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allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998
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allstateFinancial Highlights, Shareholder Letter and Our Customer Family 1998

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  • 1. Financial Highlights $ in millions except per share data 1998 1997 % change Revenues $25,879 $24,949 3.7 Operating income 2,573 2,429 5.9 Net income 3,294 3,105 6.1 Total assets 87,691 80,918 8.4 Shareholders’ equity 17,240 15,610 10.4 Per Common Share* Operating income 3.08 2.78 10.8 Net income 3.94 3.56 10.7 Dividends 0.54 0.48 12.5 Shareholders’ equity 21.00 18.28 14.9 Market value–closing 38 1⁄2 45 1⁄4 –high 52 3⁄8 473⁄16 –low 361⁄16 28 1⁄8 *Per common share data have been restated for the effects of the 2-for-1 stock split paid on July 1, 1998. Net Income Net Income per Total Assets Diluted Common Share $ in millions $ in billions 484 1,904 2,075 3,105 3,294 0.54 2.12 2.31 3.56 3.94 61.0 70.0 74.5 80.9 87.7 94 95 96 97 98 94 95 96 97 98 94 95 96 97 98 1
  • 2. To Our Shareholders T his is my first letter to shareholders as chairman, president and chief executive officer of Allstate. I welcome the opportunity to lead 53,000 of the finest employees and agents in America, whose combined efforts led to another record year for the company. 1998 was a watershed year for another reason, too: Jerry Choate, my predecessor and good friend, announced his retirement after a stellar 37-year career at Allstate. Starting as an opera- tions supervisor in California, Jerry rose through the company and graced everything and everyone he touched with a sense of purpose and integrity. He took over as CEO in 1994 and under his stewardship the company and its shareholders thrived. From 1994 to 1998, during his leader- ship, we increased operating income to $2.6 bil- lion and improved earnings per share from $.30 to $3.08. The value of Allstate stock, although Ed Liddy with down in 1998, increased more than $21 billion, Jerry Choate from $11.88 to $38.50 per share. (at right, below, His emphasis on people resulted in numerous and bottom employee and diversity honors, including “best photo), former company to work for” awards from Fortune, chairman and Working Mother and Minority MBA magazines chief executive in 1998. He leaves a very strong legacy. officer. Outstanding Results In 1998 we achieved outstanding bottom line results in the face of an increasingly competitive market. Operating income was $2.6 billion, or $3.08 per share, a 10.8 percent increase on a per-share basis, over the prior year. Net income, which includes capital gains, was a record $3.3 billion, or $3.94 per share. Our capital position, which helps fund new growth, is in the best condition in the company’s history. Most importantly, we continued to sharpen the strategies and accelerate the programs that will enhance our sales and claims operations, bond 2
  • 3. old and new customers ever more closely to us Strengthening the Customer Experience First and foremost, we’re strengthening the through unrivaled service, and position the cor- Allstate customer experience. For two years we’ve poration to generate strong growth in the future. been focusing on the best ways to provide a We are blessed with many unique assets. We unique insurance experience to our customers. have the most highly recognized brand name in That, in turn, will drive higher satisfaction, the business. We have a dedicated agency force greater retention and improved growth rates. In 15,500 strong and a claims organization second last year’s annual report letter, we described how to none. We have a broad range of insurance our intensive research has yielded highly valuable products, making it easy for consumers to get the information about what customers want and the protection they need. We have a high-quality type of service that appeals to them. investment portfolio that consistently achieves Since then our efforts have accelerated. In excellent returns. And we have world-class 1998, we readied new programs to sell and ser- research facilities and data management skills vice the customer better, to provide faster and that provide us with ongoing insights into what more efficient claims service, to improve our customers want. reliability and prove our loyalty, and to price The Need to Grow our product more effectively. Our challenge is to use our strengths to grow — Many important initiatives in sales and claims faster and more profitably. It won’t be easy, because are being introduced in 1999, including: the competitive environment is fierce. New as s Expanded agency hours during the week and well as traditional competitors are finding more on Saturdays, to make it more convenient for ways to deliver an increasing array of financial customers to have access to account information products and services. Strong industry operating and talk with a licensed insurance professional. and investment performance are creating substan- We also plan to add several hundred agents to our tial excess capital, intensifying the battle for the sales force. customer. Declining inflation and lower interest s Seamless phone links from agents’ offices to rates are adding more pressure on companies to call centers where sales representatives can find innovative ways to grow their business. All answer customer questions 24 hours a day, seven of this has led to intense price competition. days a week. No other insurer can offer all these In this competitive environment, our premium benefits — licensed professionals to serve cus- growth is not yet in line with our own or the mar- tomers in person, weekend and longer weekday ket’s expectations. As a result, our stock price fell office hours and 24-hour coverage. Quite simply, 15 percent in 1998, after having soared 56 per- we’re making it easier for customers to do busi- cent the previous year. ness with us. Profitable top-line growth, the engine for s New target marketing programs to make us prosperity in the years ahead, is our No. 1 priority more attractive and competitive with selected in the company. Allstate customers and prospects. So how do we get there? We’re focusing on s An easier renewal process and increased con- improving our core business, and also looking at tact with key customers to encourage new policy new opportunities for growth as well. We plan to purchases and improve retention rates. grow Allstate faster, in more ways, more places and with more products than ever before. 3
  • 4. s New desktop technology and processes to this market, in order to reach customers who handle questions and allow customers to give us prefer to do business this way. claim information more easily. This is important We will also be expanding our life and savings at a claim “moment of truth,” when customers business, starting with our own auto and home- look to us for fast and empathetic help. owner customers. Only 1 in 11 Allstate auto and homeowner customers currently are insured with s Introduction of property claims coordinators our life and savings products, so increasing cross- as a single point of contact to help guide cus- line sales is a major priority within the company. tomers through the claims process. We’re also developing new life and savings products. s Customer contact in most cases within 24 To that end, we set up the Allstate Federal Savings hours of notice of loss. In some states we’re test- Bank in 1998 to begin providing new financial ing a program to repair cars with minor damage products, such as cash management and personal within 72 hours. We’re working to reduce signifi- trust services, to our customers. And in March cantly the number of days it takes to inspect and 1999, we announced a joint venture with Putnam settle auto claims. Investments to sell variable annuity insurance Overall, in both our sales and claims organi- products. We’re piloting programs to train and zations, we’ve been re-engineering the way we license some of our life specialists and producers operate to make it easier for the customer to do as fully accredited financial advisers, and we’re business with us. The goal is to raise service levels looking at acquiring companies whose producers to new heights, thereby attracting more new provide financial advice. We’re also exploring the customers and retaining more current ones. An expanded use of new Internet channels to sell our improvement of just 1 point in retention is worth life and savings products, some of which are sold $180 million a year in incremental revenue, so on line now. retention initiatives are a high priority. Another sizable opportunity lies outside the New Ways to Grow U.S. We already market a full range of personal The experience, expertise and scale of our agency property and liability products in Canada. We and claims organizations give us a huge competi- have aggressive growth plans in Germany and tive advantage in our core markets. But just as Japan, where we currently have just auto insur- important, our strengths also serve us well as we ance, and also in South Korea, the Philippines increase our focus on other channels of distribu- and Indonesia, where we sell life coverage. We’ll tion. We plan to build or buy capabilities that will introduce auto insurance in Italy later this year. make us a force beyond our traditional base. We intend to build solid businesses in countries One important channel is independent we view as long-term attractive markets. agents, who sell Allstate and other insurance company products countrywide. We already have The Core of Allstate extensive experience in this area. We’ve worked Our core is, and will continue to be, the Allstate with rural independent agents for more than 25 brand and the Allstate agent. That’s where we’ll years. More recently we’ve built our Deerbrook focus most of our attention and where most of brand into a top player by selling non-standard our success in 1999 and the years ahead will insurance through the independent agency channel. come. But for us to achieve sustainable, profitable We plan to significantly increase our presence in growth year-in and year-out, we must utilize ad- ditional channels, brands and products. We must start reaching segments of the marketplace we don’t 4
  • 5. currently reach. Ever-changing customer needs for products and services demand it. The Allstate Corporation will, over time, be multi-channel, multi-brand, multi-product and multi-national. Not all these initiatives will bear fruit right away, but they plant the seeds for future growth. In the pages that follow, we describe how our product breadth and expertise can help serve cus- tomers for a lifetime, building relationships that generate trust, loyalty and greater business. And we go on to describe the high standards set by our employees, in the workplace as well as in the communities they serve. Allstate is a great company, a caring company, with a strong record of safety innovations, product and service excellence, community support, and solid shareholder returns. I’m confident that with our strengths, strategies and the resolve to provide the highest level of service in the industry, we’re on the right track for continued growth and prosperity. Finally, I’d like to express my thanks to one of our directors, Mary Alice Taylor, who stepped down from the board last year following the merger of Citibank and Travelers. Mary Alice made valuable contributions to the board and corporation during her tenure here, and we will miss her. I’d like to welcome to the board two new directors — Ronald T. LeMay, president and chief operating officer of Sprint Corporation, and H. John Riley Jr., chairman, president and chief executive officer of Cooper Industries Inc. I’d also like to acknowledge Edward W. Young, who headed the international and specialty operations and retired in 1998 after a 33-year career at Allstate. Our board and senior management team are crucial to Allstate’s future, and their out- standing services were instrumental in guiding us through our first five years as a public company. Edward M. Liddy Chairman, President and Chief Executive Officer 5
  • 6. Our Customer Family Teen Driver Fir nt e st em Re tir sid Re enc e Strengthening the customer experience… at every stage of life. Empty we d s Nes w ly t Ne Cla y Bab im First Building Stronger Relationships: At Allstate, satisfying customers means more than just great claims service. It also means providing advice, information and the right coverage for the changing needs of our customer family at every stage of life. We’re building on our world-class reputation for product excellence and superior service to deliver greater reliability, to enhance loyalty and to strengthen our best-in-class claims operation. The stories that follow relate how, as our customer relationships grow, we can build stronger ties and generate more business. 6
  • 7. Strong customer from newborns to relations, like retirees and new strong family ties, drivers to empty are built on de- nesters. The stories pendability, loyalty that follow illustrate and understanding. how great service For more than 60 can lead to strong years Allstate has relationships, and served the insur- increased business ance needs of over time. millions of customers— The Allstate Customer Family Tree Aaron and Angie Doug, Heidi and Mike and Robin Lynn and Anne Cay Chavez Jr. Amy Bydash Robin Summers Polly Colin Newbold Echols Miller Auto Auto Auto Auto Home Auto Auto Renter Home Home Life Home Home Life Life Life Umbrella Umbrella Boat Motor Club 7
  • 8. ¢ Cay Chavez Jr. Wichita, Kansas Allstate Customer: 9 months Policies: 1 Agent: Anthony Newry The Allstate Customer Family Tree Cay Chavez Jr. Auto New Drivers: Every year 1.5 million 16-year-olds slide behind the wheel for the first time. Allstate can meet their needs with our broad auto coverage and auto safety pro- grams. Allstate strongly supports teen safety programs and graduated licensing laws. Last year Allstate agents ordered almost 1 million company safety brochures and videos to distribute to their teenage customers. Safer, more experienced drivers make the nation’s roadways safer for everyone. 8
  • 9. Cay Chavez Jr., 17, agent, who talked to with the ’85 Cougar them about the he bought and responsibilities of restored last year, safe driving. “We when he began dri- got the teen driver ving: “I love this brochure, and I car but it costs signed the contract money, so I’m that says I’ll call working to help pay home for a ride if for the upkeep and I’m ever out drink- the insurance.” ing,” Cay says. “It Before he got his makes a lot of driver’s license, his sense.” mom took him to see their Allstate
  • 10. Amy Bydash, 21, on any of it worked, so campus at the my agent explained University of Toledo: the various provi- “When I got my car sions. He made it and my own apart- real easy for me.” ment, I went to my Amy has never had Allstate agent and an accident or he set me up with break-in, but she the insurance I says her policies needed. Even with give her a good my limited income, feeling. “I know if these policies are something hap- very affordable. I pened with my car had no idea how or apartment, I’m covered all around.”
  • 11. ¢ Amy Bydash Toledo, Ohio Allstate Customer: 2 years Policies: 2 Agent: Rich Brown The Allstate Customer Family Tree Cay Chavez Jr. Amy Bydash Auto Auto Renter Going it Alone: Settling into a first household is a big move. Proper liability protection and coverage for personal belongings, even for young people just starting out on their own, is important. And many mortgage companies require proof of adequate coverage before they’ll approve a loan. Whether it’s an apartment, condo or house, Allstate has the protection and agent expertise to help first-time renters and buyers feel right at home. 11
  • 12. ¢ Aaron and Angie Polly Paradise, California Allstate Customers: 4 years Policies: 3 Agent: Larry Spencer The Allstate Customer Family Tree Aaron and Angie Cay Chavez Jr. Amy Bydash Polly Auto Auto Auto Renter Home Life Wedding Vows: Young married couples pledge their devo- tion “in sickness and in health,” but don’t always plan for life’s unexpected problems. Allstate agents can help newly- weds get a good start by providing financial advice and proper coverage for their belongings, as well as adequate life insurance. There’s peace of mind in knowing if some- thing unexpected happened, they’re financially protected. 12
  • 13. Aaron and Angie in the future.” He Polly were far- enabled them to sighted about their lower their rates, financial responsi- too. “I had another bilities: “We’re auto policy at the committed to life- time, but my time planning and Allstate agent saving for the showed us how a future,” says Aaron. multiple line dis- “When we first got count was actually married, we went to less expensive. We my Allstate agent want the best for and he guided us to each other and our the best plan for future. Allstate is our needs, now and helping us make that happen.”
  • 14. Heidi and Doug policy. And in the Newbold with their meantime, if some- baby: “When Colin thing happens to was born our us, he’s protected.” Allstate agent The Newbolds also helped set up life rely on their agent coverage for him. In for auto and home- the future he can owner insurance. convert it to his “It gives us peace own universal life of mind to know we have the right coverage.”
  • 15. ¢ Doug and Heidi Newbold with 6-month-old Colin Bedford, New Hampshire Allstate Customers: 10 years Policies: 4 Agent: Jim Parolin The Allstate Customer Family Tree Aaron and Angie Doug and Heidi Cay Chavez Jr. Amy Bydash Polly Newbold Auto Auto Auto Auto Renter Home Home Life Life Umbrella Baby Makes Three: 4 million babies are born in the U.S. every year. Newborns are a blessing, but they also create huge financial responsibilities. Allstate agents can offer a wide variety of life insurance policies to make sure the family wage earners, as well as the infant, have adequate coverage. It’s also a good time to review auto and home- owner policies. That way the expanding family has the broadest and best protection possible. 15
  • 16. ¢ Robin D. Summers Mount Vernon, New York Allstate Customer: 3 years Policies: 2 Agent: James R. Jubilee, Jr. The Allstate Customer Family Tree Aaron and Angie Doug and Heidi Cay Chavez Jr. Amy Bydash Robin Summers Polly Newbold Auto Auto Auto Auto Home Renter Home Home Life Life Life Umbrella Moment of Truth: Life is unpredictable. When an accident or tragedy occurs, good insurance coverage helps put people back on their feet. At Allstate, we deliver on the promise to help people recover. A strong brand name, financial strength, almost 70 years of experience and a claim organization second to none keep our customers protected—and secure against the unexpected. 16
  • 17. Robin Summers on a little boy. He remembers her hus- pushed the boy to band LeVerne: “He safety but was was well-educated, killed in the acci- well-respected, dent. Robin’s well-loved, a good Allstate agent was spirit.” He was also there to help. “He a hero: In May 1998 was so supportive, LeVerne, an actor, a good friend of the was returning home family. And without from his agent’s the life policy he office when he saw sold us, I wouldn’t a car bearing down have the financial security I have today.”
  • 18. Robin and Mike builds cash value to Echols, fishing near supplement their their home: “With retirement nest egg, our three kids grown and also saved up, we have more them money on time to relax. But their auto coverage. we’re also working “His advice on our for the day we can insurance needs retire. These are and savings has our prime savings been invaluable; years.” To help out, he’s given us the their Allstate agent most for our insur- set up a life insur- ance money.” ance policy that
  • 19. ¢ Mike and Robin Echols Birmingham, Alabama Allstate Customers: 12 years Policies: 4 Agent: Pete Russell The Allstate Customer Family Tree Aaron and Angie Doug and Heidi Mike and Robin Cay Chavez Jr. Amy Bydash Robin Summers Polly Newbold Echols Auto Auto Auto Auto Home Auto Renter Home Home Life Home Life Life Life Umbrella Boat Empty Nest: From diapers to diplomas, kids cost a lot of money. It’s hard to save money during the child rearing years. But when kids grow up and leave home, parents can start to focus on preparing for retirement. Allstate’s broad array of products and expert agent counseling can provide both protection and savings—and help feather the nest for the future. 19
  • 20. ¢ Lynn and Anne Miller Evergreen, Colorado Allstate Customers: 50 years Policies: 4 Agent: Naoma Eisenbach The Allstate Customer Family Tree Aaron and Angie Doug and Heidi Mike and Robin Lynn and Anne Cay Chavez Jr. Amy Bydash Robin Summers Polly Newbold Echols Miller Auto Auto Auto Auto Home Auto Auto Renter Home Home Life Home Home Life Life Life Umbrella Umbrella Boat Motor Club Golden Years: Nearly 10 million U.S. families enjoy retirement. Allstate agents and life specialists can help by assisting with life insurance and annuities, as well as estate and financial planning. Working with Allstate to structure a retirement plan that meets family members’ needs, and the needs of their heirs, can make the retirement years still more golden. 20
  • 21. Lynn and Anne Miller, retired and living in Colorado, have been Allstate customers for 50 Allstate Motor Club. years. “We bought Allstate’s always our first auto policy been very good for right after we got us, and we’ve never married and moved had occasion to to Chicago. Later think of switching. we moved to Texas Our agent gives us and added more all the personal coverage. We attention we’ve retired here in 1989 ever needed.” and added home- owners and the

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