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The Allstate Corporation

The Allstate Corporation

Allstate Plaza
2775 Sanders Road
Northbrook, Illinois 60062
U.S.A.
(847) 402-5000
(800) 416-8803
Fax: (847) 836-3998
Web site: http://www.allstate.com

Public Company
Incorporated: 1931 as Allstate Insurance Company
Employees: 51,400
Total Assets: $80.91 billion (1997)
Stock Exchanges: New York Chicago
Ticker Symbol: ALL
SICs: 6311 Life Insurance; 6331 Fire, Marine & Casualty Insurance; 6351 Surety Insurance; 6371 Pension, Health & Welfare Funds; 6719 Holding Companies, Not Elsewhere Classified

The Allstate Corporation is the holding company for Allstate Insurance Company, the second largest property and casualty insurance company by premiums in the United States. Allstate controls about 12 percent of the U.S. home and auto insurance market, second only to State Farm Insurance Companies. In addition, Allstate Life Insurance Company offers life, annuity, and pension products, and its Business Insurance offers select coverages for small and medium-sized businesses. Allstates 20 million customers are served by 15,200 full-time captive agents, and thousands of independent agents, in the United States and Canada. Personal property and casualty policies account for over three-fourths of Allstates revenue, while Life Operations account for 15 percent. In June 1993, Sears, Roebuck and Co. offered nearly 20 percent of Allstates stock to the public in the largest initial public stock offering in U.S. history, making Allstate the nations largest publicly held personal property and casualty insurance company. The remaining 80 percent of Allstate became publicly owned in 1995, when Sears spun the rest of the company off to its shareholders.

Formed in 1931

The idea for Allstate came during a bridge game on a commuter train in 1930, when insurance broker Carl L. Odell proposed to his neighbor, Sears, Roebuck and Co. president and CEO Robert E. Wood, the idea of selling auto insurance by direct mail. Odell suggested that selling insurance by mail could sharply reduce costs by eliminating commissions paid to salesmen. The idea appealed to Wood, and he passed the proposal on to the Sears board of directors, whose members were also intrigued by the concept. Allstate Insurance Company, named after an automobile tire marketed by Sears, went into business in April 1931, offering auto insurance by direct mail and through the Sears catalog. Lessing J. Rosenwald was Allstates first chairman of the board, and Odell was named vice-president and secretary.

The companys early success proved Odell and Wood correct with regard to cost-cutting. Selling primarily through the regular Sears catalog, Allstate took in $118,323 in premiums on 4,217 policies in 1931, with a staff of 20 employees based at Sears headquarters in Chicago. Although the company showed underwriting losses in its first two years of operation, by 1933 it earned a profit of $93,000 from 22,000 active policies. That year, the first sale made by an Allstate agent was completed from a Sears booth at the Chicago Worlds Fair.

In 1934, Allstate opened its first permanent sales office in a Chicago Sears store, marking the beginning of a transition from direct mail to agents as its principal avenue of sales. The use of Sears stores enabled the company to keep a lid on costs even with the added expense of agents commissions. Allstates growth through the remainder of the Depression was slow but steady. By 1936, the companys premium volume had reached $1.8 million. Revenue from premiums more than tripled by 1941, reaching $6.8 million from over 189,000 policies in force. In 1943, James Barker was named chairman of Allstates board.

The United States participation in World War II slowed Allstates growth somewhat, since automobile production and usage were curtailed. New legislation, however, helped pave the way for a period of explosive growth that the company would experience after the wars end. In 1941, when only about a quarter of U.S. drivers had auto liability insurance, a law was passed in New York firmly establishing the financial responsibility of drivers for damage or injuries resulting from auto mishaps. New Yorks law inspired a flurry of legislation in other states, and by the mid-1950s nearly every state had some sort of financial responsibility law on its books.

Postwar Boom Years

During the ten-year period after World War II, Allstate grew at a phenomenal pace, nearly doubling its size every two years. There were 327,000 Allstate policyholders paying premiums totaling over $12 million in 1945, and by 1955 Allstates sales had risen to $252 million, with more than 3.6 million policies in force.

Growth was facilitated by a change in the companys structure that was implemented in 1947. That year, Allstate decentralized its operations, adopting a three-tiered structure. Research and policy development were conducted at Allstates home office. Zone offices were created to interpret company directives, and in turn oversee the regional offices, where the programs were put into effect. Some regions were further organized into district service offices and local sales/service centers. The restructuring extended to the first foreign offices as well. Allstate became an international company in 1953 when its first Canadian office opened. Along with the restructuring, the 1947 introduction of the Illustrator Policy, which simplified the language of policies and added pictures to enhance customers understanding of their coverage, facilitated growth.

During the 1950s, Allstate became more than an auto insurer. Throughout the decade, Allstate expanded its services to include the entire spectrum of insurance. Personal liability insurance was introduced in 1952. In 1954, Allstate began offering residential fire insurance. Commercial fire, personal theft, and homeowners insurance were all added in 1957. Through a subsidiary, Allstate Life Insurance Company, life insurance became part of the companys package in 1957 as well. In 1958, personal health and commercial liability insurance were added to the Allstate line. By the end of the decade, boat owners, group life, and group health insurance were all being offered. A new entity, Allstate Enterprises, Inc., was created in 1960 as an umbrella for a whole batch of non-insurance businesses to come. Among the activities eventually conducted under the Allstate Enterprises banner were a motor club and a number of finance operations, including vehicle financing, mortgage banking, and mutual fund management.

Allstates now well-known slogan, Youre in Good Hands With Allstate, first appeared in 1950 after its creation by the companys general sales manager, Davis W. Ellis. By the end of the decade it was used in the companys first network television advertising campaign, which featured actor Ed Reimers.

Allstates growth throughout the 1950s paved the way for continued growth over the next few decades. Not only did the company increase its sales volume but it increased its offerings and its operating space. In 1963, the Allstate Life Insurance subsidiary passed the $1 billion mark in insurance in force, after only six years of operation. By that time, over 5,000 agents were selling Allstate life, automobile, home, and business insurance. Two new subsidiaries, Allstate Insurance Company of Canada and Allstate Life Insurance Company of Canada, were formed the following year. In 1966, the Judson B. Branch Research Center (later renamed the Allstate Research and Planning Center) was opened in Menlo Park, California. The companys home office was moved to a new 723,000-square-foot complex in the Chicago suburb of Northbrook, Illinois, a year later. Meanwhile, Allstate continued to make additional types of insurance available to its customers throughout the decade, including workers compensation insurance in 1964, surety bonds in 1966, ocean marine coverage in 1967, and a business package policy in 1969.

The 1970s: Diversification and International Expansion

By 1970, there were 6,500 Allstate Insurance agents. That year, Allstate unveiled a mutual fund. In 1972 Allstate entered the mortgage banking business by acquiring National First Corporation. The following year, the company purchased PMI Mortgage Insurance Company, marking its initial entry into that field. Around the same time, Allstate insurance became available through independent agents in rural areas not covered by agents working directly for the company. For 1973, Allstate generated earnings of $203 million, nearly 30 percent of parent company Searss total.

Company Perspectives:

Consumer surveys indicate the insurance industry has a long way to go to satisfy customers completely. Customers want insurance to be friendlier and easier; they want the claims process to be fairer and more efficient; and they want their agents to be loyal and highly familiar with their needs. Thus we ve undertaken one of the most important initiatives in Allstates historyto generate faster, more profitable premium growth by aligning the entire company to deliver more of what customers say they want and need. We know the outcome will mean significant changes, over time, in the way we do business. But with our financial and organizational strength, we see these changes as tremendous opportunities for growth.

The 1970s also saw Allstate increase its presence abroad dramatically. In 1975, the company entered the Japanese market through a joint venture (Seibu Allstate Life Insurance Company, Ltd.) and purchased Lippmann & Moens, a group of Dutch insurance operations. The remainder of the decade also included the formation of Tech-Cor, Inc., an auto-body research and reclamation firm, in 1976; the establishment of a Commercial Insurance Division (later called Allstate Business Insurance) to oversee the companys commercial operations in 1978; and the formation of a new wholly owned subsidiary, North-brook Property and Casualty Insurance Company, in 1978. Allstate Reinsurance Co. Limited, a London Subsidiary of Allstate International, was incorporated in 1978. Two new policies, the Basic Homeowners Policy and the Healthy American Plan (life insurance), were introduced in 1978 and 1979, respectively.

Allstate was the sixth largest insurance group in the United States by 1980. At that time, the company was operating four zone offices, 31 regional offices, 219 claim-service offices, 687 automobile damage inspection stations, and 2,720 sales/service centers. For 1980, the company reported $450 million in net income on revenue of $6.2 billion, as well as assets of $10.5 billion and 40,000 employees. In 1981, two Dean Witter Reynolds insurance companies, Surety Life Insurance Company and Lincoln Benefit Life Company, became part of the Allstate Life Insurance group. Allstate, Dean Witter, and Coldwell Banker joined forces the following year to form the Sears Financial Network, first appearing in eight Sears stores and later expanding to many other locations.

Donald F. Craib, Jr., was named chairman of the board at Allstate in 1982. Under Craib, a major reorganization of Allstates corporate structure was initiated. The New Perspective, as it was called, entailed the elimination of zone offices, as well as other streamlining and decentralizing moves. A new, more flexible life insurance plan, the Universal Life policy, was also unveiled that year. By the end of 1983, Allstates claim staff consisted of 12,500 employees, the largest force in the industry.

In 1985, Allstate rolled out its Neighborhood Office Agent (NOA) program. In its first year, the NOA program placed 1,582 agents in 944 locations. The following year, the company launched an extensive $30 million advertising campaign that included nine new television commercials and the creation of a new tag line: Leave It to the Good Hands People. The campaign, which extended to print and radio as well, emphasized family protection. For 1986, the company reported income of over $750 million on revenue of $12.64 billion.

A number of business insurance developments took place at Allstate in 1987. First, the companys Commercial Insurance Division and Reinsurance operation were combined under the Business Insurance umbrella. In addition, two new programs were launched in that area. The Topflight program created special ties between the companys Northbrook subsidiary and certain independent agents. The STAR-PAK program offered a new business package policy that provided special services such as the delivery of price quotes within five hours. Allstate also launched the Allstate Advantage Program, a three-tiered rating system for auto insurance, in 1987. A new board chairman and chief executive officer, Wayne E. Hedien, was named in 1989.

Throughout the 1980s, the company had grown at a rate that could not be supported by its profits. It had roughly doubled its premiums during the decade, but in doing so it had burdened itself with a large number of high-risk policy holders. This growth had increased the companys costs both in terms of claims payouts and regular operating expenses. Meanwhile, the company also had to contend with customer backlash against insurance rates, including an ongoing court battle in California involving the 1988 passage of Proposition 103, which called for a rollback on premium rates. Allstates income shrank from $946 million in 1987 to $701 million in 1990. Resolving Proposition 103 issues put some major concerns behind the company.

The 1990s: Natural Disasters and Spinofffrom Sears

After a solid year in 1991, Allstate suffered losses from Hurricane Andrew in 1992 that obscured an otherwise outstanding year for the company. This natural disaster led to a net loss of $825 million for the year. Subsequently, an insurance crisis developed in Florida. The legislature was unable to enact a solution the following spring, and Allstate announced a plan to not renew some 300,000 Florida property customers living in high hurricane risk areas. A state-mandated moratorium on nonrenewals was imposed until November 15, 1993. On November 9, 1993, the Florida Legislature approved a catastrophe fund bill designed to protect insurance consumers and the insurance industry from the financial devastation caused by severe hurricanes. The bill enabled Allstate to renew about 97 percent of its Florida property customers in 1994.

In June 1993, 20 percent of Allstate was offered to the public. The offering was an extraordinary success, generating $2.4 billion in capital. That sum was the largest ever raised in an initial public offering in the United States. The separation of Allstate from Sears was part of Searss new focus on its traditional business of merchandising. With newly found financial strength from the successful public offering, Allstate posted impressive numbers for 1993: a record net income of $1.3 billion on revenue of $20.9 billion.

A dip in profits followed in 1994, however, in the wake of another natural disaster which involved massive claims against Allstate. The Northridge, California earthquake, which struck in January, resulted in claims totaling over $1 billion. In its wake, as had happened following Hurricane Andrew, Allstate (and most other insurers) attempted to stop writing policies for homeowners insurance in the state, and California eventually passed legislation creating a state Earthquake Authority to help pay future catastrophe claims.

Allstate became completely independent in June 1995, when Sears gave up its 80 percent stake in the company, distributing 350.5 million shares of Allstate stock to its own stockholders. Allstate also streamlined its operations, selling off the PMI Mortgage Insurance subsidiary to raise funds for corporate growth. A smaller hurricane in 1995, Opal, resulted in a more manageable amount of damage than Andrew, and the companys yearly totals were a record-setting $22.8 billion in revenues and $1.9 billion in income.

Concurrent with the positives of Allstates independence and financial success, controversies were surfacing on a number of fronts. In Texas, the companys use of Allstate-run law firms to represent claimants in court was being examined, while in California Allstate was accused of falsifying engineering reports to minimize earthquake damage claims. In several other states, attorneys general were investigating allegations that the company was overcharging single car owners for auto insurance. Additional states were examining the practice of mailing out pamphlets to auto accident claimants which attempted to dissuade them from consulting an attorney. The company fought these and all such actions vigorously. Allstate, along with a number of other insurance carriers, was also accused of redlining, or denying insurance to inner city and minority homeowners. In this case, the company announced it was making changes to its policy guidelines which would improve the opportunity for such customers to obtain in surance.

Strong years were again seen in 1996 and 1997, with record revenues and income posted in each. The company began trying new methods of insurance sales, using more independent agents and exploring the possibility of telephone or Internet sales. This was a delicate subject, as the 15,000 plus traditional full-time company agents were strongly opposed to such competition. Allstate also divested itself of several smaller subsidiaries and finished selling off its real estate holdings, a move which had been started in 1991. In late 1998 the company founded a bank, Allstate Federal, which it began to use to handle many of the companys own financial transactions.

In January 1999, a new CEO was installed, Edward M. Liddy. Liddy had been with Allstate only five years, following a longer stretch with Sears, but had quickly moved into the positions of president and COO, and was expected to closely follow the pattern set by his predecessor Jerry Choate. As the company approached the year 2000, it was as strong as it had ever been, and appeared likely to continue in that position for some time to come.

Principal Subsidiaries

Allstate Insurance Company; Allstate Life Insurance Company; Allstate Indemnity Company; Allstate County Mutual Insurance Company; Allstate Holdings, Inc.; Allstate International, Inc.; Allstate New Jersey Holdings, Inc.; Allstate Property and Casualty Insurance Company; Allstate Texas Lloyds, Inc.; Deerbrook Insurance Company; Forestview Mortgage Insurance Company; Pinebrook Mortgage Insurance Company.

Principal Operating Units

Property-Liability; Life and Annuity; Investments.

Further Reading

Allstate Insurance: Playing the Field from Now On, Business Week, July 11, 1959, pp. 76-88.

Berss, Marcia, We Grew Too Fast (Allstate Insurance Improves Finances), Forbes, February 13, 1995, p. 103.

Boe, Archie R., Allstate: The Story of the Good Hands Company, New York: Newcomen Society, 1981.

Bowe, Christopher, New Thrift Targets Disenfranchised Customers, Wall Street Journal Europe, December 17, 1998, p. 25.

Cole, Robert J., Allstate Chief Heads an Investment Army, New York Times, May 3, 1970, p. F3.

Durgin, Hillary, Allstate IPO Scores Big, Grains Chicago Business, June 7, 1993, p. 38.

____, A New Hand Dealt to 1990s Allstate, Grains Chicago Business, December 20, 1993, p. 1.

Eisner, David M., Good Hands People Play Tough, Propelling Allstates Profits Up, Wall Street Journal, October 4, 1974, p. 1.

Flood, Mary, Allstate Sued over the Use of Lawyers, Wall Street Journal, November 11, 1998, p. Tl.

Levin, Gary, Allstates Ads Hand It to Family, Advertising Age, January 20, 1986, p. 1.

Opdyke, Jeff D., How Allstate Tried to Skirt State Laws, Wall Street Journal, January 4, 1995, p. Tl.

Seism, Leslie, Allstate Relaxes Standards on Selling Homeowners Policies in Poor Areas, Wall Street Journal, August 14, 1996, p. A3.

____, Auto Insurers May Be Facing Slowdown, Wall Street Journal, June 5, 1998, p. Cl.

____, To Avoid Disaster, Allstate Hands Off Home Policies, Wall Street Journal, July 11, 1995, p. B4.

Something New in Stock for Sears Shoppers, Business Week, April 25, 1970, pp. 120-22.

Steinmetz, Greg, Allstate Stock Sale Raises $2.12 Billion, Wall Street Journal, June 3, 1993, p. A3.

Stires, David, SmartMoney Online: Allstate: On Shaky Ground?, Dow Jones News Service, May 13, 1998.

This Is Allstate, Northbrook, 111.: Allstate Corporation.

Wahl, Melissa, Allstate President to Be Next Chairman, CEO, Knight Ridder/Tribune Business News, September 22, 1998.

Robert R. Jacobson

updated by Frank Uhle

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The Allstate Corporation

The Allstate Corporation

Allstate Plaza
Northbrook, Illinois 60062
U.S.A.
(708) 402-5000
Fax: (708) 402-0045

Public Subsidiary of Sears, Roebuck and Co.
Incorporated:
1931 as Allstate Insurance Company
Employees: 47,900
Sales: $20.95 billion
Stock Exchanges: New York Chicago
SICs: 6331 Fire, Marine & Casualty Insurance; 6311 Life Insurance; 6719 Holding Companies, Nee

The Allstate Corporation is the holding company for Allstate Insurance Company, the second largest property and casualty insurance company by premiums in the United States. Allstate controls about 12 percent of the U.S. home and auto insurance market, second only to State Farm Insurance Companies. In addition, Allstate Life Insurance Company offers life, annuity and pension products, its Business Insurance offers select coverages for small and medium-sized businesses, and its PMI Mortgage Insurance Company is one of the nations largest private mortgage guaranty insurers.

Allstates 20 million customers are served by 14,600 agents through over 9,300 locations in the United States and Canada. Personal property and casualty policies account for about threefourths of Allstates revenue. Life Operations account for fourteen percent of company revenue. In June 1993, Sears, Roebuck and Co. offered nearly 20 percent of Allstates stock to the public in the largest initial public stock offering in U.S. history, making Allstate the nations largest publicly held personal property and casualty insurance company.

The idea for Allstate came during a bridge game on a commuter train in 1930, when insurance broker Carl L. Odell proposed to his neighbor, Sears, Roebuck and Co. president and CEO Robert E. Wood, the idea of selling auto insurance by direct mail. Odell suggested that selling insurance by mail could sharply reduce costs by eliminating commissions paid to salesmen. The idea appealed to Wood, and he passed the proposal on to the Sears board of directors, whose members were also intrigued by the concept. Allstate Insurance Company, named after an automobile tire marketed by Sears, went into business in April 1931, offering auto insurance by direct mail and through the Sears catalog. Lessing J. Rosenwald was Allstates first chairman of the board, and Odell was named vice-president and secretary.

The companys early success proved Odell and Wood correct with regard to cost cutting. Selling primarily through the regular Sears catalog, Allstate took in $118,323 in premiums on 4,217 policies in 1931, with a staff of 20 employees based at Sears headquarters in Chicago. Although the company showed underwriting losses in its first two years of operation, by 1933 it earned a profit of $93,000 from 22,000 active policies. That year, the first sale made by an Allstate agent was completed from a Sears booth at the Chicago Worlds Fair.

In 1934, Allstate opened its first permanent sales office in a Chicago Sears store, marking the beginning of a transition from direct mail to agents as its principal avenue of sales. The use of Sears stores enabled the company to keep a lid on costs even with the added expense of agents commissions. Allstates growth through the remainder of the Depression was slow but steady. By 1936, the companys premium volume had reached $1.8 million. Revenue from premiums more than tripled by 1941, reaching $6.8 million from over 189,000 policies in force. In 1943, James Barker was named chairman of Allstates board.

The United States participation in World War II slowed Allstates growth somewhat, since automobile production and usage were curtailed. New legislation, however, helped pave the way for a period of explosive growth that the company would experience after the wars end. In 1941, when only about a quarter of U.S. drivers had auto liability insurance, a law was passed in New York firmly establishing the financial responsibility of drivers for damage or injuries resulting from auto mishaps. New Yorks law inspired a flurry of legislation in other states, and by the mid-1950s nearly every state had some sort of financial responsibility law on its books.

During the ten year period after World War II, Allstate grew at a phenomenal pace, nearly doubling its size every two years. There were 327,000 Allstate policyholders paying premiums totaling over $12 million in 1945, and by 1955 Allstates sales had risen to $252 million, with more than 3.6 million policies in force.

Growth was facilitated by a change in the companys structure that was implemented in 1947. That year, Allstate decentralized its operations, adopting a three-tiered structure. Research and policy development were conducted at Allstates home office. Zone offices were created to interpret company directives, and in turn oversee the regional offices, where the programs were put into effect. Some regions were further organized into district service offices and local sales/service centers. The restructuring extended to the first foreign offices, as well. Allstate became an international company in 1953 when its first Canadian office opened. Along with the restructuring, the 1947 introduction of the Illustrator Policy, which simplified the language of policies and added pictures to enhance customers understanding of their coverage, facilitated growth.

During the 1950s, Allstate became more than an auto insurer. Throughout the decade, Allstate expanded its services to include the entire spectrum of insurance. Personal liability insurance was introduced in 1952. In 1954, Allstate began offering residential fire insurance. Commercial fire, personal theft, and homeowners insurance were all added in 1957. Through a subsidiary, Allstate Life Insurance Company, life insurance became part of the companys package in 1957 as well. In 1958, personal health and commercial liability insurance were added to the Allstate line. By the end of the decade, boat owners, group life, and group health insurance were all being offered. A new entity. Allstate Enterprises, Inc., was created in 1960 as an umbrella for a whole batch of non-insurance businesses to come. Among the activities eventually conducted under the Allstate Enterprises banner were a motor club and a number of finance operations, including vehicle financing, mortgage banking, and mutual fund management.

Allstates now well-known slogan, Youre in Good Hands With Allstate, first appeared in 1950 after its creation by the companys general sales manager, Davis W. Ellis. By the end of the decade it was used in the companys first network television advertising campaign, which featured actor Ed Reimers.

Allstates growth throughout the 1950s paved the way for continued growth over the next few decades. Not only did the company increase its sales volume but it increased its offerings and its operating space. In 1963, the Allstate Life Insurance subsidiary passed the $1 billion mark in insurance in force, after only six years of operation. By that time, over 5,000 agents were selling Allstate life, automobile, home, and business insurance. Two new subsidiaries, Allstate Insurance Company of Canada and Allstate Life Insurance Company of Canada, were formed the following year. In 1966, the Judson B. Branch Research Center (later renamed the Allstate Research and Planning Center) was opened in Menlo Park, California. The companys home office was moved to a new 723,000-square-foot complex in the Chicago suburb of Northbrook, Illinois a year later. Meanwhile, Allstate continued to make additional types of insurance available to its customers throughout the decade, including workers compensation insurance in 1964, surety bonds in 1966, ocean marine coverage in 1967, and a business package policy in 1969.

By 1970, there were 6,500 Allstate Insurance agents. That year, Allstate unveiled a mutual fund. In 1972 Allstate entered the mortgage banking business by acquiring National First Corporation. The following year, the company purchased PMI Mortgage Insurance Company, marking its initial entry into that field. Around the same time, Allstate insurance became available through independent agents in rural areas not covered by agents working directly for the company. For 1973, Allstate generated earnings of $203 million, nearly 30 percent of parent company Searss total.

The 1970s also saw Allstate increase its presence abroad dramatically. In 1975, the company entered the Japanese market through a joint venture (Seibu Allstate Life Insurance Company, Ltd.) and purchased Lippmann & Moens, a group of Dutch insurance operations. The remainder of the decade also included the formation of Tech-Cor, Inc., an auto-body research and reclamation firm, in 1976; the establishment of a Commercial Insurance Division (later called Allstate Business Insurance) to oversee the companys commercial operations in 1978; and the formation of a new wholly owned subsidiary, Northbrook Property and Casualty Insurance Company, in 1978. Allstate Reinsurance Co. Limited, a London Subsidiary of Allstate International, was incorporated in 1978. Two new policies, the Basic Homeowners Policy and the Healthy American Plan (life insurance) were introduced in 1978 and 1979, respectively.

Allstate was the sixth largest insurance group in the United States by 1980. At that time, the company was operating four zone offices, 31 regional offices, 219 claim-service offices, 687 automobile damage inspection stations, and 2,720 sales/service centers. For 1980, the company reported $450 million in net income on revenue of $6.2 billion, as well as assets of $10.5 billion and 40,000 employees. In 1981, two Dean Witter Reynolds insurance companies, Surety Life Insurance Company and Lincoln Benefit Life Company, became part of the Allstate Life Insurance group. Allstate, Dean Witter, and Coldwell Banker joined forces the following year to form the Sears Financial Network, first appearing in eight Sears stores and later expanding to many other locations.

Donald F. Craib, Jr. was named chairman of the board at Allstate in 1982. Under Craib, a major reorganization of Allstates corporate structure was initiated. The New Perspective, as it was called, entailed the elimination of zone offices, as well as other streamlining and decentralizing moves. A new, more flexible life insurance plan, the Universal Life policy, was also unveiled that year. By the end of 1983, Allstates claim staff consisted of 12,500 employees, the largest force in the industry.

In 1985, Allstate rolled out its Neighborhood Office Agent (NOA) program. In its first year, the NOA program placed 1,582 agents in 944 locations. The following year, the company launched an extensive $30 million advertising campaign that included nine new television commercials and the creation of a new tag line: Leave It to the Good Hands People. The campaign, which extended to print and radio as well, emphasized family protection. For 1986, the company reported income of over $750 million on revenue of $12.64 billion.

A number of business insurance developments took place at Allstate in 1987. First, the companys Commercial Insurance Division and Reinsurance operation were combined under the Business Insurance umbrella. In addition, two new programs were launched in that area. The Topflight program created special ties between the companys Northbrook subsidiary and certain independent agents. The STAR-PAK program offered a new business package policy that provided special services such as the delivery of price quotes within five hours. Allstate also launched the Allstate Advantage Program, a three-tiered rating system for auto insurance, in 1987. A new board chairman and chief executive officer, Wayne E. Hedien, was named in 1989.

Throughout the 1980s, the company had grown at a rate that could not be supported by its profits. It had roughly doubled its premiums during the decade, but in doing so it had burdened itself with a large number of high-risk policyholders. This growth had increased the companys costs both in terms of claims payouts and regular operating expenses. Meanwhile, the company also had to contend with customer backlash against insurance rates, including an ongoing court battle in California involving the 1988 passage of Proposition 103, which called for a rollback on premium rates. Allstates income shrank from $946 million in 1987 to $701 million in 1990. Resolving Proposition 103 issues put some major concerns behind the company.

After a solid year in 1991, Allstate suffered losses from Hurricane Andrew in 1992 that obscured an otherwise outstanding year for the company. This natural disaster led to a net loss of $825 million for the year. Subsequently, an insurance crisis developed in Florida. The legislature was unable to enact a solution the following spring, and Allstate announced a plan to nonrenew some 300,000 Florida property customers living in high hurricane risk areas. A state-mandated moratorium on nonrenewals was imposed until November 15, 1993. On November 9, 1993, the Florida Legislature approved a catastrophe fund bill designed to protect insurance consumers and the insurance industry from the financial devastation caused by severe hurricanes. The bill enabled Allstate to renew about 97 percent of its Florida property customers in 1994.

In June 1993, 20 percent of Allstate was offered to the public. The offering was an extraordinary success, generating $2.4 billion in capital. That sum was the largest ever raised in an initial public offering in the United States. The separation of Allstate from Sears was part of Searss new focus on its traditional business of merchandising. With newly found financial strength from the successful public offering, Allstate posted impressive numbers for 1993: a record net income of $1.3 billion on revenue of $20.9 billion.

Principal Subsidiaries:

Allstate Insurance Company; Allstate Automobile and Fire Insurance Co., Ltd. (Japan, 50%); Allstate Life Insurance Company; Allstate Indemnity Compnay; All state Life Insurance Company of New York; Allstate Reinsurance Co., Ltd.; Glenbrook Life Insurance Company; Glen-brook Life and Annuity Company; Lincoln Benefit Life Company; Northbrook Life Company; Northbrook Property and Casualty Company; Northbrook National Insurance Company; PMI Mortgage Insurance Company; Surety Life Insurance Company; Saison Life Insurance Co., Ltd. (Japan, 50%); Samshin Allstate Life Insurance Co., Ltd. (Korea, 50%); TechCor, Inc.

Further Reading:

Allstate Corporation, This is Allstate, Northbrook, IL: Allstate Corporation.

Allstate Insurance: Playing the Field from Now On, Business Week, July 11, 1959, pp. 76-88.

Boe, Archie R., Allstate: The Story of the Good Hands Company, New York: Newcomen Society, 1981.

Cole, Robert J., Allstate Chief Heads an Investment Army, New York Times, May 3, 1970, p. F3.

Durgin, Hillary, A New Hand Dealt to 1990s Allstate, Crams Chicago Business, December 20, 1993, p. 1.

, Allstate IPO Scores Big, Crains Chicago Business, June 7, 1993, p. 38.

Eisner, David M., Good Hands People Play Tough, Propelling Allstates Profits Up, Wall Street Journal, October 4, 1974, p. 1.

Levin, Gary, Allstates Ads Hand It to Family, Advertising Age, January 20, 1986, p. 1.

Something New in Stock for Sears Shoppers, Business Week, April 25, 1970, pp. 120-22.

Steinmetz, Greg, Allstate Stock Sale Raises $2.12 Billion, Largest Initial Offering for a U.S. Firm, Wall Street Journal, June 3, 1993, p. A3.

Robert R. Jacobson

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The Allstate Corporation

The Allstate Corporation

2775 Sanders Road
Northbrook, Illinois 60062-6127
USA
Telephone: (847) 402-5000
Fax: (847) 326-7519
Web site: www.allstate.com

OUR STAND CAMPAIGN

OVERVIEW

The Allstate Corporation, America's longtime number two auto insurer, faced new challenges in the 1990s when competitors such as GEICO and the Progressive Corporation blanketed television with spots playing up the low prices of their policies. Long reliant on its slogan "You're in Good Hands," Allstate found itself in need of a brand refurbishing to counteract the inroads made by these direct marketers. In November 2003 Allstate released the "Our Stand" marketing campaign, its first to feature a celebrity spokesperson, actor Dennis Haysbert, known for playing the president of the United States on the hit television series 24.

While "Our Stand" included radio, print, and Internet elements, the core of the campaign was the television spots featuring Haysbert. The spots offered a soft sell in which Haysbert made the case that price was not everything when it came to buying car insurance—a relationship with an agent was important as well—and vouched for Allstate's integrity and commitment to take a stand for customers and promote their interests. Although the company did not reveal the advertising budget for the campaign, Allstate was reported in the press to have increased its ad budget 56 percent to more than $120 million in 2003, a level it maintained in 2004 and 2005.

"Our Stand" helped Allstate reestablish its position in the marketplace. The company reported that the number of consumers contacting Allstate through its sales agents, website, and call center had increased after the campaign began, but it did not provide any financial data to support the claim. Haysbert's contract was extended through 2006, however, indicating that the company was pleased with the campaign's effectiveness.

HISTORICAL CONTEXT

Allstate was credited with having the oldest surviving tagline in paid advertising: "You're in Good Hands with Allstate," which dated back to 1951, when a print ad first depicted a pair of hands cradling an automobile. (The oldest tagline in use was "Only You Can Prevent Forest Fires," a long-standing public-service effort produced by the Advertising Council; it had been used since 1947.) Throughout its history Allstate and its rivals produced advertising that was serious in tone, emphasizing such company virtues as trust and reliability and never mentioning price. Then, in the 1990s, GEICO, a direct marketer of car insurance ranked seventh in sales, upset the status quo by bombarding the television airways with humorous commercials that challenged the likes of number two Allstate and market leader State Farm solely on the basis of price. The Progressive Corporation soon followed suit, and Allstate came under increasing pressure to protect its market share.

To keep its slogan fresh and maintain relevance in the marketplace, Allstate offered variations on the "Good Hands" theme. The insurer also dabbled with celebrity endorsers. In 2001, for example, Allstate began a television, print, and radio advertising campaign that used the tagline "The Right Hands Make All the Difference." The advertisements featured football players Joe Montana and Jerry Rice as well as inventor Ann Lai, all of who whom relied on their hands in their professions. But the "Right Hands" campaign failed to stem a drop in Allstate policyholder growth, and after 18 months it was retired, replaced by the "Our Stand" campaign, which was the first Allstate advertising campaign to center on a celebrity spokesperson: actor Dennis Haysbert.

An African-American, Haysbert had acted in numerous films and television shows since getting his break in 1979, when he first appeared on the television series The White Shadow. But he achieved true celebrity status in 2001, when he was cast in the television series 24 to play Senator David Palmer, a character who would later become president. At the core of Palmer's character was moral integrity, an attribute that viewers associated with Haysbert the actor and that thus made him an ideal advocate for Allstate's message. Jill Weaver, Allstate's vice president of brand strategy, was quoted in a press release as saying that Haysbert embodied "the spirit of the Allstate brand. Experienced, honest, and understanding, with a sense of strength and conviction."

TARGET MARKET

The "Our Stand" campaign sought to update the brand image of Allstate while appealing to a more diverse customer base. In essence, auto insurers were faced with the difficult task of reaching one of the broadest markets imaginable: anyone who drove a car, whether they were male or female, young or old, and regardless of ethnicity. In this regard Haysbert was a good choice as spokesperson; he had wide appeal, even with younger consumers, despite the fact that he was born in 1954. Allstate's main pitch was that picking an insurance company was more involved than just choosing the lowest price. More important, the company argued, was the service a policyholder could expect and the integrity of the insurance agents and of the company that stood behind them. Hence, the "Our Stand" target audience was somewhat older than the demographic targeted by GEICO and Progressive. This older market also had more money to spend on car insurance and placed greater value on a relationship with a broker and the solidity of the insurance company backing the policy.

COMPETITION

In terms of market share, State Farm was Allstate's top rival. It controlled about 18.5 percent of the market in 2004, compared with Allstate's 10 percent. Next in line were Progressive with 7.1 percent and GEICO with 5.5 percent. Rounding out the top 10 in direct premiums written were Farmers Insurance Group (4.9 percent), Nationwide Group (4.5 percent), United Services Automobile Association Group (3.5 percent), American International Group (3 percent), Liberty Mutual Group (2.8 percent), and American Family Insurance Group (2.2 percent). All insurers were boosting their marketing budgets, eager to take business from each other, a result in large measure of the increasing profitability of the auto-insurance business. Because cars had become better built, they needed less repairs and were involved in fewer accidents. Consequently, insurance companies had fewer claims to pay out. Moreover, America's population was growing older, resulting in people driving slower, again leading to a decrease in accidents, greater profits for insurers, and a heated scramble to peel away the customers of rivals.

In addition, Allstate, State Farm, and other old-guard broker-based insurers found themselves competing against the likes of GEICO and Progressive in another way. Mya Frazier reported in Advertising Age, "It's a battle of the business model, pitting the call-center row of headset-wearing operators taking claims and signing on new customers against neighborhood agents who know a customer's kids and may even be a neighbor. It's pitting Internet price quotes [against] in-office consultations and the yearly search for a best price [against] a lifetime relationship with an agent." It was at this fundamental level that the "Our Stand" campaign made its case with consumers.

GOOD HANDS

Allstate's venerable slogan "You're in Good Hands With Allstate" was inspired by an incident in life of one of the company's general sales managers, Davis W. Ellis. In the spring of 1950 his youngest daughter was hospitalized with hepatitis. To ease his concern his wife told him not to worry: "We're in good hands with the doctor." That remark came to mind later in the year when Allstate was struggling to coin a slogan for its first national advertising campaign. Ellis shared the story about his daughter, and soon the company had settled on a slogan that endured for well over half a century.

MARKETING STRATEGY

In answer to GEICO and Progressive's blitz of advertising focusing on price, Allstate's "Our Stand" campaign made an emotional appeal to urge consumers to re-evaluate what was really important in insurance. Lisa Cochrane, the insurer's assistant vice president of marketing communications, told American Banker reporter Lee Ann Gjertsen, "We know that customers are looking for more than just a low price; they need good value, good protection. That's why they buy insurance or financial security products." At the same time, Cochrane noted, Allstate believed that "quality insurance should be affordable." A secondary purpose of the campaign was to promote research that, according to Allstate, revealed that 70 percent of customers who switched to Allstate saved $200. Moreover, because Allstate had in recent years become involved in banking and financial services, the "Our Stand" campaign served to build general awareness of what Allstate had to offer in addition to its core auto-insurance business.

The "Our Stand" campaign broke in November 2003. The crux of it was the television spots anchored by Haysbert, but the company also included radio spots that began airing later in the month, print ads that debuted in early 2004, and Internet executions. The first four TV spots were shot and produced by Sam Mendes, the director of the Oscar-winning film American Beauty. These initial spots set the serious tone of the more than 20 spots featuring Haysbert. In the spot titled "Pay Phone," Allstate took a subtle dig at GEICO and its telephone-based operation. The camera slowly zoomed in on Haysbert standing next to a pay phone on a dark, deserted stretch of road. In a low-key voice he asked, "If you needed your insurance, who would you call? Not the name of the company, but the name of the person? You got two seconds. Coming up blank? You may want to consider Allstate … You deserve a relationship with a real person. That's Allstate's stand. Are you in good hands?" A wide shot of the scene capped the commercial, with the Allstate logo and "You're in Goods Hands" tagline offering a counterpoint to Haysbert's final question.

A number of other commercials featuring Haysbert followed. In "Chop Shop" he stood in a dank garage where thieves ripped apart a stolen SUV to sell for parts, and he spoke about Allstate's 600-person fraud team. In "Guardrail" he stood next to a crumpled highway guardrail to talk about Allstate's 20 percent discount for people with good driving records. The spot called "Boiling Turkey" showed Haysbert in a backyard with a deep-fat turkey fryer, which was used to illustrate the potential of holiday mishaps, whether they were caused by fryers or car accidents on icy roads. In "Life Raft" he compared Allstate to a life raft and other insurers, such as GEICO, to little more than a circular life preserver—a zero. In addition, the spot promoted new policy features that dovetailed with the marketing campaign: Accident Forgiveness, which prevented rates from increasing in the event of an accident, and New Car Replacement, so that if a car was "totaled" the policyholder received a new car rather than a check that deducted appreciation.

Allstate built on the "Our Stand" campaign in 2004 and 2005. Haysbert appeared in television, radio, and print advertisements that were specifically aimed at African-Americans. Because research indicated that these consumers relied heavily on the referral of family and friends when buying car insurance, the advertisements centered on family reunions. Also in 2004 Allstate targeting the Hispanic market by airing four Spanish-language television spots featuring actor Esai Morales. The tagline for these executions was "Así piensa Allstate" (That's what Allstate believes). The Hispanic component of the "Our Stand" campaign also included radio, print, and outdoor elements. In addition, the "Our Stand" campaign was used in 2005 to introduce a new Allstate product: Your Choice Auto Insurance, which could be customized to suit individual needs.

OUTCOME

Allstate was pleased with the "Our Stand" campaign. The television spots polled well with consumers. According to USA Today's Ad Track survey, 17 percent of consumers liked the commercials "a lot." While that number was below the Ad Track average of 21 percent, it represented a strong showing in a category that consumers generally did not like. The campaign was also recognized by advertising trade publication Adweek, which named "Boiling Turkey" a "Best Spot" in December 2003. Haysbert's work was also much appreciated by Allstate. In fall 2005 the company renewed his contract to serve as Allstate spokesperson through the end of 2006. The most important measure of the campaign's success, however, was to be found on Allstate's balance sheet. While the company reported no hard numbers, it did note in its 2003 annual report, "[R]eaction, as measured by increased contact with agencies, allstate.com, and 1-800-Allstate, has been positive." Allstate had pulled the plug on the previous marketing campaign after 18 months, so the fact that the company renewed its commitment to Haysbert through 2006 indicated that the "Our Stand" campaign was having an appreciable effect on Allstate's bottom line.

FURTHER READING

"Allstate Addresses Latino Marketplace." Adweek (midwest ed.), May 18, 2004.

"Allstate Signs Celebrity to New Ads." Best's Review, January 2004, p. 64.

Anderson, Mae. "53 Years Later, Still in Good Hands." Adweek, February 3, 2003, p. 40.

Frazier, Mya. "Progressive, Geico Prod Auto Rivals into Price War." Advertising Age, February 28, 2005, p. 4.

Gjertsen, Lee Ann. "Insurers Cut Marketing, but 3 Campaigns Shine." American Banker, March 11, 2004, p. 11.

Goch, Lynna. "Get Emotional: Reaching Out to Consumers' Feelings Is the Key to Successful Insurance Marketing." Best's Review, July 2005, p. 15.

Howard, Theresa. "Presidential Allstate Ads Counter the Gecko." USA Today, August 16, 2004, p. 6B.

Kirk, Jim. "Allstate's New Campaign Takes Stand on Old Values." Chicago Tribune, November 11, 2003.

Yerak, Becky. "Allstate's Ads Push Agenda." Chicago Tribune, November 24, 2005.

                                                Ed Dinger

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