Allstate 2007 Annual Report Download - page 2

Consequently, one of my responsibilities as CEO
is to ensure Allstate has a diverse group of talented
people. We made progress in 2007 despite a highly
competitive environment and senior management
retirements. Employees are embracing Our Shared
Vision and believe in our direction. They earned
good prot sharing company contributions. We
did not do as well with Agency Owners, where
satisfaction was down, reflecting a tougher
competitive environment that led to lower growth
and bonuses. Our senior management team
is functioning well despite several significant
retirements, most importantly the retirement of
our Chairman, Ed Liddy. Ed’s exceptional leadership
has created signicant shareholder value and led
to one of the smoothest leadership transitions of
a major corporation. I will miss him.
our plan is to reinvent protection and
retirement for the consumer
Reinvent means to remake completely, to make
anew. It will require us to operate outside of
normal conventions by focusing more intently on
the consumer. This will competitively differentiate
Allstate and lead to long-term protable growth.
Your Choice Auto®, which provides customers
with accident forgiveness and deductible rewards,
has been a fabulous product reinvention, having
sold more than 3.2 million policies. Our latest
new product is Allstate GreenSM, which addresses
the reality that many consumers have to drive and
buy insurance but don’t want to pollute.
We will push to reinvent all aspects of our business.
Share the journey and fun with us by sending
your ideas to reinventeveryda[email protected].
great companies deliver great results
This is my 14th year at Allstate and the competitive
market conditions we experienced in 2007 were
the toughest I have seen. Nevertheless, we delivered
our second-highest annual prot ever! While we
had solid earnings, we did not achieve our growth
goals. Although increased competition is a part of
the story, we need to do a better job of exceeding
our customers’ expectations.
Solid operating performance did not translate into
shareholder return. We paid $901 million of
dividends, repurchased almost 10 percent of the
outstanding shares, and book value per share
increased 11 percent in 2007. Total shareholder
return was a negative 17 percent versus a decline
of 13 percent in the S&P Property Casualty index.
We did come off a great year in 2006, when total
shareholder return was 23 percent, but 2007 was
disappointing. We will persevere and stay highly
focused on raising the value of our company.
Looking forward, continuation of a difcult operating
environment in 2008 will play to our strengths.
Our strategy of focusing on value and not just
price in auto insurance enables us to invest in
improving customer satisfaction and growth.
Allstate Financial’s goal of raising returns will
continue to be a challenge but this is a better
environment to provide retirement security. We
have a high-quality, well-diversied portfolio that
should enable us to weather a soft U.S. economy,
the unwinding of excess leverage, and tumultuous
nancial markets. One of our challenges will be
having the fortitude to quickly seize opportunities
in the face of an uncertain future.
leadership of allstate brings with it a
responsibility to improve our society
Businesses need to step up and drive positive
change in America. Allstate will continue to lead
positive change in our country:
• We are waging a campaign to better prepare
and protect America through a broad-based
coalition called ProtectingAmerica.org. It is
imperative that our country improve the way
it deals with large catastrophes. More than
300 organizations have joined the coalition
and legislation has passed the U.S. House of
Representatives. Until such time as a viable
national solution is implemented, we will
continue to responsibly reduce our catastrophe
exposure to be sure we are nancially strong
for all of our 17 million customer households.
• We also must focus on keeping American
workers competitive in this rapidly changing
global economy. Globalization has helped
America grow and prosper, is good for our
investment portfolio and enables us to leverage
a broader set of skills to deliver good value for
our customers. Allstate supports lifelong
learning and education so our country can
continue to prosper.
• Government accountability and transparency
also must be improved. Allstate owns $25 billion
of municipal bonds and has a vested interest in
nancially sound public entities. The Sarbanes-
Oxley Act of 2002 improved the accountability
and transparency for our investments in the
private sector. Similar legislation for government
entities would improve our investments in the
public sector.
The Allstate Foundation continues to help
communities across America and more than 3,000
non-prot organizations. Our signature programs
on teen driving and domestic violence have made
meaningful differences in people’s lives. I have
had tears in my eyes as I listen to stories of
domestic violence victims. We give out more
than money; we provide hope and freedom.
Fellow Shareholders, I believe people are the key to
all success. All success emanates from people.
Strategies, processes, machines and money are
necessary ingredients but it is people who dream,
initiate, create and maintain success.
The competitive market
conditions we experienced
in 2007 were the toughest
I have seen. Nevertheless,
we delivered the second-
highest annual prot ever.
Businesses need to step
up and drive positive change
in America. Allstate will
continue to lead positive
change in our country.
Letter to Shareholders