The Allstate Management Discusses Q3 2012 Results - Earnings Call Transcript

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The Allstate (ALL)

Q3 2012 Earnings Call

November 01, 2012 9:00 am ET

Executives

Robert Block

Thomas J. Wilson - Chairman, Chief Executive Officer, President, Chairman of Executive Committee, Member of Equity Award Committee, Chairman of The Allstate Insurance Company, Chief Executive Officer of The Allstate Insurance Company and President of The Allstate Insurance Company

Steven E. Shebik - Chief Financial Officer and Executive Vice President

Matthew E. Winter - President of Allstate Auto, Home and Agencies

Don Civgin - President of Allstate Financial, Chief Financial Officer of Allstate Insurance Company and Executive Vice President of Allstate Insurance Company

Analysts

Josh Stirling - Sanford C. Bernstein & Co., LLC., Research Division

Ian Gutterman - Adage Capital Management, L.P.

Robert Glasspiegel - Langen McAlenney

Brian Meredith - UBS Investment Bank, Research Division

Michael Zaremski - Crédit Suisse AG, Research Division

Matthew G. Heimermann - JP Morgan Chase & Co, Research Division

Adam Klauber - William Blair & Company L.L.C., Research Division

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

Randy Binner - FBR Capital Markets & Co., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to The Allstate Corporation Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Robert Block, Senior Vice President, Investor Relations. Sir, you may begin.

Robert Block

Thanks, Matt, and good morning, everyone. Thanks for joining us today for Allstate's third quarter earnings conference call. First, Tom Wilson, Steve Shebik and I will provide some color on our results for the quarter. And then we'll go into a question-and-answer period. Also on the call are Don Civgin, Head of Allstate Financial and Insurance; Judy Greffin, our Chief Investment Officer; Sam Pilch, our Controller; and Matt Winter, Head of Auto, Home and Agencies. Don Bailey, who leads the Emerging Businesses, will not be able to join us today since he's on the East Coast a result of Superstorm Sandy.

Last night, we issued our press release and investor supplement and filed our 10-Q for the third quarter. We also posted a slide presentation to be used in conjunction with our prepared remarks. These are all available on our website.

Beginning with Slide 1, this discussion may contain forward-looking statements regarding Allstate's operations. The actual results may differ materially from these statements, so please refer to our 10-K for 2011, our 10-Q for the third quarter 2012 and our most recent press release for information on potential risks. This discussion will contain some non-GAAP measures for which there are reconciliations in our press release and on our website. And I will be available after this call to answer any follow-up questions you may have.

Now I'll turn it over to Tom for his perspective on our performance.

Thomas J. Wilson

Well, good morning. We appreciate you spending time with us today.

Before we discuss results, let me say a few words about Hurricane Sandy, which I know personally affected many of you. First, I hope you all are getting your lives back together. As you know, this was a massive storm affected most of the Eastern half of the country. If you look on Slide 2, you can see the breadth of that.

Putting it in comparison to other events, this is at least twice the breadth of Hurricane Katrina. The good news is that the wind speeds were substantially lower than Katrina and more like last year's Hurricane Irene. In fact, the winds speeds were about 2/3 of Katrina. And as you know, the damage is exponential as that speed goes up. And while it's, of course, too early to call ultimate damages, several modelers have put out insured loss estimates, Eqecat's at $5 billion to $10 billion, AIR's at $7 billion to $15 billion, with economic losses at twice that amount. If the storm's damage is over $8 billion in insured losses, that will make it the fifth-largest hurricane in U.S. history.

Of course, a lot of the damage at this point would appear to be caused by flooding. That is covered by your auto insurance. As you know, the federal government provides flood insurance, and it's typically not covered by people's homeowners insurance.

And of course, in these times of trouble -- that's when our company, Allstaters, do great work on behalf of our customers. We have 1,100 catastrophe claim adjusters out in the field as we speak; another 500 at our service centers. We have 24 mobile claim centers. We're reaching out to customers. We're doing advertising. We're walking the neighborhoods. We are very proud of the fact that we are either among the first, if not the first, to be there for our customers, and it's sort of a point of pride for us. We're out there helping them find a place to live, get food and clothing, assess their losses. And Allstaters really do an amazing job of providing for the needs of our customers, being empathetic and supportive at this time.

As you know, our customer focus is central to our strategy. In fact, we've just got the J.D. Power Auto Claims Satisfaction results this week, and our overall satisfaction on auto claims increased significantly. We're now in the high satisfaction tier, above the industry average and several other well-known insurance brands.

Now we all want to know, of course, how this storm -- much this storm will ultimately cost us, and it's obviously too early to estimate the impact of that storm. However, the catastrophe is not expected to have a material impact on our overall financial condition. Obviously, at this time, our focus is on our customers, not our monetary losses. Ultimately, of course, we do provide an estimate for cat losses in 1 month if it surpasses $150 million. We typically do that by the third Thursday of the following month. Because this event occurred at the end of a month and it involves such extensive damage, we may not have enough information to develop a credible estimate by November 15. This way that Thursday falls is really 15 days after the end of the month. But as soon as we have an estimate, we'll put one out.

Now let's move on to discuss results for the quarter. I'll focus my remarks on our performance relative to our 2012 priorities. And then Bob and Steve will cover the quarterly results in greater detail.

So moving to Slide 3. Our strategy, of course, is to provide unique products to each of the 4 customer segments in the marketplace, which you can see on the top there, and it is working. The Allstate brand serves those customers who prefer to purchase competitively priced branded products and want local advice and counsel. In this business, we've introduced several new differentiated products including Claim Satisfaction Guarantee, Drive Wise, Good Hands Roadside and House & Home.

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