Allstate
Copyright: The Allstate Corporation 1995
All Rights Reserved
<PAGE>
SLIDE 1
ALLSTATE -
AN ATTRACTIVE INVESTMENT OPPORTUNITY
- Strong Core Businesses
- Future Top and Bottom Line Growth Opportunities
- Growth Potential in Earnings Multiple
- Strong Management
Allstate
<PAGE>
- - Second largest writer of both private passenger auto
and homeowners.
- - At year end 1993, 12% of total personal lines market
share, second to State Farm (22% of market) and well ahead of
#3 Farmers (6.2% of market).
- - We are also the only large personal lines company you can
invest in directly...State Farm, Farmers, Nationwide, and USAA
are not publicly traded.
- - We are the second largest insurance company in market
capitalization (AIG is 1st).
- - Thirteenth largest life insurer in 1993 face amount in
force.
- - We are now the largest non-standard auto insurer, larger
than Progressive.
<PAGE>
SLIDE 2
ALLSTATE-THE GOOD HANDS PEOPLE
- Dominant Publicly Traded Personal Lines Company...
Insure 1 out of 8 Autos and Homes
- Formidable Distribution Franchise... More Than
14,500 Agents
- Largest Non-Standard Automobile Insurer
- Thirteenth Largest Life Insurer
- Company with a High Quality Balance Sheet and
Reserve Position
Allstate
<PAGE>
- - The recent trends of the business are strong.
- Property-Casualty Statutory Premium is up 4.6% and
Life Statutory Premium is up 13.0% for the 4th quarter 1994,
over the 4th quarter 1993.
- Life produced record profits in 1994.
- - New money is a function of new money from underwriting,
interest and dividends, capital gains, tax payments/refunds,
dividends paid, inter-company dividends and capital
contributions. Variances between 1994 and 1993 due primarily
to IPO proceeds and Debt Offering in 1993.
<PAGE>
SLIDE 3
1993 & 1994 RESULTS
1993 1994
($ Millions, Except EPS) Actual Actual 1994*
$ $ $
Statutory Premium 20,756 21,663 21,663
Operating Income 1,158 352 1,427
Operating EPS 2.66 .79 3.18
Net Income 1,302 484 1,559
Net Income EPS 2.99 1.08 3.47
Return on Equity % 17.4 5.8 17.7
Property/Liability
New Money to Invest 3,192 1,119 2,153
* Adjusted for Special Retirement Offer and all Catastrophes
in excess of $1 Billion (i.e. Northridge Earthquake)
Company Overview Allstate
<PAGE>
- - Statutory Premiums are a reasonable indicator for sales.
- - Statutory premiums are net written premium for P-L and
premiums and deposits for Life. Canada is included in
specific lines/business units.
- - Compound average growth rate for 1990-1994 is 3.3%.
Property-liability statutory premium growth slowed in the
early 90's due to managed growth.
- - We want to grow, but grow profitably.
- - Life insurance statutory premium growth of over 11% in
1994 is driven by an expanded bank distribution initiative...
over $500 Million in Sales 1994.
<PAGE>
SLIDE 4
ALLSTATE TODAY
1994 STATUTORY PREMIUMS OF $21.7 BILLION
Bar Graph Pie Chart
Vertical Axis: Total PP&C - 71%
($ Billions) Numbers 10 15 20 Owners 12%
Auto 54%
Horizontal Axis: Life 21%
Business
Year Data Point Insurance 7%
PMI 1%
1990 19.0 Other PP&C 5%
1991 19.6
1992 19.9 1994 = $21.7
1993 20.8 Billion
1994 21.7
Company Overview Allstate
<PAGE>
- - This slide shows operating income for 1990-1994 on a
reported basis.
- - As indicated, our volatility is primarily driven by
catastrophes, which as will be illustrated later, we are
working to get under control.
<PAGE>
SLIDE 5
OPERATING INCOME
Bar Chart
Vertical Axis: ($ Millions) Numbers ranging from 1100 to -1000
Horizontal Axis:
Year Data Point
1990 571
1991 719
1992 (607)
1993 1,159
1994 352
Company Overview Allstate
<PAGE>
- - On the right side, we reflect how $1,427 in 1994 Adjusted
Operating Income is broken down, with 70% related to Personal
Property & Casualty and 16% from Life Insurance.
<PAGE>
SLIDE 6
IMPROVED PROFITABILITY
ANALYSIS OF OPERATING INCOME
Bar Chart Pie Chart
Vertical Axis: 1994 Distribution
($ Millions) Numbers ranging
from 1,500 to -1,200 PP&C 70%
Life 16%
Horizontal Axis: Business Insurance 10%
PMI 4%
Data Points
Year Actual Adjusted $1,427 Operating
1990 571 Income
1991 719
1992 (607) 1,043
1993 1,158
1994 352 1,427
Adjusted excludes Special Retirement Offer in 1994, OPEB in
1992 and all Catastrophes in Excess of $1 Billion (i.e.
Hurricane Andrew in 1992 and Northridge Earthquake in 1994)
Company Overview Allstate
<PAGE>
- - These items are some of the keys to our business
performance.
- - We believe we are on target in all of these key
priorities except one.
- - Let me address the catastrophe issue first and then come
back and talk about these other priorities.
<PAGE>
SLIDE 7
BUSINESS PRIORITIES
On Target
Yes No
Growth of Target Markets (check)
Non Standard Auto Growth (check)
Increased Retention (check)
Loss Cost Containment (check)
Expense Management (check)
Life Growth and Profit (check)
Catastrophe Exposure
Management (check)
Business Priorities Allstate
<PAGE>
- - This exhibit reflects the markets where we have the
greatest exposure to catastrophes.
<PAGE>
AREAS WITH SIGNIFICANT EXPOSURE TO
CATASTROPHE LOSSES
Map of the United States
California, Florida, New Jersey, Connecticut, Rhode Island and
South East New York broken away and shaded
Business Priorities Allstate
<PAGE>
- - We seek to manage our surplus to absorb catastrophes of
$1 Billion and still be at a premium to surplus ratio of 2.2
to 1. We believe that at that level we can maintain our
existing claim paying ratings. In 1994 we absorbed a $1.625
Billion catastrophe and ended the year at a premium surplus
ratio of 2.5 to 1. Management's goal is to improve this ratio
in 1995.
- - We continue to review traditional Reinsurance options, as
well as capital market solutions to our exposures... the Kobe
earthquake will make reinsurance even more expensive.
- - We have actively worked with the states of Florida and
California toward legislative remedies. The Natural Disaster
Recovery Act direction is being rethought due to Republican
control of Congress. We will take a very proactive role in
legislative solutions.
- - Rate Increases:
Florida: Taken - $66 million in homeowners
$8 million in mobilehome
California: Taken - $26 million in homeowners
$10 million in other property
earthquake of $75 million
North East: Taken - $28 Million in homeowners
- - We seek to continue to make rate adjustments to
adequately position our price, based on potential catastrophe
losses, subject to regulatory and competitive pressures.
- - Policy revisions are being pursued in many states.
<PAGE>
SLIDE 9
CATASTROPHE EXPOSURE MANAGEMENT
INITIATIVES
- Surplus
- Capital Markets
- Reinsurance
- Legislative Initiatives/Remedies
- Operational Initiatives
- Limits on New Business/Renewals
- Rate Increases
- Policy Revisions
Business Priorities Allstate
<PAGE>
- - Florida - reduction or elimination of new business.
- Increased non renewal activity, 14,000 non renewals
on the Atlantic side between April - December 1994
- Reduce exposure by up to another 50,000 in the one
year period beginning April 15, 1995... 20,000 on the Gulf
side, 30,000 on the Atlantic side.
- Florida catastrophe fund is in effect
- Funded primarily by charges against insureds
- If insured funding is not sufficient, the fund
has municipal bonding capability equal to 2 to 10X the revenue
stream of insured funding.
- If insured funding and bonding does not provide
enough funds, a 2% assessment is made against insurers and
additional bonds are issued, secured by this new revenue
stream.
- Coverage provided to insurers is 75% of
catastrophe losses in excess of 2 times an insurers annual
property insurance premiums.
- In 1994, we paid approximately $71 Million to
the Florida Catastrophe Fund
- - California - Earthquake endorsement period
- Current legislation would attempt to put in
Earthquake Pool legislation, which would be recommended for
all new business and renewal business.
- In 1994 in the Growth Markets of Florida (non-
catastrophe prone areas) we grew over 2.5%.
<PAGE>
SLIDE 10
CATASTROPHE EXPOSURE MANAGEMENT
FLORIDA
- No New Property Written in High Risk Areas
- Significant Non Renewals In Hurricane
Prone Areas in 1994
(Map of - Non Renew up to 50,000 Policies in Coastal
Florida) Areas beginning in April 1995
- Led Industry in Passage of Florida
Hurricane Fund Legislation
- Rate Increases of $74 Million
CALIFORNIA
- No New Business
- 1995 Insurance to Value Increases
- Rate Increase of $36 Million on
Homeowners, and $75 Million on Earthquake
(Map of - Earthquake Endorsement at Every 2nd Year
California) Renewal Only
- Policy Changes Approved
- Pursuing Legislative Actions
Business Priorities Allstate
<PAGE>
- - Both full time agents and new business production
(applications) are being increased in growth markets and
decreased in limited growth markets.
% Distribution to
Countrywide Total
Auto Allstate Industry
California 10.8 12.2
New Jersey 5.9 4.5
Georgia 2.9 2.6
Total
Limited 19.6 19.3
% Distribution to
Countrywide Total
Property Allstate Industry
California 15.5 11.7
New York 12.0 7.8
Florida 9.1 5.7
New Jersey 3.4 3.6
Total
Limited 40.0 28.8
NOTE: These are not market share numbers but the % of
Allstate's and the Industry's business in these states
compared to the Countrywide total (% distribution).
Growth/Limited Growth Markets: These markets are areas where
the Company intends to grow, or conversely, intends to grow on
a limited basis at this time.
Limited Growth Markets may be areas that are catastrophe
prone; constrained by regulatory situations and/or the legal
climate.
Growth Limited Growth Total
Markets Markets Markets
Producers
Full-time Agents 8,899 4,114 13,013
# Variance to
Prior Year 177 (138) 39
Independent
Agents 1,792 164 1,956
# Variance to
Prior Year 263 17 280
Based on 1993 Direct Written Premiums
Source: A. M. Best
<PAGE>
SLIDE 11
SEGMENTED APPROACH TO GROWTH
STANDARD AUTO/PROPERTY
% Change in New Business - 1994 vs 1993
Standard Auto Homeowners
% %
Growth Markets 20.7 23.1
Limited Growth Markets (30.2) (12.9)
Total Markets 8.4 12.6
Business Priorities Allstate
<PAGE>
Enhanced Multi Tier (EMT) allows Allstate to more precisely
price auto insureds based on their riskiness.
- - 1994 combined ratio results are favorable; note the
discount and the corresponding combined ratio.
Impact
Risk Status Definition
Advantage 20% Discount -no inexperienced operators
-no accident or violations last
5 years
-prior standard insurance last
3 years
-Allstate HO, Condo, or MH
policy
Preferred 10% Discount -no inexperienced operators
-no accidents or violations last
5 years
-prior standard insurance last
3 years
-no Allstate HO, Condo, or MH
policy
Multi-Policy 5% Discount -Allstate HO, Condo, or MH
policy
Standard No Discount -Does not quality for advantage,
preferred, or multi-policy
Surcharge 20% Surcharge -Prior non-standard insurance or
single car with one chargeable
accident or violation last 3
years.
- - EMT is in place in all but six states (not scheduled:
Alaska, D.C., Georgia; not planned: Hawaii, New Jersey,
Texas)
<PAGE>
SLIDE 12
ENHANCED RISK SELECTION
STANDARD AUTO
Distribution 1994
Before Enhanced 1994 Combined
Risk Multi-Tier Distribution Ratio
% % %
Advantage 23.0 33.4 90.8
Preferred --- 28.2 94.9
Multi Policy --- 15.9 103.1
Standard 76.0 21.9 104.5
Surcharge 1.0 .6 107.9
Total 100.0 100.0 98.3
Business Priorities Allstate
<PAGE>
- - Top line growth (net written premiums) has a 16.2% CAGR
(1990-1994).
- - Non-standard auto is priced to achieve an underwriting
profit. Combined ratios have been below 100% in each of the
last 5 years.
- - Allstate is the market share leader in non-standard auto.
<PAGE>
SLIDE 13
GROWTH IN NON-STANDARD AUTO MARKETS
Bar Graph Bar Graph
Net Written Premium GAAP Combined Ratio
16.2% CAGR
Vertical Axis: Vertical Axis:
($ Millions) Numbers (% to Earned Premium)
ranging from 900 to 1650 Numbers ranging from
90 to 100
Horizontal Axis:
Horizontal Axis:
Year Data Point
1990 916 Year Data Point
1991 1,088 1990 99.6
1992 1,264 1991 98.3
1993 1,407 1992 98.7
1994 1,668 1993 97.0
1994 95.7
83 90 92 94E
Market Share % % % %
Allstate 2.5 11.3 12.4 12.8
Progressive 6.1 8.9 9.2 10.3
Business Priorities Allstate
<PAGE>
- - Note: The Retention Economic Exhibit is an
"illustration".
- - Both the auto and homeowner renewal ratios are up at
record levels.
- - Since 1990, auto is up 1.2 points and homeowners 1.8
points.
- - The renewal trends illustrate increased customer
satisfaction with their service.
- - Renewal business tends to be more profitable than new
with lower loss ratios and lower expense ratios (due to
acquisition and back office processing costs).
- - These renewal ratios are 12 month moving, by quarter, on
a gross 30 day basis (Auto 6 month policy, Homeowners 12 month
policy).
<PAGE>
SLIDE 14
IMPROVED RETENTION
Retention Economics
Bar Graph
Vertical Axis:
(Combined Ratio) Numbers
ranging from 0 to 100
Horizontal Axis
Our Business Today
Allstate 1994
Illustration Standard Auto Book
Data Points
Expense Loss Expense Loss
Year Ratio Ratio Ratio Ratio
Year 1 48.6 77.8 1994 29.7 68.6
Year 10 23.0 60.3
Retention
Line Graph
Vertical Axis: (Renewal Ratio) Numbers ranging from 87.0 to
92.0
Horizontal Axis:
Line 1: Standard Auto Line 2: Homeowners
(6 Month) (12 Month)
Year Data Point Data Point
1990 89.1 87.6
1991 89.0 88.0
1992 89.5 88.5
1993 90.5 88.9
1994 91.1 89.1
Business Priorities Allstate
<ALLSTATE>
- - One of our major initiatives will always be loss
containment which we believe will, over the next few years,
save several hundred million dollars cumulatively.
- - This slide reflects our injury severity experience over
the last 5 years.
- - Our goal is to keep loss cost increases below inflation
index for medical/auto parts, etc. Our recent results
relative to bodily injury severity are favorable to the
industry. Recent physical damage severity results are
comparable to the industry. On a paid pure premium basis, we
are significantly better then the industry on all coverages
(B.I. and P.D. - 6.3%, collision - 2.5%, comprehensive -
5.7%).
- - Medical Management
- Data Base of over 9,000 medical procedures with
prices
- Utilization Review
- - Special fraud investigative units reduce fraud and saved
over $100 Million in 1994.
- - Almost 70% of cases handled by in-house lawyers - saves
considerable amounts in Loss Adjustment Expenses... $3,000 per
file.
- - Pro Shops - Over 3,900 auto repair shops - agreed pricing
and guaranteed repair quality.
- Eliminates appraisals at drive-in
- Being mechanized.
- - Claim Core Process redesign is a reinvention of the
entire Claims process.
<PAGE>
SLIDE 15
LOSS COST CONTAINMENT
AUTO PAID SEVERITY
Medical Management
Special Fraud Investigative Units Bodily Injury
Extensive Use of In-House Counsel [line graph]
Priority Repair Option ("PRO") Shops
Claim Core Process Redesign
[Line Graph]
Vertical Axis: (% Var. to Pr. Yr.) Numbers ranging from 11
to -3
Horizontal Axis:
Line 1: Med CPI Line 2: Paid Severity
Year Data Point: Data Point:
90 9.1 3.5
91 8.7 1.8
92 7.4 -.1
93 6.0 -2.0
94 4.5 -2.5
Business Priorities Allstate
<PAGE>
- - Allstate vs Industry expense ratios are shown on a trade
basis (left graph) while internal Allstate expense ratios are
shown as a % of earned premium (right graph).
- - Allstate had previouslye committed to improving our
expense ratio by 2 points. As of the end of 1994, our
reduction has been 1.4 pts. We are ahead of schedule toward
achieving this goal.
- - Over the last ten years, direct writers consistently
enjoyed a nearly 7.5 point expense ratio advantage over agency
writers.
- - Allstate's expense ratio has been 2-3 points above the
direct writers, though the gap narrowed to under 1 point in
1994. The Direct Writers include the low cost Direct
Marketing companies.
- - Allstate's plan calls for a continuing decline in its
expense ratio beyond the original target of 22.2%.
<PAGE>
SLIDE 16
EXPENSE MANAGEMENT
- - Goal: To Improve Expense Ratio By 2 Points Between 1992
and 1997
Left Graph
Allstate Vs Industry
Vertical Axis: (Expense Ratio) Numbers ranging from 20 to 35
Horizontal Axis:
Line 1: Line 2: Line 3:
Agency Writers Allstate Direct
P/C Group Writers
Year Data Point Data Point Data Point
82 31.9 24.1 22.1
83 32.5 25.1 22.6
84 31.9 23.3 24.3
85 29.2 23.0 21.1
86 28.0 23.0 21.1
87 28.6 23.6 21.1
88 29.2 24.0 21.2
89 29.5 24.9 21.5
90 29.5 24.8 21.8
91 29.8 24.9 22.5
92 30.2 24.7 22.6
93 29.7 24.3 22.4
94* 29.7 23.1 22.3
Right graph
Allstate
Vertical Axis: (Expense Ratio) Numbers ranging from 21 to 25
Horizontal Axis:
Line 1: Goal Line 2: Actual
Year Data Point Data Point
90 24.5 24.5
91 24.8 24.8
92 24.2 24.2
93 23.8 23.8
94 - 22.8
97 22.2
Excluding SRO in 1994
*Estimate for Industry
Source: A.M. Best
Business Priorities Allstate
<PAGE>
Assets:
- - Invested assets, including separate accounts, topped $26
Billion in 1994.
- - Separate accounts have grown from $407 million in 1990 to
$2.8 billion in 1994, as Allstate passes the investment risk
to the policyholder via variable annuities.
Profitability:
- - Net income dropped in 1992 due to commercial mortgage
writeoffs of $92 Million (after-tax).
- - Writeoffs improve to $53 million in 1993 and $39 million
in 1994.
- - One time nonrecurring charges of $17.5 million (after-
tax) in 1993 (LASER), and $14.2 Million (after tax) in 1994
(SRO). Excluding these, life net income was still up 24.7% in
1994 vs. 1993.
- - Strong operating results in 1994 driven by favorable
annuity margins, especially expense margins.
<PAGE>
SLIDE 17
LIFE GROWTH
Life Growth... Assets
Bar Chart
Vertical Axis: ($ Billions) Numbers ranging from 10 to 30
Horizontal Axis:
General Acct. Separate Acct. Total
Year
1990 15.3 .4 15.7
1991 18.5 .5 19.0
1992 20.9 .9 20.9
1993 22.1 2.3 24.4
1994 23.4 2.8 26.2
Life Profitability... Net Income
Bar Chart
Vertical Axis: ($ Millions) Numbers ranging from 50 to 250
Horizontal Axis:
Year Data Point
1990 184.4
1991 165.6
1992 75.0
1993 163.2
1994 211.0
Business Priorities Allstate
<PAGE>
- - Asset exclude Separate Accounts.
- - Duration of Fixed Income Portfolio:
(Years) AIC ALIC
1994 1993 1994 1993
Muni's (Avg.) 6.2 5.2 N/A N/A
Private Placements 5.1 5.1 4.6 5.1
Corporate/Public 6.1 6.9 4.8 4.8
- - We currently have about $381 Million of unrealized gains
in our equity portfolio. In 1994 our portfolio outperformed
the average equity mutual fund.
- - The % of Invested Assets classified as
problem/restructured/and potential problem" (net of reserves)
is 1.1% for the Allstate Corporation. (net is 1.1%; gross,
(eg with mortgage reserves) is 1.2%)
- - Our mortgage portfolio is well-diversified geographically
and also by type and size of mortgage loan. We review each
loan individually on an annual basis, or more frequently, and
believe we have addressed every exposure that can be
anticipated at this time.
- - We don't have a big investment in real estate ($814
Million). But, that which we do has done well in this
environment.
- - Overall a very high quality portfolio with an in-depth
monitoring process.
<PAGE>
SLIDE 18
$48.2 BILLION IN TOTAL INVESTED ASSETS
Pie Chart
Fixed Income 79%
Equities 10%
Mortgage Loans 7%
Real Estate 2%
Short-Term & Other 2%
94.8% of Fixed Income Securities are Investment Grade
Financial Overview Allstate
<PAGE>
- - Allstate has a conservative debt to equity ratio, and has
the capacity to increase debt levels. Allstate's debt shelf
registration has $650 million remaining and Allstate also has
access to a $1 billion (bank) line of credit.
- - Debt to Equity is 10.3% both including and excluding
unrealized Capital Gains of $40.2 Million, and Currency
Translation Adjustment ($15.7) Million. Debt to Total
Capitalization is 9.4%.
- - NOTE: Unrealized Capital Gains consists of $386.4
Million for equity securities and a loss of $346.2 Million for
fixed Income securities.
- - Despite this year's devastating California earthquake,
Allstate' surplus remains strong (premium/surplus of 2.5) as
does Allstate's various claims paying ability and long term
debt ratings.
<PAGE>
SLIDE 19
CAPITAL STRUCTURE
Year Ended 1994
($ Millions) Actual
$
Capitalization
Long Term Debt 869.2
Shareholders Equity 8,426.0
Total Capitalization 9,295.2
Key Ratios
EBIT/Total Fixed Charges 2.5x
Debt/Equity Ratio 10.3%
Premium to Surplus Ratio 2.5x
Long Term Claim Paying Ability
Ratings Debt Rating Casualty Life
S&P A AA AA+
Moody's A2 Aa3 Aa3
A.M. Best N/A A- A+
Financial Overview Allstate
<PAGE>
- - Loss reserves, at $16.9 Billion (Gross) are a major focus
of the company. Reserve status is reviewed quarterly.
Reserves are also considered by the Company's independent
public accountants in connection with their annual audit of
the Company's financial statement. The establishment of loss
reserves is an inherently uncertain process, there can be no
assurance that ultimate losses will not exceed Allstate's loss
reserves.
- - This chart demonstrates that reserves have developed very
favorably since 1982 with the exception of 1989.
- - Although the 1994 data (1993 accident year) is not
available yet, we believe results will again be very
favorable.
- - In summary, we believe our aggregate reserve level is one
of the Company's points of financial strength.
<PAGE>
SLIDE 20
$16.9 BILLION IN TOTAL RESERVES
FAVORABLE ACCIDENT YEAR DEVELOPMENT SINCE 1982
Bar Chart
Vertical Axis: ($ Millions) Numbers ranging from 500 to -300
Portion of chart above 0 labeled Favorable
Portion of chart below 0 labeled Unfavorable
Horizontal Axis:
Year Data Point
82 20
83 49
84 92
85 42
86 13
87 50
88 92
89 -240
90 243
91 475
92 308
93 N/A
Financial Overview Allstate
<PAGE>
- - Our strategy remains the same...
- - We will see increase employee ownership through:
- Profit Sharing Plan
- Employee Stock Ownership
- Managed Stock Incentives
- - Following the Spin off, equity financing will become an
alternative.
- - We may wish to invest a higher percentage of investable
cash in taxable instruments than we have in the past. This is
driven by AMT and the elimination of tax consolidation with
Sears. We currently expect this to have a 1995 impact of less
than $15 Million.
<PAGE>
SLIDE 21
IMPACT OF THE SPIN-OFF
- No Impact On:
- Strategy
- Ratings
- Market Position
- Increased Employee Ownership
- Increased Capital Markets Flexibility
- Reduced Investment Income
- Loss of Tax Consolidation
- Lower Purchases of Municipal Securities
Spin-off Implications Allstate
<PAGE>
- - Allstate's number one priority is crystal clear: risk
exposure management... the limiting of maximum probable loss
(ideally, to $1 billion) from a single catastrophic event.
<PAGE>
SLIDE 22
GOALS FOR GROWTH AND PROFITABILITY
- - Grow Property/Casualty Business In Selected Areas and
Segments
- - Continue to Grow Non-Standard Auto Business
- - Reduce Likelihood of Catastrophic Loss to $1 Billion from
any Single Event
- - Expense Management... Continue Reduction Beyond 1997
- - Combined Ratio Goal... Below 100% in our Core Personal
Lines Business
- - Continue Life Growth in Statutory Premium and Net Income
Goals Allstate
<PAGE>
SLIDE 23
SHAREHOLDER VALUE INITIATIVES
- Achieve Aggressive Performance Goals
- Grow the Business with Quality
- Manage Catastrophe Exposure
- Control Losses and Expenses
- Maintain Strong Balance Sheet
- Focus on Market Valuation
Summary Allstate
<PAGE>
APPENDIX
<PAGE>
- - Allstate's dividend yield is competitive with the
industry.
- - At the 1994 year end stock price of $23.75, the 1995
dividend yield will be 3.2% based on 1994's year end stock
price.
<PAGE>
SLIDE 24
INSURANCE STOCK MARKET PRICES AND RATIOS
DECEMBER 31, 1994
Current P/E Com-
Price/ Ratio bined
Dividend Book (1) Ratio
Yield Ratio 1994E As of 9/94
% %
Property Casualty
Chubb Corp. 2.4 1.6 14.0 101.6
Continental Corp. 0.0 0.8 N/M 126.2
Gen Re 1.6 2.1 17.0 103.8
SAFECO Corp. 3.8 1.1 11.1 104.5
St. Paul Cos. 3.4 1.4 10.2 104.0
USF&G Corp. 1.5 1.3 14.5 109.5
Group Average 2.1 1.4 13.4 109.6
Multi-Line Insurers
AETNA 5.9 1.0 10.6 124.4
CIGNA 4.8 0.8 10.0 143.0
AIG 0.5 1.9 14.8 100.8
Group Average 3.7 1.2 11.8 114.7
Specialty
Cincinnati Fin. 2.5 1.3 14.3 102.0
CNA 0.0 0.9 N/M 116.5
GEICO Corp. 2.0 2.3 17.5 96.1
Progressive Corp. 0.6 2.5 12.6 92.8
Ohio Casualty 4.5 1.1 14.1 106.0
Group Average 1.9 1.6 14.6 106.8
S&P 500 Index 2.8 2.9 14.8
SP Prop (Prop Cas) 2.2 1.6 13.7
SP Lines (MultiLine) 1.6 1.7 13.7
SPEC (Specialty) 1.5 1.6 15.0
Note: Group averages are weighted based on market value.
Source for all data except combined ratio is Bloomberg.
Source for combined ratio, through nine months, on a statutory
basis, is ISO.
(1) Based on Operating EPS
Allstate
<PAGE>
- - From 1986 - 1992, Allstate's growth exceeded the
industry.
- - Allstate's growth fell below the industry in 1993, due to
our managed growth philosophy.
- - The Property/Casualty Industry is a $250 billion
industry.
<PAGE>
SLIDE 25
PROPERTY CASUALTY NET WRITTEN
PREMIUM GROWTH
Total Lines
Line Graph
Vertical Axis: (% Var. to Pr. Yr.) Numbers ranging from 0 to
30
Horizontal Axis:
Line 1: Allstate Line 2: Industry
Year Data Point Data Point
83 6.4 4.6
84 7.0 8.5
85 13.5 21.9
86 21.5 22.3
87 16.1 10.0
88 11.5 4.4
89 8.4 2.8
90 8.7 3.9
91 3.9 2.3
92 4.8 2.0
93 3.5 6.2
94 2.8 3.7
Personal Lines
Line Graph
Vertical Axis: (% Var. to Pr. Yr.) Numbers ranging from 0 to
30
Horizontal Axis:
Year Line 1: Allstate Line 2: Industry
Data Point Data Point
83 6.9 8.9
84 5.6 7.0
85 12.2 12.2
86 19.6 14.0
87 15.3 11.9
88 12.7 6.9
89 10.3 5.1
90 9.4 6.5
91 4.7 5.2
92 4.8 6.7
93 3.8 5.5
94 2.9 4.3
Commercial Lines
Line Graph
Vertical Axis: (% Var. to Pr. Yr.) Numbers ranging from 0 to
30
Horizontal Axis
Year Line 1: Allstate Line 2: Industry
Data Point Data Point
83 5.6 .9
84 21.4 11.8
85 22.6 33.9
86 33.3 30.3
87 20.8 8.0
88 5.4 1.9
89 -2.8 1.3
90 4.0 2.8
91 -2.1 -0.1
92 5.0 -2.3
93 0.9 6.0
94 2.1 3.1
1994 Net Written Premium
(4 Billions)
Allstate Industry* Allstate/Industry
$ $ $
Total Lines 16.2 250.5 6.5
Personal Lines 14.4 119.9 12.0
Commercial Lines 1.8 123.6 1.5
Estimate for Industry
Source: A.M. Best Allstate
<PAGE>
- - Allstate's growth in personal lines has been less than
the industry since 1991. (Auto market share was flat in 1991,
then declined; Home Owner market share has declined since
1991).
- - Allstate's slower growth was deliberate, emphasizing
profitability.
<PAGE>
SLIDE 26
PERSONAL LINES NET WRITTEN PREMIUM GROWTH
- Demonstrated the Ability to Grow the Company
- 1994 Increase in Growth Markets of 4.5%
Chart
Vertical Axis: (% Var. to Pr. Yr.) Numbers ranging from 0 to
14
Horizontal Axis:
Year Bar 1: Allstate Line 1: Industry
Data Point Data Point
1988 12.7 6.9
1989 10.3 5.3
1990 9.5 6.5
1991 4.7 5.3
1992 4.8 6.7
1993 3.8 5.5
1994* 2.9 4.3
*Estimate for Industry
Source: A.M. Best Allstate
<PAGE>
- - Personal lines industry is much more concentrated than
the industry overall.
- - Top five companies have 47% of personal lines market; 29%
of total market (including commercial).
- - In personal lines, Allstate is a strong #2, with double
the marked share of the next competitor.
<PAGE>
SLIDE 27
MARKET SHARE OF TOP 5 COMPANIES
1993
Total Property/Casualty Total Personal Lines
Pie Chart Pie Chart
State Farm 12.2% State Farm 22.0%
Allstate 6.4% Allstate 12.0%
Farmers 3.7% Farmers 6.2%
AIG 3.6% Nationwide 3.5%
Nationwide 3.2% USAA 3.2%
All Others 70.9% All Others 53.1%
Source: A.M. Best
Allstate
<PAGE>
SLIDE 28
WHAT IS ALLSTATE?
- Highly Recognized Insurance Franchise - "You're in
Good Hands"
- Direct Writer
- Dominant Personal Lines Company... Only Publicly
Traded Company in Top 5
1993 Market Shares
Auto Homeowners
% %
State Farm 21.7 State Farm 23.3
Allstate 12.1 Allstate 11.8
Farmers Group 6.3 Farmers Group 5.6
Nationwide 3.6 USAA 3.1
USAA 3.3 Nationwide 2.8
Source: A.M. Best
Allstate
<PAGE>
- - Direct Writers gained market share at the expense of
agency writers in personal auto over last 15 years.
- - From 1978-1993, market share gain for direct writers was
9.3 percentage points. Much of that came in the later years,
as agency companies pulled back from personal auto (Aetna,
USF&G, Chubb)
- - Market is approaching $100 Billion in size (total of
agency + direct).
- - Direct Response Writers have over 7.5% of the auto
market.
<PAGE>
SLIDE 29
P/C INDUSTRY MARKET SHARE TRENDS
PRIVATE PASSENGER AUTO
DIRECT WRITERS
Bar Chart
Vertical Axis: (% Market Share*) Numbers ranging from 50 to
70
Horizontal Axis:
Year Data Point
78 58.6
79 60.4
90 61.1
81 61.3
82 61.0
83 61.2
84 61.1
85 61.6
86 62.7
87 63.4
88 63.9
89 65.4
90 66.2
91 67.8
92 68.0
93 67.9
Size of Market in 1993 is $95 Billion
(*) of Premium Written
Source: A.M. Best
Allstate
<PAGE>
- - Unlike the Personal Lines (47%), the market concentration
of the 5 top Life companies is only 23%.
<PAGE>
SLIDE 30
LIFE MARKET SHARE*
($ Billions) 1993
Face Amount
Rank Company in Force Market Share
$ %
1 Prudential 407.8 5.2
2 Metropolitan 378.8 4.8
3 Travelers 357.4 4.6
4 New York Life 317.2 4.1
5 Northwestern
Mutual 312.5 4.0
6 Transamerica 298.5 3.8
7 Equitable 255.5 3.3
8 State Farm 243.1 3.1
9 General America 193.1 2.5
10 Lincoln National 190.8 2.4
13 Allstate 119.5 1.5
Total Industry 7,817.7 100.0
* Based on ordinary life insurance in force (face amount).
Source: One Source Allstate
<PAGE>
SLIDE 31
FINANCIAL SUMMARY
1990 1991 1992 1993 1994
($ Millions,
Except EPS)
Statutory Premium 18,996.6 19,570.5 19,914.4 20,756.1 21,662.5
Growth (%) 12.9 3.0 1.8 4.2 4.4
Net Income as
Recorded 701.3 722.5 (825.2) 1,301.5 483.8
Effect of $1B
Cats and Other
Adj (1) - - (1,975.6) - (1,074.9)
Effect of Other
Catastrophes (296.8) (333.8) (528.2) (354.8) (317.4)
ROE (%) 10.2 9.7 (11.4) 17.4 5.8
Effect of $1B
Cats and Other
Adj (1) - - (25.4) - (11.9)
Effect of Other
Catastrophes (4.1) (4.2) (7.4) (4.2) (3.7)
Operating EPS* N/A N/A (1.41) 2.66 0.79
Effect of $1B
Cats and Other
Adj (2) N/A N/A (3.83) - (2.39)
Effect of Other
Catastrophes N/A N/A (1.22) (.80) (.71)
(1) Special Retirement Opportunity in 1994, OPEB in 1992, and all
Catastrophes in Excess of $1 Billion (i.e. Hurricane Andrew in 1992
and Northridge Earthquake in 1994)
(2) Special Retirement Opportunity in 1994, and all Catastrophes
in Excess of $1 Billion (i.e. Hurricane Andrew in 1992 and
Northridge Earthquake in 1994)
Allstate
<PAGE>
