Sanford C. Bernstein Twenty-Ninth Annual Strategic Decisions … · 2017-04-17 · Sanford C....

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2002 2008Sanford C. Bernstein Twenty-Ninth Annual

Strategic Decisions ConferenceMay 29, 2013

Thomas J. WilsonChairman, President, and Chief Executive Officer

Sanford C. Bernstein 29th Annual Strategic Decisions Conference – May 29, 2013

Bank of America Merrill Lynch Financial Services Conference

1

Safe Harbor

Forward-Looking Statements and Risk FactorsThis presentation may contain forward-looking statements about our outlook for the Property-Liability combined ratio excluding the effect of catastrophes, prior year reserve reestimates, business combination expenses, and the amortization of purchased intangible assets for 2013, our investment portfolio and our capital management plan. Additional information on factors that could cause results to differ materially from those projected in this presentation is available in the 2012 Form 10-K and in our most recent earnings release, available on our website, allstate.com. This presentation also contains some non-GAAP measures. You can find the reconciliation of those measures to GAAP measures on the Investor Relations portion of our website, allstate.com, under the “Quarterly Investor Info” link and “Conference Call Archive” link. Forward-looking statements are subject to the Private Securities Litigation Reform Act of 1995 and are based on management’s estimates, assumptions and projections. Actual results may differ materially from those projected based on the risk factors described below.

•Premiums written and premiums earned, the denominator of the underlying combined ratio, may be materially less than projected. Policyholder attrition may be greater than anticipated resulting in a lower amount of insurance in force.

•Unanticipated increases in the severity or frequency of standard auto insurance claims may adversely affect our underwriting results. Changes in the severity or frequency of claims may affect the profitability of our Allstate Protection segment.

•The actions we have taken to reduce the sensitivity of our investment portfolio to a rise in interest rates may not be effective.

•Statements about the implementation of our capital management plan are subject to market conditions.

We undertake no obligation to publicly correct or update any forward-looking statements. This news release contains unaudited financial information.

Sanford C. Bernstein 29th Annual Strategic Decisions Conference – May 29, 2013 22

Strategically Responded to Dramatic External Change, Now Positioned for Growth

Delivering Industry-

Leading Auto Margins

Delivering Industry-

Leading Auto Margins

Proactively Managing

Investment Portfolio

Proactively Managing

Investment Portfolio

Improving Returns from

Allstate Financial

Improving Returns from

Allstate Financial

Improving Returns from Homeowners


Creating Sustainable Growth by Focusing on the Customer

20122004 201020082006

Significant Hurricane

LossesFinancial Crisis /

Economic Recession

Significant Catastrophe and Severe Weather Losses

Selected Dramatic External Shocks

Competitively Differentiated

Customer Value

Propositions

Competitively Differentiated

Customer Value

Propositions


-4.1%-4.8%

-6.2% -5.8%

-3.6%

2.8%

2.4%

-1.9%

-1.3%

2.4%2.1%

-0.1%

7.1%

-3.4%

-4.2% -3.9%

3.4%

0.1%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2005 2006 2007 2008 2009 2010 2011 2012 Q12013

NWP Growth PIF(2) Growth

3

2002 2008

Combined Ratio(% of Earned Premium and Index to 2005)

64.872.0 73.6 74.3 71.6

64.8 66.4

70.5

10.9

19.5

46.5

29.0 31.3

50.0

18.775.7

91.5

102.6105.6

88.085.1

63.0

73.2

23.2

40

50

60

70

80

90

100

110

2005 2006 2007 2008 2009 2010 2011 2012 Q12013

CR ex-Cat Cat Ratio PML Index

121.6119.7133.5

Written Premium / Policies in Force

(1) Probable maximum loss for hurricanes and earthquakes as calculated by external risk models and after reinsurance recoveries(2) Excludes Canada(3 )Excludes TX and CA mandated rate reductions(4) Q1 2013 results on a 12 month moving basis for NWP Growth

Combined ratio excluding catastrophes has declined for the last 3 years

Policies in force have declined while rates have increased premiums written

CW Approved 1.0% 2.4% 3.6% 3.2% 8.4% 7.0% 8.6% 6.3% 5.6%Rate Changes


(4)(3)(1)


Focus on Delivering Attractive Risk Adjusted Returns

4

Corporate

Municipal

US & Foreign Gov't/Agency RMBS

Non-agency RMBS/ABS

Equity Securities

MortgageLoans/CMBS

Ltd PartnershipIntersts/Other

Short TermInvestments

$100.5$95.6 $97.3

Carrying Value ($ in billions)

38% 46% 50%

16%

16%

33%

21%

15%

11%7%

5%

9%

6%

5%

11%

6%5%

9%

2008

6%3%3%

5% 7%1%

9%

6%

4%8%

8%2%

2009 2010 2011 2012

16%

9%

6%

15%

3%5%

10%

23%

29%

$99.8$96.0

13%

(Measured at Year End)

21%25%

22%

46%

20%

12%

28%

47%

15%

10%13%

41%

0%

10%

20%

30%

40%

50%

Due in three years orless

Due after three yearsthrough seven years

Due after seven yearsthrough ten years Due after ten years

12/31/2011 12/31/2012 3/31/2013

Property-LiabilityFixed Income by Scheduled Maturity Date

Portfolio Total Return (GAAP)

-11.1

10.98.5

6.6 7.3

-15

-10

-5

0

5

10

15

2008 2009 2010 2011 2012

(%)


80

85

90

95

100

105

110

115

120

125

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ALL GEICO PGR State Farm Industry Average

5

Notes: ALL data is Allstate Brand Standard AutoIndustry source is SNLAmounts prior to 2008 do not reflect change in accounting for acquisition costs

Auto performance has yielded attractive profitability and returns

Standard Auto Combined Ratio

Delivering Industry-Leading Auto Margins


Improving Returns from Allstate Financial

Exited variable annuity business in 2006

Reduced fixed annuity business

New premiums and deposits peaked in 2004; were cut in half by 2008, and have exited most product lines today

Lowered cost structure by 20% in 2009

Expanding higher margin benefits and Life business

Investing in higher return cash-generating investments

6


Brand Neutral

Brand Sensitive

Local Advice &Assistance Self Serve

Distinct offerings and strategies to drive growth in all consumer segments

Market Premium ShareAuto: ~30%

Property: ~35%Encompass Rank #15

Market Premium ShareAuto: <1%

Property: <1%


Property: ~10%Esurance Rank #7


Property: ~55%Allstate Rank #2

Competitively Differentiated Customer Value Propositions


05

1015202530354045

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Allstate Brand Standard AutoStates with Increases in New Issued Apps

05

1015202530354045

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Allstate Brand Standard AutoStates with Improved Retention

Allstate Brand Unit Growth Trend Slowly Improving . . .

8

Allstate Brand Policies in Force*

0

10

20

30

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q12013

Thou

sand

s

Total Std. Auto Homeowners

(Mil)

* U.S.

Q12013

Change since2003(Mil)

TotalStd. AutoN/S AutoHome.All Other

30.516.9

.55.97.2

-1.3.6

-.9-1.2

.2

In 2012, 27 states had favorable comparisons to 2011. In 2012, 11 states had favorable comparisons to 2011.


Esurance . . . Off To a Good Start

NWP

PIF

100

150

200

250

300

350

400

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013400

500

600

700

800

900

1000

1100

1200($ Mil) (000)

9

NWP PIF

Objective ProgressImprove marketing effectiveness Launched successful new ad campaign

Improved awareness, consideration, and conversion rateIncreased advertising spending

Improve customer mix and increase policyholder retention Shifting new business mix towards preferredWriting more multi-car policiesImproving customer retention Increasing lifetime premium

Broaden product portfolio Expanded auto coverage to additional statesLaunched rentersLaunching homeowners and motorcycle

Leverage claims capabilities Applying best practices and technologyImproved vendor pricing

Utilize Allstate’s scale Achieving savings from Allstate’s purchasing scale, personnel costs, operating centers, information technology development and investments


2013 Priorities

10

Grow insurance premiums

Overall net premiums written increased 2.5% from Q1 2012, with all brands contributing

Maintain auto profitability

Allstate brand standard auto combined ratio of 94.2, an underlying combined ratio of 93.5

Esurance combined ratio of 116.7 remains elevated due to higher new business growth

Encompass combined ratio of 105.8, trend improved, further profit improvement actions required

Raise returns in the homeowners and annuity businesses

Improved Allstate brand homeowners profitability with an underlying combined ratio of 65.8 and a recorded combined ratio of 85.1

Annuity returns declined due to reduced limited partnership income and continued low interest rates

Proactively manage investments

Total return on investment portfolio … 1.2% for Q1 2013

Progress made on strategic initiatives to deliver more attractive risk-adjusted returns

Reduce our cost structure

Operating expenses increased driven by employee costs and accelerated technology investments

Reinsurance program costs lowered beginning June 1, 2013


Innovating Around the Connected Consumer with Drivewise®

Value proposition extends beyond pricing

Currently in 16 states

High acceptance rate

Over 40,000 enrollments each month

More than 450 million miles recorded

Aggressively expanding into new states while building innovative services to augment current offering

https://share.allstate.com/sites/Auto_Line_Pgm_Mgmt/DriveWise/Drive Wise Pictures/Drive Wise Pic.bmp

https://share.allstate.com/sites/Auto_Line_Pgm_Mgmt/DriveWise/Drive Wise Pictures/DW Pic 2.bmp


Additional Growth Platforms

12


Actively Manage Capital to Increase Shareholder Value Opportunities

Capital Management Plan . . . Actions enhance Allstate’s strategicand capital flexibility

Lower cost of capital

Minimal impact on earnings

No impact on share repurchase program

13


A Focused Strategy and Proven Ability to Execute Creates Value for Customers and Shareholders

Unparalleled brand and franchise

Only competitor able to offer products and services to all four unique consumer segments

Focused and consistent priorities

Proactive execution

Significant return of capital

Business model and capabilities to drive real growth

14

Bank of America Merrill Lynch Financial Services Conference

15

Sanford C. Bernstein Twenty-Ninth Annual Strategic Decisions … · 2017-04-17 · Sanford C....

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