Bank of America Merrill Lynch 2014 Insurance Conference ... · Bank of America Merrill Lynch...

Bank of America Merrill Lynch

2014 Insurance Conference

February 12, 2014

Thomas J. Wilson

Chairman, President, and Chief Executive Officer

Safe Harbor

This presentation contains forward-looking statements and information. 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, our Form 10-Q for the quarter ended September 30, 2013, the last slide of this

presentation, 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.

Bank of America Merrill Lynch Conference: February 12, 2014 1

Continuing to Effectively Execute Our Strategy to Provide Competitively

Unique Offerings to Distinct Consumer Segments

Brand

Neutral

Self-

Serve

Local Advice

and Assistance

Brand

Sensitive

Market Premium Share

Auto: ~30%

Property: ~35%

Encompass Rank #15


Auto: <1%

Property: <1%


Auto: ~25%

Property: ~10%

Esurance Rank #7


Auto: ~45%

Property: ~55%

Allstate Rank #2

2 Bank of America Merrill Lynch Conference: February 12, 2014

(1) Available to common shareholders

Excellent 2013 Return on Equity and Policy Growth

Financial Highlights

($ in Millions, PIF in thousands, except per share data)

2013

%

Change

Revenues $34,507 3.6

Allstate Protection Policies 33,336 1.5

Net Income(1) 2,263 (1.9)

Per Diluted Common Share(1) 4.81 2.8

Operating Income 2,670 24.3

Per Diluted Common Share 5.68 30.3

Book Value Per Common Share

Reported 45.31 6.9

Excluding the impact of

unrealized net capital gains

and losses on fixed income

securities

42.55 14.6

ROE Net Income 11.0% (0.9)pts

Operating Income 14.5% 2.1pts

2013 Operating Priorities and Results

■ Grow insurance premiums

‒ Positive premium growth; all brands contributing

■ Maintain auto profitability

‒ Protection Auto recorded combined ratio: 96.4

‒ Allstate Brand Auto maintaining underlying performance;

Esurance & Encompass profit improvement underway

■ Raise returns in homeowners & annuity businesses

‒ Allstate Brand Homeowners underlying combined ratio: 62.7

‒ Divestiture of LBL, subject to regulatory approval

■ Proactively manage investments

‒ Protection portfolio duration reduced to mitigate rate risk

‒ Annuity returns improved; long-term

outlook remains challenging

■ Reduce the cost structure

‒ Pursuing continuous improvement, simplifying

processes and streamlining technology


4

Operating Priorities for 2014

Our priorities have evolved to reflect success in achieving return improvement

goals established in 2011 and a focus on balancing growth and returns

2014 Priorities

1. Grow insurance policies in force

2. Maintain the underlying

combined ratio

3. Proactively manage investments

to generate attractive

risk-adjusted returns

4. Modernize the operating model

5. Build long-term growth platforms

2013 Priorities

1. Grow insurance premiums

2. Maintain auto profitability

3. Raise returns in the homeowners

and annuity businesses

4. Proactively manage investments

5. Reduce the cost structure

Bank of America Merrill Lynch Conference: February 12, 2014

■ Each Brand is positively contributing to growth

‒ Allstate Brand auto growing over prior year

‒ Homeowners rate of decline decreasing;

positioned for profitable growth

‒ Esurance, Encompass growth rates are

expected to slow given profit improvement

actions

■ Exclusive Agency force is energized and engaged

‒ Footprint is growing year over year

‒ Agencies are larger and better capitalized

‒ Agency relationship survey results

significantly improved

‒ Agency engagement in writing Allstate

Financial products continues to rise

Growth Momentum Continues to Build

Allstate Brand Auto and Homeowners Policies in Force

-0.9% -1.4% -1.3%

-1.0%

-0.3%

0.7%

1.5%

-3.8%

-4.6%

-5.8% -5.4%

-4.4%

-3.2%

-2.2%

-8%

-6%

-4%

-2%

0%

2%

2010 2011 2012 Q1 13 Q2 13 Q3 13 Q4 13

Auto Homeowners

Protection Written Premium & Policies in Force

-0.2%

0.3%

4.0%

2.5%

4.2%

5.3% 4.7%

-2.4%

0.8%

-1.1% -0.7%

0.0%

0.8%

1.5%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2010 2011 2012 Q1 13 Q2 13 Q3 13 Q4 13

Net Written Premium PIF

(1)

(1) Growth rate in 2012 reflects acquisition of Esurance in 2011


6

Proactively Responding to External Change: Drivewise® & DriveSense™

More Touchpoints, Safer Drivers

■ Drivewise currently in 30 states;

DriveSense in 15 states

■ Nearly 1.5 billion miles of data recorded

since inception

■ Extending the value proposition beyond

pricing:

■ Improve driving behaviors

■ Teen safe driving

■ Platform for future services


7

Long-Term Growth Platform: Allstate Business to Business

(1) Revenue defined as premiums written for Business Insurance, Roadside, and Dealer Services; and total premiums & contract charges plus net investment income for Allstate Benefits.

Benefits YE 2013 % Var to

PY

Revenue(1) $0.9B 9.3%

Business Insurance YE 2013 % Var to

PY

Revenue(1) $0.5B 2.7%

Policies in Force 301K 6.4%

Roadside Services YE 2013 % Var to

PY

Revenue(1) $0.4B 17.7%

Good Hands

Roadside Members 1.6M 82.2%

Dealer Services YE 2013 % Var to

PY

Revenue(1) $0.3B 52.6%

■ Organization created to better serve business

customers under one leadership structure

‒ Includes Encompass (~50% of B2B premiums

written) and Ivantage in addition to the entities

on the right

■ Combined entity provides a focused platform for

growth:

‒ Earned Premium of $2.1B for 2013 grew 7.5%

versus 2012 (8.3% excluding Encompass)

‒ Policies in Force of 2.5 million grew 3.0% in

2013 (-0.2% excluding Encompass)

‒ Consolidated underlying combined ratio: 93.4

was 0.7pts higher than 2012


(1) Price/Book and Book Value metrics stated on a Tangible Book Value basis. Source: Bloomberg (2) There were five dividend payments made in 2012

Allstate Is An Attractive Investment Opportunity

8

■ Strategy creates sustainable revenue and earnings growth by offering unique

products to four distinct consumer segments

■ Focused, consistent priorities and a history of delivering on our commitments

■ Attractive auto and underlying homeowner margins

■ Well-established track record of strong cash returns to shareholders

■ Valuation continues to have significant upside potential

Strong Cash Returns

Returned over $32 Billion to Shareholders

since 1995 Spin-off from Sears

Price / Book Multiple(1)

Price per share at:

Mean = $63

+1 Std Dev = $81

-1 Std Dev = $46

Q4

1995

Q4

2013 Q4

2001

Q4

2008

0

1

2

3

Cash Returned

per Common

Share % Returned

2013 $4.67 9.4%

2012(2) $2.94 8.3%

2011 $2.65 9.2%


9

Safe Harbor

This presentation contains a forward-looking statement about our outlook for the Property-Liability

underlying combined ratio. This statement is made subject to the safe-harbor provisions of the Private

Securities Litigation Reform Act of 1995. Actual results may differ materially from those described in

the forward-looking statement for a variety of reasons, including the following:

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.

We undertake no obligation to publicly correct or update any forward-looking statements.


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