Bermuda-based White Mountains Insurance Group is building up its interests in online insurance.

The company, which owns Esurance, announced yesterday that it had paid $30 million for a 42 percent stake in Answer Financial Inc.'s outstanding debt and equity.

Answer is an internet and telephone-based insurance agency based in Encino, California, which filed for Chapter 11 bankruptcy yesterday in a court in Wilmington, Delaware.

In its documents Answer listed assets of less than $10 million and debt of between $50 million and $100 million.

White Mountains was listed as being owed $21.4 million by Answer. The Bermuda company's acquisition of the stake was part of Answer's restructuring plan.

Answer said the negotiated reorganisation plan will enable it to "recapitalise and develop its business", according to court documents filed with the petition.

Answer, founded in 1995, assists consumers with insurance purchases over the Internet and by telephone. Consumers can compare competitive quotes with the assistance of licensed insurance agents.

White Mountains' chief executive officer Ray Barrette said: "We believe that online insurance distribution channels will continue to grow in importance. Answer Financial's agency platform is a nice complement to Esurance. We are excited to invest in a renewed Answer Financial, further building on our success at Esurance."

Answer has more than 275,000 policies in force.

The company's reorganisation involves a stock and note purchase agreement with Elliott Associates LP, and PSC Holdings Ltd, as well as White Mountains.

Answer said it sent a disclosure statement that outlines the terms of the plan to certain creditors and based on ballots received, all creditors entitled to vote under the plan voted to accept it. The company requested a combined hearing for court approval of the disclosure statement and confirmation of the plan.

The 20 largest unsecured creditors are owed $823,352. The three biggest creditors are: Esurance Inc., owed $161,600; Primerica, owed $125,000; and Douglas Emmett 1998 LLC, owed $115,000.