Allstate Corporation Notice of 2014 Annual Meeting, Proxy Statement and 2013 Annual Report Allstate in the Community
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BUILDING A BETTER FUTURE Allstate’s Good Hands® protect what’s good in people’s lives The Allstate Corporation Notice of 2014 Annual Meeting, Proxy Statement and 2013 Annual Report Allstate in the Community it’s good to give back. Our business is focused on people and the communities where they live. We’re a fundamental part of people’s lives, whether we provide insurance coverage to protect people from life’s uncertainties or financial services to help prepare them for a secure future. Our strong connection to customers and communities informs our desire to give back in areas where we can have a positive social impact, including our business and environmental practices. IN 2013 Thomas J. Wilson Chairman, President and Chief Executive Officer n o i l l $ i m fellow shareholders customer-focused 29 strategy is working Given by The Allstate 47% Our strategy of focusing on the four Foundation, Allstate, its Reduction in teen crash Allstate is a special place. We rally employees unique segments of the consumer employees and agency 45% of charitable fatalities since we began insurance market is working. As our owners to support local funding support to our teen safe driving and agency teams around the theme of competitors respond, we will continue communities diverse communities program in 2005 “ Be A Force For Good” and live this by striving to invest in improving and expanding the customer value propositions for to do the right thing at the right time, putting all three underwritten brands: Allstate, % people before policies and defying expectations. Esurance and Encompass. This is not easy, and we are not always perfect • Allstate agencies improved their service levels for customers who prefer local 8.3 since we are an organization powered by advice and want the value that comes Total spend with Nearly 100,000 actual from the Allstate-branded offering. businesses owned by $5.8 million donated by and virtual Purple Purses minorities, women, employees and agency filled with domestic people. Allstate is a different kind of insurance • Esurance continues to provide new 21.8% reduction in greenhouse gas emissions veterans and the LGBT owners through the violence information tools and services to assist customers company and is on a different path — a path based since 2007 community Allstate Giving Campaign distributed who prefer to tackle their own insurance on a differentiated customer-focused strategy needs, while expanding the breadth of that invests in people and takes a proactive its branded products. • Encompass provides a packaged auto JUNE leadership approach. As a result, our operating and homeowners policy for customers 3,700 Volunteers in Allstate’s of independent agencies who Week of Service in June performance was strong and shareholders had a want local advice but prefer a choice of insurance carriers. 38% total return in 2013. Going forward, the future 65% of agency looks bright given our capabilities, brands and 1,400 agency owners owners and employees helped inform consumers 200,000 total involved in corporate financial strength. on relevant safety topics volunteer hours responsibility programs For more information, visit www.allstate.com/corporate-responsibility 0206_ALLSTATE_CVR.indd 2 3/26/14 9:25 PM BRAND-NEUTRAL Profitable Growth • Our strategy of serving unique Encompass products are sold Answer Financial, an independent consumer segments with E C through independent agencies that personal lines insurance agency, N differentiated offerings fueled A serve brand-neutral customers who serves self-directed, brand-neutral T S I our growth in 2013. S prefer personal service and support consumers who want a choice S S E A from an independent agent. between insurance carriers. L F D - • Revenues increased 3.6% to N S E A R E $34.5 billion, net income available V C E I V to common shareholders (“net D A L income”) was $2.3 billion, and A C O operating income* rose 24.3% to L Allstate brand products are sold Esurance brand products are primarily through Allstate exclusive sold directly to self-directed, $2.7 billion, or $5.68 per diluted agencies and serve brand-sensitive brand-sensitive consumers common share, due in part to lower customers who prefer local personal online and through call centers catastrophe losses than in 2012. advice and service. and select agents. • The Allstate brand, which is delivered BRAND-SENSITIVE through 9,300 Allstate agency locations, remains the company’s largest core business. It grew both policies and premiums in 2013. achieved 2013 the last six years, having increased nearly operating priorities 25% from an average premium of $861 Allstate delivered strong results last year in 2008 to $1,115 in 2013. In 2013, the on all five 2013 operating priorities. homeowners business generated an Premiums earned by brand underwriting profit* of $1.4 billion, a $2.7 • G row Insurance Premiums: Total ($ billions) billion improvement over 2011, reflecting As of December 31, 2013 premiums grew as a result of policy a large decline in catastrophe losses. 1.2 growth in all three brands where we 1.2 While we can’t predict the future level allstate underwrite risk (Allstate, Esurance and encompass of catastrophe losses, Allstate is far Encompass). Our Allstate Benefits and esurance better-positioned to maintain appropriate 25.2 Allstate Roadside Services businesses returns in homeowners insurance. also grew. Returns also improved in the annuity • M aintain Auto Profitability: The total business, but more work needs to be Allstate Protection auto combined ratio done to achieve sustainable profitability. of 96.4 continued at the attractive levels Premiums earned by product • P roactively Manage Investments: ($ billions) we maintained over the past decade. Investment income exceeded our As of December 31, 2013 However, the Esurance and Encompass expectations, as strong results from 6.6 auto auto loss ratios were higher than our limited partnership investments partially homeowners targets. These management teams other personal offset the negative impact of low interest 18.4 lines continue to work hard to improve these 1.6 rates. Interest rate risk was substantially commercial results so we can maintain overall 0.5 lines reduced beginning in 2012, which was 0.5 other business growth in policies in force. lines a smart decision, given that interest • R aise Returns in Homeowners and rates increased in 2013. The total return Annuity Businesses: Allstate brand on the portfolio was 1.8% for the year. Reported and underlying homeowners returns showed continued combined ratios* This return did not meet our long-term improvement as a result of our actions, reported targets, as the rise in interest rates 4 . underlying 3 1 2 . positioning this business for sustainable 5 0 . 0 1 8 . 6 3 6 5 1 lowered the value of our fixed income . 3 . 2 9 2 . 9 . 9 9 9 8 7 7 9 profitability. Insurance premiums in 8 8 8 8 portfolio. On a three-year average, the 8 this business have now reached levels total return of 5.2% was much closer appropriate for the dramatic increase in to the level of return expected given the catastrophe losses we experienced over portfolio’s risk characteristics. * For a definition of this term, please see the “Definitions of Non-GAAP Measures” on the first page following the 1 3 2 9 0 1 1 1 1 proxy statement. 0 0206_ALLSTATE_INSRT.indd 1 3/26/14 9:38 PM • Reduce Our Cost Structure: Progress Financial Strength was made in reducing our future cost structure, including changes to our processes and employee benefits. • The Allstate Corporation and Continuous improvements and Allstaters are proud to its major subsidiaries are well simplification in our processes and do good for customers capitalized, have a strong technology were also initiated to portfolio of businesses and deliver more value to our customers. and communities. significant liquidity. strong financial results Our stakeholders deserve • We had $2.6 billion of deployable As a result of excellent operating results, assets at the holding company financial performance was strong in 2013. the best from us, and level as of year-end 2013. we will continually • Premiums written increased by • We continue to improve our $1.1 billion or 4.2% over 2012. strive to exceed their financial strength and strategic • Net income was $2.3 billion, as operating flexibility by repurchasing expectations. profit was somewhat reduced by losses outstanding debt and issuing on the pending sale of Lincoln Benefit new lower-cost senior debt, Life Company, the replacement of hybrid debt and preferred stock. high-cost debt and employee benefit- • Our investment portfolio is largely related charges. comprised of high-quality fixed • Operating income* reached $2.7 billion. income investments, which provide • Return on equity was 11.0% and 14.5% growing esurance significant cash flow and liquidity. on a net income and operating income* Equity and limited partnership Esurance targets consumers who basis, respectively. investments provide higher returns. prefer self-service but still want • Operating income return on equity* the value of a branded experience. of 14.5% exceeded our 2014 year-end By repositioning the brand goal of 13%, even after adjusting for (“Esurance, an Allstate company”), the relatively low level of catastrophe increasing marketing and applying Portfolio composition losses and nonrecurring charges in 2013. Allstate’s pricing expertise, Esurance As of December 31, 2013 grew policies in force by 26.7% in strengthening capital 6.3% 2013. In 2013, Esurance expanded 5.8% Proactively managing capital is a core geographically to 41 states and by 6.1% focus. We continued to build on our legacy offering homeowners in three states. 2.9% in 2013 by reducing capital in lower-return 3.8% businesses, investing in growth and providing shareholders with good cash returns.