The Allstate Corporation Pat Macellaro: Vice President, Investor Relations Raymond James 2016 Institutional Investors Conference March 8, 2016

Transcription

1 The Corporation Pat Macellaro: Vice President, Investor Relations Raymond James 2016 Institutional Investors Conference March 8, 2016

2 Forward-Looking Statements and Non-GAAP Financial Information 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 2015 Form 10-K, in our most recent earnings release, and at the end of these slides. These materials are available on our website, allstateinvestors.com, under the Quarterly Investor Info link. This presentation also contains some non-gaap measures. You can find the reconciliation of those measures to GAAP measures within our most recent earnings release and investor supplement. These materials are available on our website, allstateinvestors.com, under the Quarterly Investor Info link. 1

3 is an Attractive Investment Opportunity We Are The Good Hands Competitively differentiated strategy based on: Customer segmentation Diversified portfolio of businesses Analytics-based decision making Attractive long-term returns generated from insurance and investments Auto, homeowners, other personal lines, life insurance, and workplace benefits Investment grade fixed income and performancebased equity portfolio Nation s largest publicly held personal lines insurer, serving 16 million households Five year total shareholder return of 116% vs. S&P 500 of 80% Growth by offering unique customer value propositions and expanding the product portfolio and geographic footprint Proactive approach to risk and return More than $11 billion in cash returned to common shareholders since

4 Deliver the Best Value to Each Customer Segment by Offering Unique Products and Services at a Competitive Price Neutral Local Advice and Assistance Self- Serve Sensitive Differentiated Value Propositions for each Consumer Segment Key Capabilities Across All Customer Segments Pricing Sophistication, Analytics and Risk Management Product and Service Breadth and Innovation Claims Capabilities Technology 3

5 Diversified Portfolio of Businesses Auto Attractive returns on capital Sophisticated pricing Claim settlement capabilities Drivewise telematics offering Sources of Revenue at Year-End 2015 ($35.7B) Realized Capital Gains and Losses Net Investment Income Auto Homeowners Target customers prefer to bundle products; improves auto retention Attractive returns on capital more than compensate for volatility Financial Life Insurance good returns and potential Workplace Benefits (3.3M policies) - attractive growth and returns Managing annuity block returns through investment portfolio allocation Investments Proactive approach to risk and return AF Premiums & Contract Charges Other Esurance Encompass Sources of Operating Income (1) at YE 2014 ($2.4B) Financial Operating Income 22% Property- Liability Net Investment Income 31% Home Sources of Operating Income (1) at YE 2015 ($2.1B) (1) Auto and Homeowners = after-tax underwriting income, Financial = Operating Income, Property Liability Net Investment Income is after-tax. Not included in chart 2014: Other Property-Liability businesses account for an after-tax underwriting loss of $131M, and Corporate accounts for an operating loss of $312M. Not included in chart 2015: Other Property-Liability businesses account for an after-tax underwriting loss of $9M, and Corporate accounts for an operating loss of $298M. Auto 21% Home 26% Financial Operating Income 21% Property- Liability Net Investment Income 35% Auto 6% Home 38% 4

6 Recent Auto Profitability Impacted by a Sudden, Sharp Increase in Accident Frequency 100 Auto Combined Ratio 1 Total Auto Property Damage Gross Frequency: Indexed to Year-end Operating Income Return on Required Capital (2) 5-year average: ~16% Profit improvement plan leverages national and local capabilities: Auto insurance rate increases of $1.1 billion approved across all three underwriting brands in 2015 Underwriting guideline changes intended to slow new business and target underperforming segments and geographies Claims organization focused on operational excellence Expense spending reductions resulted in a 1.2 point lower property-liability expense ratio compared to 2014 (1) Auto results prior to 2011 are not adjusted for DAC accounting change adopted in (2) Assumes after tax margin and investment yield at 3:1 premium / surplus ratio. Average of the years

7 Homeowners a Competitive Advantage Repositioned homeowners business to adapt to dramatic increase in severe weather in 2008 Average gross premium increased over 30% from and approximately 45% from Reduced size of the business by ~25% (2 million policies) from peak in 2006 to the bottom in Q Significant shift to $1,000 and higher base deductibles House & Home product, which appropriately prices roofing losses, accounts for over 20% of total brand homeowner premium Cumulative underwriting income of $4.6B from , which includes $5.0B of catastrophe losses (CR) Homeowners Combined Ratio 1 Severe weather Average gross premium 2 $799 $832 $850 $861 $883 $943 $999 $1,074 $1,115 $1,140 $1,155 Catastrophe losses ($B) $4.1 $0.6 $1.1 $2.7 $1.6 $1.8 $2.9 $1.4 $1.0 $1.4 $1.2 Underwriting income ($B) ($1.9) $1.4 $0.5 ($1.1) ($0.1) ($0.3) ($1.3) $0.7 $1.4 $1.1 $1.4 (1) Homeowners results prior to 2011 are not adjusted for DAC accounting change adopted in (2) Average gross premium excludes Canada in 2011 and prior. 6

8 Esurance Expanding Product Suite and Geographic Footprint Esurance (1) Results ($ in Millions, except ratios) Net Written Premium $1,024 $1,310 $1,513 $1,613 Growth rate NA (1) 27.9% 15.5% 6.6% Policies in Force 1,031 1,306 1,470 1,491 Growth rate NA (1) 26.7% 12.6% 1.4% Recorded Combined Ratio Expense Ratio Underlying Loss Ratio Auto Product Launches Market Coverage 2015: 98% (added Alberta Canada in 2015) Homeowners Product Launches Market Coverage 2015: 49% WA ME WA ME CA OR NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI OH IN WV KY VT MA NH NY RI CT PA NJ DE MD VA DC NC CA OR NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI OH IN WV KY NY PA VA NC VT MA NH RI CT NJ DE MD DC AZ NM OK AR TN SC AZ NM OK AR TN SC MS AL GA MS AL GA TX LA FL Footprint prior to acquisition Additions since acquisition TX LA FL No current presence (1) Esurance acquired Q Raymond James 2015 Institutional Investor Conference: March 3,

9 Investing in Sustainable Value Creation Expanding Exclusive Agency platform Underpenetrated markets Leveraging technology and analytics to increase advisory capacity Successful history of selectively pursuing adjacent acquisitions Benefits Partnership Marketing Group Esurance Leveraging synergies across businesses to serve the small business market Innovative, broad solutions to protect the business, the business owner and the employees Building connected customer platform Expanding Drivewise and Esurance DriveSense Roadside Services innovation 8

10 Less Trading Activity Proactive Investment Approach Balances Risk and Return Source of Investment Return ($77.8B portfolio at Q4 2015) Market Performance Market-Based Core Market-Based Active Largely investment-grade fixed income and passive equity Predictable earnings and cash flows Actively managed public market strategies Takes advantage of market presence and shortterm opportunities Highly diversified and liquid Low cost structure Sophisticated research and analytics Performance-Based Long-Term Long-term idiosyncratic investments in private markets Invest with best-in-class partners Limited partnerships Performance Based Opportunistic Leverage investment expertise and research Investments in both public and private markets Liquidity and duration likely to be between marketbased and performance-based investments More Trading Activity Co-investments Direct Individual Asset Performance 9

11 is an Attractive Investment Opportunity 9.2% Total Cash Return per Common Share Common Dividends Common Share Repurchases 8.3% 9.4% 10.7% 12.3% Competitively differentiated strategy based on: Customer segmentation Diversified portfolio of businesses Analytics-based decision making 6.3% 10.5% 8.9% 5.2% 7.9% 2.9% 3.1% 1.5% 1.8% 1.8% (1) End of Period Common Shares Outstanding (Millions) % decline since Attractive long-term returns generated from insurance and investments Auto, homeowners, other personal lines, life insurance, and workplace benefits Investment grade fixed income and performancebased equity portfolio Growth by offering unique customer value propositions and expanding the product portfolio and geographic footprint Proactive approach to risk and return Long history of cash returns to shareholders (1) There were five dividend payments in

12 Forward-Looking Statements Forward-Looking Statements This presentation contains forward-looking statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of These forwardlooking statements do not relate strictly to historical or current facts and may be identified by their use of words like plans, seeks, expects, will, should, anticipates, estimates, intends, believes, likely, targets and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to: (1) adverse changes in the nature and level of catastrophes and severe weather events; (2) impacts of catastrophe management strategy on premium growth; (3) unexpected increases in the frequency or severity of claims; (4) regulatory changes, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (5) market convergence and regulatory changes on our risk segmentation and pricing; (6) the cyclical nature of the property and casualty business; (7) reestimates of reserves for claims; (8) adverse legal determinations regarding discontinued product lines and other legal and regulatory actions; (9) changes in underwriting and actual experience; (10) the influence of changes in market interest rates on spread-based products; (11) changes in estimates of profitability on interest-sensitive life products; (12) reducing our concentration in spread-based business and exiting certain distribution channels; (13) changes in tax laws; (14) our ability to mitigate the capital impact associated with life insurance statutory reserving requirements; (15) operational issues relating to a decline in Lincoln Benefit Life Company s financial strength ratings ; (16) market risk and declines in credit quality relating to our investment portfolio; (17) our subjective determination of the fair value of our fixed income and equity securities and the amount of realized capital losses recorded for impairments of our investments; (18) competition in the insurance industry; (19) conditions in the global economy and capital markets; (20) losses from legal and regulatory actions; (21) restrictive regulation and regulatory reforms; (22) the availability of reinsurance at current levels and prices; (23) risks of our reinsurers; (24) a downgrade in our financial strength ratings; (25) the effect of adverse capital and credit market conditions; (26) failure in cyber or other information security; (27) the impact of a large scale pandemic, the threat or incurrence of terrorism or military action; (28) possible impairments in the value of goodwill; (29) changes in accounting standards; (30) the realization of deferred tax assets; (31) restrictions on our subsidiaries ability to pay dividends; (32) restrictions under the terms of certain of our securities on our ability to pay dividends or repurchase our stock; (33) changing climate and weather conditions; (34) loss of key vendor relationships or failure of a vendor to protect confidential and proprietary information; and (35) failure to protect intellectual property. Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the Risk Factors section in our most recent Annual Report on Form 10-K. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement. 11