Allstate 2007 Annual Report Download - page 6

For most competitors in the insurance industry,
success is dened by a traditional set of numbers:
combined ratio, return on equity, and total returns
to shareholders. At Allstate, we also see a deeper
definition of value. Our goal is to grow the
value of our company for customers, associates,
shareholders, our communities and society.
Not just economic growth. Value in terms of
customer experiences, when we innovate to meet
unanswered needs and hidden demand. Value
measured in expanded opportunities, when we
develop our people to perform at new levels. Value
for our shareholders in terms of protable growth.
And value from our presence in our communities
and our positive role in society, which is returned
to us in the form of enhanced reputation, loyalty
and brand strength. In an industry that needs to
become more focused on consumer needs and
more creative, these are the measurements that
will determine success in the future. That’s exactly
how we plan to raise the bar in our industry.
leading by executing
One of our operating principles is a relentless
focus on those few things that provide the greatest
impact. Allstate has been able to consistently
deliver value ahead of the competition through
an intense focus on operational excellence—the
ability to run all aspects of our business exceptionally
well over time. Achieving this higher standard
of nancial leadership in our industry was a
challenge in 2007. Yet our efciency and discipline
produced a combined ratio of 89.8 for the year,
meaning that for every dollar we earned in
premiums, it cost us 89.8 cents to operate our
Property-Liability business. Further, we delivered
on our combined ratio commitment given to
shareholders at the beginning of the year. As
noted in the 2007 at a Glance section of this
report, our low combined ratio is the result of
disciplined focus on balancing protability and
growth, our sophisticated pricing expertise and
strong, continuous expense management.
Managing all of our businesses effectively means
measuring all of our businesses together. We do
this through a discipline called Enterprise Risk and
Return Management. It’s a process that combines
data from across Allstate with an economic model
that allows us to fully balance risk and reward.
Allstate stochastically models the risks inherent
in its property and casualty and nancial services
businesses holistically, not just within each business
or within each risk class. This leads to a deeper
understanding of our business as a whole, assures
solvency, enables better business decisions and
increases shareholder value.
leading by example
We continue to invest in leadership in the insurance
and nancial sector, particularly where our scale,
sophistication and brand strength give us competitive
advantage. Your Choice Auto exemplies this
approach. At the close of 2007, Your Choice Auto was
selling at a rate of about 100,000 policies per month
in the fourth quarter and constituted more than $2
billion in annual revenue. With its higher average
premiums and higher customer retention levels,
Your Choice Auto put us ahead of the competition.
Products like Your Choice Auto, and now Your
Choice Home, are fuel for Allstate’s powerful
distribution force—more than 30,000 people
who sell our products through Allstate agencies.
We want to supply those agencies with more than
innovative products. We also want to inspire them
to perform as entrepreneurial business owners.
Our Resources For Growth program, established
in 2006, promotes this mind-set by recognizing
and rewarding higher performing agencies and
ensuring that company resources are more
powerfully focused on protable agency growth
and building our competitive position. Resources
for Growth provides the support to unleash the
potential of our best agencies.
Surrounding and supporting all our activities is
one of our most important assets: the Allstate
brand. Our brand is well known and trusted,
and when combined with our marketing strength,
encourages our consumers to think differently
about insurance. Our brand gives our customers
condence and gives Allstate credibility when we
innovate and introduce new products. We have
the opportunity to dramatically increase our share
by reinventing in such markets as motorcycles,
commercial auto, life insurance and retirement,
since many of our auto and home insurance
customers do not currently buy these products
from us today. Our brand is a means to efciently
reach and capture that opportunity.
leading in total returns
Our overall capital management strategy has
produced a strong record in the 12 years that Allstate
has operated as a fully public company. While
we outperformed our peers in many measures
in 2007, the year clearly presented challenges.
The market has been tough on nancial services
stocks. We accept the responsibility to buck that
trend and raise our value.
During the year, our long record of sound management
of shareholder capital was reected in an increase
in dividends per share to $1.52, up 8.6 percent from
2006. We repurchased 61 million common shares
for $3.55 billion, representing nearly 10 percent of
shares outstanding at the beginning of the year.
Looking at the longer term, since Allstate’s initial
public offering in 1993, we have raised dividends
an average of 10.8 percent annually. Our consistency
in dividends puts us in an exclusive group—among
the top 10 percent of all American companies who
have raised dividends every year for the past 13
years. Our repurchases since our public offering
have totaled more than 40 percent of our issued
common stock, for more than $16 billion. In sum,
over this time, we’ve increased total shareholder
value by 389 percent and returned to shareholders
about two out of every three dollars of earnings
we’ve generated. Our employees continue to share
in this growth. In 2007, our non-bonus-eligible
employees received a prot-sharing match of
$1.42 for every $1 of Basic Pre-tax Deposits they
contributed to The Savings and Prot Sharing
Fund of Allstate Employees.
In 2008, we believe our four operational priorities—
consumer focus, enterprise risk and return optimization,
operational excellence and aggressive capital
management—will continue to deliver excellent
returns and help us continue to outperform
the industry.
From our scale, innovation, execution, risk
management, investments and our human
energy, Allstate is prepared to deliver value
to customers and shareholders that sets a
new standard for our industry.
Reinventing Leadership