Allstate 2008 Annual Report Download - page 145

Management’s Discussion and Analysis
of Financial Condition and Results of Operations–(Continued)
Allstate brand homeowners premiums written totaled $5.64 billion in 2008, a decrease of 1.3% from
$5.71 billion in 2007, following a 3.6% decrease in 2007 from $5.93 billion in 2006. Contributing to the Allstate
brand homeowners premiums written decrease in 2008 compared to 2007 were the following:
●decrease in PIF due to lower new issued applications and policies available to renew
●26.0% decrease in new issued applications to 594 thousand in 2008 from 803 thousand in 2007
●increase in average gross premium in 2008 compared to 2007, primarily due to higher average renewal
premiums related to increases in insured value and approved rate changes, including those taken for our
net cost of reinsurance, partially offset by a shift in geographic mix as our catastrophe management
actions reduce premiums written in areas with generally higher average gross premiums and state
insurance department initiated rate decreases in California and Texas
●increase in the renewal ratio in 2008 compared to 2007
●decrease in the net cost of our catastrophe reinsurance program
Actions taken to manage our catastrophe exposure in areas with known exposure to hurricanes, earthquakes,
wildfires, fires following earthquakes and other catastrophes have had an impact on our new business writings for
homeowners insurance, as demonstrated by the decline in Allstate brand homeowners new issued applications.
Allstate brand homeowners premiums written decreased in 2007 compared to 2006. Contributing to the
Allstate brand homeowners premiums written decrease in 2007 compared to 2006 were the following:
●increases in ceded reinsurance premiums
●decrease in PIF due to lower new issued applications and renewal ratio
●18.6% decrease in new issued applications to 803 thousand in 2007 from 987 thousand in 2006
●increase in average gross premium in 2007 compared to 2006, primarily due to higher average renewal
premiums related to increases in insured value and approved rate changes, including our net cost of
reinsurance, partially offset by a shift in geographic mix as our catastrophe management actions reduce
premiums written in areas with generally higher average premiums
Our strategy to reduce risk in catastrophe prone areas will continue to impact new issued applications and
the renewal ratio in 2009, although to a lesser degree than in 2008 and 2007. Examples of the impact of this
strategy include our decision to cease writing new homeowners applications in California, to cease offering
renewals on certain homeowners insurance policies in certain down-state locations in New York and to reduce
PIF in coastal management areas (southern and eastern states) thereby lowering hurricane exposures. This
includes Texas and Louisiana where the combination of reduced PIF and ceded wind coverage in the coastal
regions reduced our loss exposures to wind by 43.5% and 34.9%, respectively, below 2006 levels.
Encompass brand homeowners premiums written totaled $471 million in 2008, a decrease of 12.5% from
$538 million in 2007, following a 8.7% decrease in 2007 from $589 million in 2006. Contributing to the Encompass
brand homeowners premiums written decrease in 2008 compared to 2007 were the following:
●decrease in PIF as of December 31, 2008 compared to December 31, 2007, primarily due to our
catastrophe management actions in certain markets
●the discontinuation of a large national broker arrangement; Encompass brand homeowners premiums
written excluding the terminated national broker’s business decreased 8.3% to $464 million in 2008 from
$506 million in 2007
●increase in average gross premium in 2008 compared to 2007 due to rate actions including those taken for
our net cost of reinsurance
Encompass brand homeowners premiums written decreased in 2007 compared to 2006. Contributing to the
Encompass brand homeowners premiums written decrease in 2007 compared to 2006 were the following:
●increases in ceded reinsurance premiums
●decrease in PIF as of December 31, 2007 compared to December 31, 2006 partially due to a decline in the
renewal ratio in 2007 compared to 2006, primarily due to our catastrophe management actions in certain
markets
●increase in average gross premium in 2007 compared to 2006 due to rate actions taken in the current year,
including those taken for our net cost of reinsurance, and increases in insured value
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MD&A