Allstate's Strategy: Achieving Consistent Earnings Surprises

Competitive Landscape and Industry Comparison

Allstate evaluates market opportunities based on size and competitive landscape, aiming to carve out significant shares. Competitors like Travelers, The Hartford, AIG, and Chubb highlight competitive dynamics, growth areas, and market responses to pricing, underscoring the intense competition Allstate faces in the insurance industry.

"And we're looking at those markets through the size of the opportunity of the market and the competitive landscape of how much we could carve." --- (ALL, Investor Day, 2024/06/25)

"You expect the larger account business to be more competitive. And then on the selective middle market, I kind of anticipate maybe that to be higher growth areas for you from a net premium written perspective. So maybe you can provide some colors on that topic." --- (TRV, earning call, 2024/Q2)

"Retention was steady, and the broader economic environment remains conducive for growth. In Small Commercial, with our unique and superior market position, industry-leading products, unmatched customer experience, and unrivaled pricing accuracy, we continue to deliver exceptional results, including strong top line growth and" --- (HIG, earning call, 2024/Q2)

"Our business remains competitive due to its long-standing market leading positions, innovative products, distribution relationships across multiple channels, customer-focused service and strong financial ratings. Our primary challenges include:" --- (AIG, sec filing, 2024/Q1)

"So, it's always inherently messy. But typically when rate and price are adequate or in excess of what's required to earn a reasonable return, then the market, in time notices and responds and becomes more competitive." --- (CB, earning call, 2024/Q1)

Market Positioning and Strategic Initiatives

Allstate's market positioning and strategic initiatives focus on delivering predictable earnings, disciplined M&A, strategic investments, leveraging content across new channels, and aligning strategic priorities to improve ROI. These efforts enhance growth, competitive advantage, and resilience.

"Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities." --- (ALL, sec filing, 2024/Q1)

"We're 6 weeks in. We're doing a lot of work at the moment. We are strategic, as you know, very disciplined around our M and A. We look at what is required in our portfolio, what we require to be successful, what will accelerate the growth and how we can add like we use the product madness example, how we can add content, technology, customer relationships, market access as a way of accelerating the growth of an asset." --- (ALL, Investor Day, 2024/06/25)

"So we're showing the government that not only are we entering the market, but we're actually making strategic investments in that market." --- (ALL, Investor Day, 2024/06/25)

"The most recent most of these have been centered around creating opportunities to leverage our great content across new or new adjacencies, channels and market growth opportunity segments.These acquisitions have generated growth and sustainable competitive advantage whilst also enhancing the group's scale, strategic capabilities and resilience." --- (ALL, Investor Day, 2024/06/25)

"This holistic approach ensures that strategic priorities are aligned across the enterprise, that resources are allocated more efficiently and overall improves our returns on investment in this important area." --- (ALL, event transcript, 2024/06/25)

Product Innovation and New Offerings

Allstate is accelerating growth and enhancing offerings through new products like Custom 360, expanding to more states, and launching a new auto product in nine states. Their Transformative Growth strategy includes building new technology and product platforms, while a coordinated enterprise-level approach ensures best practices across the company.

"We're also moving quickly into scaling phase of our strategy with a focus on squarely accelerating growth and improving strength of our offerings in existing regulated markets, Taking share from competitors, partnering with our land based customers with technology, content and product solutions, we refer to this as Phase 1 on this slide." --- (ALL, Investor Day, 2024/06/25)

"And then there's Custom 360. And Custom 360 is the new product offering. We're in about 17 states currently with the intent to expand pretty much into every state by the end of this year or into 2025." --- (ALL, earning call, 2024/Q1)

"And then you have to make sure you have talent that knows how to use it. And so the with the ecosystem, what we've done with Transformative Growth is build new technology, particularly in the Property Liability business on product platform." --- (ALL, conference, 2024/06/05)

"As you heard from Matt and the other business lines, we're increasingly taking a coordinated enterprise level approach to product strategy and dissemination of best practices across the company." --- (ALL, event transcript, 2024/06/25)

"So we've done that. We have launched a new auto product in 9 states right now." --- (ALL, conference, 2024/06/05)

Cost Management and Operational Efficiencies

Allstate's cost management and operational efficiencies have led to a significant improvement in underwriting income and combined ratio, despite increases in operating costs and reinsurance expenses. Enhanced premiums, better loss cost trends, and lower catastrophe losses have driven these efficiencies.

"Underwriting income was $89 million, the combined ratio of 93%, which improved by 15.6 points compared to prior year was driven by higher premiums earned, improved underlying loss cost trends, lower catastrophe losses and operating efficiencies." --- (ALL, earning call, 2024/Q1)

"58 www.allstate.com Allstate Health and Benefits Segment Results Operating costs and expenses Three months ended March 31, ($ in millions) 2024 2023 Non-deferrable commissions $ 91 $ 79 General and administrative expenses 134 124 Total operating costs and expenses $ 225   $ 203   Operating costs and expenses increased $22 million in the first quarter of 2024 compared to the first quarter of 2023, primarily due to growth in individual health and group health and investments in the business." --- (ALL, sec filing, 2024/Q1)

"Operating costs and expenses increased 5.9% or $13 million in the first quarter of 2024 compared to the first quarter of 2023, primarily due to growth at Allstate Protection Plans." --- (ALL, sec filing, 2024/Q1)

"The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the first quarter of 2024 was $286 million compared to $219 million in the first quarter of 2023." --- (ALL, sec filing, 2024/Q1)

"Property-Liability Operations Underwriting results Three months ended March 31, ($ in millions, except ratios) 2024 2023 Premiums written $ 13,183 $ 11,783 Premiums earned $ 12,900 $ 11,635 Other revenue 430 353 Claims and claims expense (9,349) (10,180) Amortization of DAC (1,608) (1,452) Other costs and expenses (1,417) (1,279)" --- (ALL, sec filing, 2024/Q1)

Risk Management and Underwriting Strategies

Allstate maintains a cautious underwriting risk appetite in New York and New Jersey, despite recent rate approvals, indicating a strategic focus on achieving appropriate rate levels before pursuing growth in these states.

"Really no change in New York and New Jersey in terms of our underwriting risk appetite, even with the rate approvals that we got late last year, we still don't feel like we're at the appropriate rate level to want to grow in those two states." --- (ALL, earning call, 2024/Q1)

"The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company's underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability." --- (TRV, press release, 2024/07/19)

"Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income (Loss) Three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 Net loss decreased for the three months ended June 30, 2024, largely driven by improved underwriting results and an increase in net investment income." --- (HIG, sec filing, 2024/Q2)

"The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios." --- (AIG, sec filing, 2024/Q1)

"The two items were an unusually large structured transaction we wrote, partially offset by the previously discussed corrective underwriting actions in primary and excess casualty that are continuing to wind down over the next few quarters." --- (CB, earning call, 2024/Q1)

Customer Experience and Retention

Improving customer experience and retention is a key focus for Allstate, as evidenced by industry peers. Chubb enhances services and communication, Hartford leverages advertising and rate actions, Progressive invests in multi-product households, Travelers maintains high retention and new business growth, and AIG reports strong retention and new business performance.

"But no, they want Chubb and the renewal retention rate and the growth in new business, it's very gratifying that way.And we're improving our services and constantly improving our services and in the way we communicate with our customer." --- (CB, earning call, 2024/Q2)

"Effective policy count retention is also affected by advertising and rate actions taken by us and competitors, as well as the effect of subsequent cancellations and non-renewals by customers." --- (HIG, sec filing, 2024/Q2)

"Our efforts to increase our share of multi-product households remains a key initiative and we will continue to make investments to improve the customer experience in order to support that goal." --- (PGR, sec filing, 2024/Q1)

"Retention remained excellent at 85% and new business was up 9% to a record quarterly high of $732 million.In terms of pricing, we're pleased to sustain strong levels of renewal premium change, which was double digits for the fifth quarter in a row." --- (TRV, earning call, 2024/Q2)

"So I think the growth will be there. I believe like the retentions are very strong now, where in the past that remediation still affected the current portfolio and new business has been just terrific." --- (AIG, conference, 2024/05/29)