Allstate Financial CEO: Company Throwing Weight Behind Esurance
May 7, 2012 by Michael Buck
Michael Buck |
Allstateis backing its newest unit, Esurance, strongly as the direct automobile writer goes head to head with competitors in the direct market.
Allstate has only owned Esurance for one full quarter, but is pleased with the direction it is headed, said Don Civgin, president and chief executive officer of Allstate Financial and Esurance head, during the company’s first-quarter earnings conference call. Esurance, once represented by the cartoon advertising icon of Erin Esurance, was bought by Allstate late last year (Best’s News Service, Oct. 7, 2011). In the first quarter, the company spent $45 million on a new Esurance advertising campaign as part of a rebranding effort.
“We wanted to get some weight behind it,” Civgin said. “We’ll continue to spend money so long as it’s economic to do so and at the moment, it feels like we’re spending the right amount.”
Over the next year or two, the company’s Esurance brand is slated to grow. Civgin said Esurance is planning a launch of a series of new and additional products and increasing the number of state in which the company operates. At the time Allstate purchased the company, it did not operate in all 50 states, he said.
Allstate Chairman and CEO Thomas Wilson said during the call that Esurance is competing well with Geico and Progressive.
In the first quarter, Allstate saw an increase in overall premiums reflecting the acquisition of Esurance, higher average homeowners premiums, and growth in emerging businesses, Wilson said in a written statement.
The company characterized its first-quarter results as “strong,” posting net income of $766 million, up 46% from the same period a year ago. The property-liability combined ratio was 92.1, which is 2.8 points better than the prior-year quarter. Helping the bottom line was a 22% drop in catastrophe losses, which were tallied at $259 million for the quarter.
The company is taking rate increases on homeowners, automobile and personal injury protection, as it focuses on profitability, said Matthew Winter, Allstate’s president of auto, home and agencies divisions, said during the call. He said this is having a “chilling effect” on the company’s ability to grow.
“We feel like that’s the right balance right now,” Winter said. “We believe that growth in the absence of profitability is the wrong strategy, so we’re pretty disciplined right now as far as focusing on getting rate adequate both in homeowners and auto and accepting, but not liking, the fact that it can impact our ability to grow.”
In homeowners, Winter said “an acceptable range” of rate increases to expect in the rest of the year is in the high single digits. Wilson said there was some decline in auto policies in Florida and New York, which reflects recent profit improvement actions.
“We believe in small frequent adjustments rather than large and infrequent in terms of managing our business from a customer standpoint,” Wilson said.
Allstate Insurance Group currently has a Best’s Financial Strength Rating of A+ (Superior). On the morning of May 3, shares of Allstate Corp. (NYSE: ALL) were trading at $34.45, up 4.68% from the previous close.
(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)
Copyright: |
(c) 2012 A.M. Best Company, Inc. |
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A.M. Best Company, Inc. |
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