哈佛商学院案例好事达保险公司AllstateInsurance

9-708-485REV:JULY24,2008________________________________________________________________________________________________________________ProfessorJohnR.Wellspreparedthiscase.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.Copyright©2008PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.JOHNR.WELLSTheAllstateCorporation“Weintendtoreinventprotectionandretirementfortheconsumer.”—AllstatePresidentandCEOThomasJ.Wilson1Attheendof2006AllstateCorporation(Allstate)wasthesecondlargestpersonallinesinsurerintheUSwithtotal2006insurancepremiumsearnedof$29.3billion.2(SeeExhibit1)Itstwomainbusinesssegments,AllstateProtectionandAllstateFinancial,generatedcombinedrevenuesof$36billionandsold13majorlinesofinsurance,retirementandinvestmentproducts,through12,900exclusiveagentsand50,000financialspecialistsin49statesandCanada.3Allstatewasthesecond-largestplayerinboththepersonalautoandhomeowners’insurancesegments,withmarketsharesof11.1%and12.3%,respectively.(SeeExhibit2)DespiterecentearningsvolatilitycausedbyhurricanessuchasKatrina,RitaandWilma,Allstatecontinuedtodelivergoodperformanceandpostedpre-taxprofitsof$2.1billionfor2005afteraccountingfor$5.5billionofhurricanelosses.Pre-taxprofitsroseto$7.2billionin2006.Analysts,however,fearedarenewedboutofcompetitivepressureonthehorizonintheinsurancesector,anddoubtedtheindustry’sabilitytoresistthepricecuttingthathadcharacterizedtheindustryinthepast.Industryunderwritingprofitsfromautomotiveinsurancewereatrecordhighs,mainlyasaresultofcontinuouslydecliningaccidentfrequency,butmanythoughtthistrendcouldnotcontinue.Furthermore,therewastheconstantthreatfromautoinsurancespecialistssuchasProgressiveandGEICO,whowerecontinuingtogainmarketshare.Lossesfromnaturaldisastershadalsounderminedconfidenceinthetraditionallymoreattractivehomeownerssector.4OnJanuary1,2007,ThomasJ.Wilson,becameCEOofAllstate,steppingupfromhisroleasPresidentandCOO.WilsonhadjoinedAllstatein1995fromastrategicplanningroleatSears,andsincethattimehadrunboththefinancialservicesandinsurancesidesofAllstate.WilsonreflectedonAllstate’sstronghistoricalfinancialperformanceandthepathahead.“We’vemadealotofprogressinimprovingourprocessesandmakingthemmoreefficient,butpeoplearealsogettingintofeweraccidentsandindustryreturnsarenowatanall-timehigh.Thismeansthatwemustcontinuetobecomemorecostefficientwhilemaintainingourstrongcustomerfocus.Inaddition,goingforward,thepopulationisagingandmanyarecomingupforretirement.Weintendtoservethembetter,toreinventprotectionandretirement.Withourtalentedteamandourfinancialandriskprotectionportfolioweareideallypositionedtodoit.”5708-485TheAllstateCorporation2PropertyandCasualtyInsuranceOverviewPropertyandcasualty(P&C)insurancewasoneofthreemainsegmentsoftheinsuranceindustry;lifeandhealthinsuranceweretheothermajorsegments.TheP&Cindustrysegment$453billioninwrittenpremiumsintheUSin2006andthetop10playersaccountedfor48%ofsales(seeExhibit2).TheP&Cinsurancebusinesswashighlycompetitiveandnotoriousforitscyclicality,withperiodsofmeagerunderwritingprofitsinterspersedwithlongperiodsofunderwritinglosses(seeExhibit3).Whilecompaniestypicallymadeupforunderwritinglosseswithincomefrominvestments,itwasnotuncommonforasignificantpercentageoffirmstobedeclaredfinanciallyimpairedbyratingsfirms.6Thelargestsub-segmentoftheP&Cindustrywasprivatepassengerautoinsurance.Therewereapproximately280competitorswriting$5millionormoreofprivatepassengerautoinsuranceintheUSin2006,7andthetopfourcompanies,StateFarm,Allstate,ProgressiveandGEICO(BerkshireHathaway)accountedfor43%ofsales(seeExhibit4).StateFarmandAllstateofferedabroadlineofinsuranceproductsandfinancialservices,butProgressiveandGEICOfocusedmainlyonautoinsurance.Traditionally,broaderlineinsuranceplayershadoftenlostmoneyonautoinsurance,butusedittowincustomersformoreprofitableproductssuchashomeowner’sinsurance.8However,highlossesduetohurricaneshadcausedmanytoreviewthisstrategy.Morerecently,mostofthetopplayersweremakingprofitsinautoinsurance(seeExhibit5).Insuranceallowedindividualmembersofagrouptopoolriskanddistributelossesamongallmembersofthegroup.9Insurerscollectedpremiumsandsetasideamajorityofthesepremiums,tocoverlosses.Earnedpremiumswereinsurancecompanies’largestsourceofrevenue.10Sincelosseswerepaidafterthepremiumswerereceived,insurersalsogeneratedinvestmentincomefrominvestingthepremiums.Inthepropertyandcasualtysegment,investmentstrategieswereheavilyfocusedonfixedincomesecuritiessuchasmunicipalbonds.11Aswellasinterest,companiesrealizedgainsandlossesonthesaleoftheseinvestments(seeExhibit6).Thelargestexpensecategoryforinsurerswas“los