When a company sets its sights on strategic acquisitions, it typically does so from a position of strength. But when Sacramento, Calif.-based Ins-Web Inc. revealed in late November that it would acquire the online insurance assets of Mountain View, Calif.-based Intuit Inc., it showed that even a financially vulnerable entity can wheel and deal.Amid a checkered fiscal 2000, InsWeb still found the financial muscle to purchase Alexandria, Va.-based QuickenInsurance.com-its chief rival in the online insurance market. The deal should be finalized during the first quarter of 2001 following regulatory clearance from the U.S. Department of Justice and the Federal Trade Commission.
Best of both worlds
Under the deal, InsWeb will inherit Intuit's intellectual property technology and become the exclusive aggregator of online insurance services for Quicken.com, along with QuickenInsurance.com and various Quicken software products.
In turn, Intuit receives 16.6% of post-close InsWeb common stock, along with an undisclosed share of InsWeb revenues, which could be doled out through combined fixed and variable quarterly payments based on quotes generated and policies sold.
"Even though we're getting out of online insurance, we view this deal as a way to combine the best components of both companies," says Steve Aldridge, president of QuickenInsurance.com, who will relinquish his post once the deal closes.
What may have intrigued industry observers about the InsWeb/Intuit deal is that within the acquisition, Ins-Web was the hunter rather than the hunted.
The company, which records about 1 million "user sessions" a month, embarked on a restructuring program last June when it cut its workforce by 40% and moved out of its San Francisco headquarters to more modest digs in Sacramento.
InsWeb's year was also marred by the loss last spring of Bloomington, Ill.-based State Farm Insurance, one of its key carrier affiliates-which, incidentally, is one of QuickenInsurance.com's carrier partners.
The buyout, industry observers say, can be perceived as an effective means to resuscitate InsWeb's operation. QuickenInsurance.com generates 350,000 to 700,000 visitors a month to its site, and in 1999 furnished consumers with 1.25 million real-time quotes. Once QuickenInsurance.com is folded into its operation, InsWeb revenues are projected to increase $10 million a year.
"InsWeb inherits QuickenInsurance.com's competencies, as well as its carrier partners," says Todd Eyler, senior analyst with Forrester Research Inc., Cambridge, Mass. "This enables Ins-Web to better negotiate with their various distribution partners."
InsWeb typically has paid a fixed fee to these partners, and Eyler believes the deal will enhance InWeb's negotiation position with carriers.
Indeed, Aldridge emphasizes that Intuit saw the synergy that existed between the two entities-combining QuickenInsurance's technology and distribution outlets with Ins-Web's burgeoning online affiliations.
"We have built a connection to our business partners and carriers to provide real-time quotes. We're proud of that technology, and Ins-Web can now take advantage of that platform," Aldridge says. "QuickenInsurance also provides InsWeb with additional Web traffic and distribution, while InsWeb comes equipped with a strong management team and an online model committed to customer service."
The QuickenInsurance.com Web site, located at www.quickeninsurance.com, will evolve into a co-branded site that's linked back to InsWeb's host server. "The look and feel of the QuickenInsurance site will remain unchanged," says Hussein Enan, who will remain CEO of InsWeb.
Meanwhile, Steve Bennett, Intuit's president and chief executive officer, will become a member of InsWeb's board of directors.
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