent-agent market for personal insurance has “no real dominant competitors,” and represents an opportunity for Allstate, according to Liddy. Other companies selling insurance to individuals through independent agents include Progressive, Safeco Corp., Mercury General Corp. and Travelers Property Casualty Corp.

Allstate rose 69 cents to close at $38.69, and Chicago-based CNA Financial fell 38 cents to close at $42.44, both on the New York Stock Exchange.