Allstate 2Q Income Up; ‘Distracted’ Agents Affect Policy Count

NU Online News Service, Aug. 1, 12:09 p.m. EDT

Allstate Corp. admits at least some of the decrease in policies-in-force in its homeowners' insurance segment is due to agents being “distracted a little bit” by upcoming changes to their commission structure.

Matthew Winter, president of Allstate auto, home and agency, made the comments during the company's second-quarter earnings conference call.

He says Allstate has aggressively embarked on a “reengagement strategy” with agents to teach them the new compensation schedule, announced last year, which aims to incentivize agents to meet performance goals. The new structure is to be used next year.

“We understand how important agency morale is; We believe in them,” Winter says of agents. “We want to make changes in a positive way without negatively impacting anything.”

As of June 30, Allstate homeowners policies-in-force decreased 6.2 percent compared to last year, to about 6.1 million.

Underwriting restrictions in certain states and decisions to stop offering some coverage in selected coastal areas also impacted policy counts, Allstate says in its filing with the U.S. Securities and Exchange Commission.

Thomas J. Wilson, chief executive officer, says the rate of decline in policies-in-force won't change. In fact, it may be a “little higher” as the year goes on, he adds.

Wilson says that, according to a survey of agents taken at a recent conference, a large majority supports the commission changes at Allstate and stands behind the company.

“You have to listen to the broad opinion as opposed to just the noisiest ones,” he says, referring to some reported agent-driven criticism of the plan.

Overall Allstate Corp. turned in a profitable second quarter with net income of $423 million, compared to a net loss of $624 million a year ago during the same period as substantial catastrophe losses of $819 million in the quarter were still far less than $2.3 billion of catastrophe losses incurred in 2011's second quarter.

The second-quarter property-liability combined ratio for Allstate was 98 compared to 123.3 in the prior year's second quarter as rate increases begin to take effect.

During the second quarter, Allstate was approved to raise rates an average of 10.2 percent in seven states, which averages to a 1.2 percent increase countrywide.

Second-quarter premiums written in this segment increased 2.1 percent to $1.64 billion.

Winter says the homeowners' insurance business is entirely local. He likened the business to playing “Whack-a-Mole”—when you solve one problem, another pops up. Therefore, Allstate has made the move to allow local management to make more decisions to react to trends.

“We'll continue to approach the game that way,” he says.

Allstate auto got rate increases of an average 4.4 percent approved in 19 states, which averages to a 1.5 percent increase countrywide.

As of midday August 1, shares of Allstate Corp. are up more around 6.8 percent to $36.64—the highest Allstate shares have sold since September 2008.