Allstate Poised to Benefit From Reduced Exposure Along East Coast

November 5, 2012

Allstate Corp.’s chief executive said the company’s effort during the past five years to reduce exposures along the East Coast is helping to lower Sandy-related losses.

“It’s still too early to tell on either the volume, the mix or the severity. But I can tell you that from a risk management standpoint, we are down in policy counts in all of the affected areas by a reasonably substantial amount,” said CEO Thomas Wilson during the Nov. 1 earnings call.

“The actions we took over the last five years in places like New York, New Jersey, all along the East Coast, have lowered the policy counts we have there. That will obviously impact what our losses are relative to what they would have been,” said Wilson.

Matthew Winter, president of Allstate Auto, Home and Agencies, also said during the earnings call that Allstate has about 16 states where the company is either closed for homeowners’ new business or have significant new business restrictions in them. “I think Sandy is a good indication of why we did that, and it will prove to have been a good move for us to reduce our exposure in some of these coastal areas,” said Winter.

When asked about regulators’ announcements that hurricane deductibles would not be applicable for Sandy, which had been reclassified as a “Post-Tropical Cyclone” before landfall, CEO Wilson said Allstate was “prepared for that.”

“A hurricane gets its energy from the water. The winter storm, or Northeaster, gets its energy from the temperature differential in the air. And so that’s why it’s been classified that way,” he said. “That’s what’s fair and accurate for our customers. I’m not sure where we are down in the far Southern states. But the damage is much less severe down there.”

Wilson also said the lack of hurricane deductibles would not substantially raise industry’s loss figures.

“Not everybody has a tropical cyclone deductible. It’s complicated because even when you have it in the marketplace, not every policy has it. So I’d say, to the extent it’s not triggered, industry losses would obviously be higher than when it’s triggered because that is a higher deductible than you would have on a normal all-peril policy,” said Wilson. “But I don’t think it would substantially alter the overall numbers, which are such big wide slots anyway. You know that the ranges are billions of dollars, so I don’t think it would impact it much.”

 

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Latest Comments

  • November 6, 2012 at 4:56 pm
    Really says:
    That's a good catch. You should fault a business for mitigating risk. When premiums shoot up for State Farm let's jump on them for writing business in a high risk area. Goo... read more
  • November 5, 2012 at 3:28 pm
    Big D says:
    While people suffer Allstate touts it's profits for not writing business here. Stockholders ~ you're in "good hands". NY, NJ, CT just remember this when your Allstate auto r... read more
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