Dive Brief:

• The Allstate Corporation is laser focused on “returning auto insurance profitability back to historic levels” for the year ahead, CFO Jess Merten said during the 2023 Raymond James Institutional Investors conference on Monday. 
• In order to restore auto margins, the Northbrook, Ill.- based insurance company has outlined four key areas of focus: increasing rates, reducing expenses, implementing stricter underwriting requirements and modifying claims packages to manage lost costs. But implementing rate increases and reducing operating expenses are the two biggest strategic priorities, Merten said. 
• Despite competitor Prudential planning to ramp up its marketing spend to grow its personal auto book, Merten declined to comment on when exactly Allstate will be pivoting to growth initiatives over profitability strategies.

Dive Insight:

Although Allstate’s largest competitors “believe they are rate adequate and have moved to advertising to increase the size of their market share, in terms of when Allstate will be in a position to do that, I am not making a call as to when that will be,” Merten said. 

Profitability is the company’s main focus right now, specifically in California, New York and New Jersey, which account for about half of profitability issues, the finance chief said. 

Allstate reported a net loss of $310 million during the fourth quarter ending Dec. 31, 2022, citing auto insurance underwriting losses that continued to hold back results.

“California, New Jersey and New York are the toughest states for profitability because of regulations,” Merten said. The company’s California strategy “is to do a series of 6.9% increases pretty quickly, and we are also working actively in New York to get a rate filing,” he said.

Merten also stressed that the entire auto insurance industry is having profitability issues.

Another core part of the company’s growth plan is reducing operating expenses, as they are halfway through their goal of reducing expenses from 2018 to 2034 by approximately 6% of premiums to 23%. 

“We started our expense initiative several years ago and we believe lowering operating costs will help improve profitability not only in the near term but it will also increase customer value in the long term through lower prices,” Merten said. 

Merten said that he has the utmost confidence that “these actions will result in restoring auto profitability to historic levels,” he said.

The CFO took the financial helm of Allstate in August 2022. Last month, he collected $1.2 million through a sale of company stock by exercising options which were not set to expire until 2029, according to reporting from Insurance Business America. Since that sale, Allstate’s stock has dropped 5%.