Esurance Continues Growth as Allstate Profits Down in 3Q

The Allstate Corporation, Northbrook, Ill.Allstate’s earnings in the third quarter dove a substantial 57 percent after the insurer sustained a multi-million dollar loss on the sale of its life insurance unit, according to the company’s financial statement released this week.

But executives said in a Thursday conference call with investors that it is positioning its car insurance subsidiary, Esurance, for “long-term profitability” with advertising and product-bundling campaigns.

CEO Thomas Wilson told investors that the loss in net income, down to $319 million from $723 million during the same period last year, was because of a “$475 million after-tax loss from [the] pending sale of Lincoln Benefit Life.”

The parent brand of Allstate performed well in its auto coverage sector, with standard auto policies increasing 1.1 percent versus a year ago and 0.6 percent versus last quarter.

“[The Allstate brand] serves customers who prefer local advice, assistance and a branded experience,” Wilson said.

In addition, Wilson said that Allstate’s performance in auto insurance showed “continued improved retention and stronger business growth.”

Esurance Sees Big Growth in Premiums, Policies

Wilson used better terms when speaking about Esurance’s growth in the third quarter.

The Allstate subsidiary “continues to generate significant premium and unit growth as it successfully leverages the benefits of being part of Allstate,” Wilson told investors.

Premiums for Esurance grew 27 percent while the number of active policies increased by 32 percent compared to last year’s third quarter.

“Increased advertising that’s more effective, better pricing for preferred-risk auto customers and improved claim practices are designed to acquire and retain profitable lifetime valued customers,” Wilson said. “The Esurance team is working to adjust pricing and underwriting to ensure that this growth will generate long-term profitability.”

Allstate closed a $1 billion acquisition of Esurance and Answer Financial in October 2011 in a bid to strengthen its online presence.

Esurance “serves a self-directed, brand-sensitive customer,” Wilson said, and is a direct-to-consumer car insurer that bases much of its business online. Answer Financial specializes in consumer information and quote comparison services.

Allstate will try to strengthen its business across coverage lines as it pursues a bundling campaign through Esurance that will target policyholders who own vehicles to offer them policies with both auto and homeowners coverage.

“In the Esurance side, you’re not seeing people pursue the bundling, and we’re just getting starting there,” Robert Block, vice president of investor relations at Allstate, told investors during the conference call. “We just rolled out in one state, homeowners, but Esurance has not only the potential of a good low-cost model and an ever-increasing strength in its brand to be able to then broaden the product suite from there.”

Wilson said that new business strategies could slow the current boom in Esurance’s business in the coming year.

“We expect growth to decline somewhat in 2014,” he said.

 

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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