Allstate Corp. CEO Thomas Wilson said at the insurer’s annual meeting this week that the company’s shift away from catastrophe-prone areas and into products other than homeowners insurance will take years to complete.
The first-year chief executive said the number of homeowners policies the company writes will continue to shrink as it adjusts its strategy amid a sharp increase in the frequency of devastating storms, although homeowners will remain a core of its business.
“We’re not trying to exit the homeowners business,” he told reporters after the meeting. “We like the homeowners business — especially without losses from major hurricanes, because that just has wiped out all the profit that we’ve made from that business.”
Allstate, the nation’s second-largest property and casualty insurer after State Farm, said last Thursday that it would stop writing new homeowners policies in California in order to help control its catastrophe exposure.
That was just the latest move in a strategy to minimize risk in coastal areas nationwide since Katrina and other hurricanes devastated the Gulf Coast nearly two years ago, causing it to lose a record $1.55 billion in the third quarter of 2005.
Wilson said the company will expand its Your Choice automobile insurance and add retirement-related and other financial products as part of the transition. Under the recently introduced Your Choice program, customers are able to choose various benefits for their policies.
“We’ve been trying to get smaller in a way that’s still customer-friendly,” he told shareholders. “It’s about trying to find a way through what’s a very difficult situation.”
Some consumer advocates have criticized Allstate for pulling back in vulnerable regions and expressed concern that less competition in those areas will cause homeowners rates to jump. Despite its short-term loss in 2005, the Northbrook, Ill.-based insurer has been on a torrid profit streak and nearly tripled its net income to $5 billion last year on record revenue of $35.8 billion.
Wilson acknowledged that its coverage shift is making some people unhappy but said Allstate is less interested than before in insuring against earthquakes and hurricanes because “the market really hasn’t worked.”
“We need to get smaller in these exposed areas so we can stay strong for the whole company,” he told shareholders.
Allstate shares fell 20 cents to $62.66 Tuesday. They are down about 4 percent since the start of the year when Wilson succeeded Edward Liddy, who remains chairman.
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