Ya gotta hand it to Allstate. The "good hands" company has managed to work its way towards the top of the property/casualty insurance pile. The company is the second-largest personal lines insurer in the US, just behind rival State Farm. Its Allstate Protection segment sells auto, homeowners, and other property/casualty insurance products in Canada and the US. Allstate Financial provides life insurance through subsidiaries including Allstate Life and American Heritage Life. It also provides investment products, targeting affluent and middle-income consumers. Allstate Motor Club provides emergency road service.
Allstate Protection's property/casualty businesses -- which cover about 16 million households -- account for more than 85% of the entire company's total premiums. Most of the segment's sales come from traditional auto and homeowners policies. In addition to traditional property/casualty policies, Allstate sells specialty products including coverage for motorcycle and boat owners, renters and landlords, and mobile home dwellers. It also provides roadside assistance, as well as auto protection and service coverage sold through dealerships. Commercial products are geared towards small business owners.
Subsidiaries Esurance (auto insurance), Encompass (package policies), and Answer Financial (agency sales) operate online and have a combined customer base of close to 840,000 and growing.
All of the company's life insurance, annuities, and banking services operate through Allstate Financial. While these sales account for approximately 10% of the company's total revenue, Allstate considers them to be useful for deepening relationships with Allstate Protection customers.
Allstate's largest property/casualty markets are California, Florida, New York, and Texas. The company operates throughout the US and in Puerto Rico, the US Virgin Islands, Guam, and Canada. It leases properties in Northern Ireland (three), India (two), and London.
Sales and Marketing
Allstate maintains a network of about 10,400 exclusive agencies which sell its Allstate-branded insurance products through approximately 24,400 licensed sales professionals. It also offers these products, and Encompass-branded products, through some 2,100 independent agencies that are primarily located in rural areas of the US. Allstate Financial products are sold through exclusive agencies (and approximately 1,000 exclusive specialists) and 6,000 workplace enrolling independent agents. Other products are sold through financial representatives, online, and over the phone.
To better compete with its faster-growing direct-to-consumer competitors Progressive and GEICO, Allstate has been expanding its marketing efforts to reach younger consumers who like to compare and purchase insurance online.
In 2014 and 2015, Allstate spent $23.5 million and $17.5 million, respectively, on advertising.
Allstate has seen steady revenue growth over the past five years, primarily due to organic measures. In 2015 it posted a 1% increase to $35.6 billion due to higher property/casualty premiums earned, mainly in the auto and homeowners lines. A decline in the cost of its reinsurance program also helped revenue growth that year.
Net income declined 24% to $2.2 billion that year, largely due to higher property liability claims and claims expenses. Despite that decline, cash flow from operations rose 12% to $3.6 billion on a decrease in reinsurance recoverables and changes in income taxes.
Allstate is focused on growing its number of insurance policies in force, increasing premiums, maintaining profitability in the auto segment, and increasing returns in the homeowners and annuity segments. It is also focused on proactively managing its investments, modernizing its operating model, and building long-term growth platforms. To grow policy sales, the company is enhancing its independent agency network (especially in targeted geographic areas), sales support organization, and online sales platforms. It is also working to increase cross-sales of voluntary benefit products through its exclusive agents, as well as to form new strategic alliances and develop new product offerings. Subsidiary Esurance is expanding, both by adding new complementary products and by launching its products in new geographical locations. At the same time, Allstate is working to reduce its operational costs.
The company is continuing to invest in automotive telematics, or wireless device technologies that track drivers' habits, through which it can provide more accurate policy pricing.
To slim down on its less-profitable operations, in 2014 Allstate sold its Lincoln Benefit Life unit to Resolution Life Holdings for $600 million to reduce its exposure to spread-based operations. The company retains a majority of its US life operations. It also sold Sterling Collision Centers to Service King Collision Repair Centers.
Catastrophe management is also a key part of the company's stability. To limit its exposure to catastrophic claims in the face of increasing severe weather events in recent years, Allstate has quit writing new homeowners policies in some coastal areas, including California and Florida, that are vulnerable to hurricane, wind storms, and earthquakes. While it still renews existing homeowners policies in California, the company tweaked its underwriting to reduce exposure to claims for fires following earthquakes.