History and Current Status of Allstate

Allstate is the largest publicly held insurer in the U.S. The company is also the nation’s second-largest home and auto insurer, behind State Farm. Founded in 1931, Allstate began as a division of Sears, Roebuck and Company. In 2007, the corporation reported revenues of $36.8 billion and a net income of $4.6 billion. Allstate sells a variety of insurance lines, including home, auto, life, and commercial insurance. Allstate now also offers investment and retirement products as well as some banking services. In this post, we’ll discuss Allstate’s current status and evaluate their performance as a home insurer.

Financial Performance

Standard & Poor’s recently downgraded Allstate’s financial outlook from stable to negative as of October 2008. S&P attributed the downgrading to Allstate’s capital adequacy deterioration, a result of the company’s substantial catastrophe losses and sizeable investment losses. The company’s aggressive dividend and share-repurchase strategies also hurt its financial rating. However, S&P also confirmed that Allstate has retained its A+ counterparty credit rating.

Customer Service

Every year, J.D. Power & Associates survey thousands of homeowner’s insurance policyholders to assess their satisfaction with their insurance company. Customers can rate their insurers on six different criteria, with the ratings ranging from one, meaning among the worst, to five, meaning among the best. Here is how Allstate fared on the six evaluation criteria:

• Overall experience: 3/5
• Policy offerings: 3/5
• Pricing: 2/5
• Billing and payment: 3/5
• Contacting the insurer: 2/5
• Claims: 2/5

Dropping Coverage

Many homeowners may not even be able to consider Allstate as a potential home insurer because the company has recently dropped coverage in many coastal states. After Hurricane Katrina, many home insurance companies have begun dropping catastrophic loss coverage in areas most susceptible to mass disasters, and Allstate is no exception. In the last few years, Allstate has dropped coverage in coastal areas of the Carolinas, Maryland, Virginia, and Alabama. Most coastal portions of Northern states have also been dropped from Allstate’s coverage map. Similarly, Allstate also recently dropped earthquake coverage in Washington state and Alaska. In other areas prone to tornados and severe thunderstorms, such as Texas, the company has stopped offering windstorm coverage in its home insurance policies.