3. 3
McKinsey & Company SIBC Analysts
Miles Wood
Shawnee, KS
Class of 2020
Business & ACMS
Marcela Bertini
SĆ£o Paulo, Brazil
Class of 2019
Business Analytics &
Economics
Dominic Bozzo
Pittsburgh, PA
Class of 2020
Computer Science
Godsee Joy
Silver Spring, MD
Class of 2020
Economics & Peace
Studies
Andrew Herbst
Columbia, SC
Class of 2020
Finance & PLS
Mackenzie Nolan
Winnetka, IL
Class of 2019
Political Science &
Arabic
Gabby Biltz
Garrettsville, OH
Class of 2021
Business
Mariana Queiroz
SĆ£o Paulo, Brazil
Class of 2020
Business Analytics &
Economics
Carlos Ariza Matos
Santo Domingo, DR
Class of 2021
Business
Luis Bigott
Miami, FL
Class of 2020
Finance & ACMS
4. 4
Despite sustained revenue growth since 2010, Allstate is
struggling to maintain margins in a highly competitive industry
Sources: Allstate 10-K
36,769
29,394
32,013 31,400
32,654
33,315
34,507
35,239 35,653
36,534
29,744
32,039
30,240 29,919
31,277
29,620 29,495
30,588
32,043
33,460
4,636
(1,679)
854 911 787
2,306 2,280 2,850
2,171 1,877
($5,000)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenue($mm)
Total Revenue Total Operating Exp. Net Income
5.1%6.1%8.1%6.6%6.9%
2.4%2.9%2.7%
-5.7%
12.6%
5. 5
Allstate should consolidate key brands to enhance the customer
experience and partner with Waymo to hedge shifting auto trends
Brand Consolidation Auto Insurance Partnership
Objectives
Enhance Distribution Strategy Maintain Allstate Brand Hedge Risk with Auto Insurance
Impact
Ecosystem Improve Profitability Defensive Strategy
To maintain focus on the
customers, Allstate should
constantly adapt to trends
Build on Allstateās current brand
perception by offering high
quality service across the board
Avoid and counter threats that
have the potential to disrupt
Allstateās business model
Create a true one-stop-shop
insurance provider and reinvent
the customer experience
Growing direct-to-consumer
lines, while eliminating
inefficiencies, will drive profits
Investment in future markets
positions Allstate to remain an
industry leader
$
7. 7Sources: Bain & Company, IBM
As technology empowers convenience and customization, the P&L
insurance industry must adapt to meet consumer expectations
Historical
Trend
Impact
P&L insurance companies
have traditionally targeted an
older demographic through
an agent-focused strategy
Traditionally low customer
interaction
P&L insurers tend to focus on
traditional service lines
Increasing importance of
digital presence
Millennials are twice as likely
to buy their policies online
instead of with a local agent
Transition from a resource
based economy to a shared
economy
Exponential growth of data
Transformation of offerings
Tailored products based on
customer data
Explore adjacent markets
Digitization in response to a
younger customer base
Online platforms and services
improve experience and add
customer value
Increase high-quality
interactions with consumer
to monetize brand loyalty
Rise of consumer interaction
as a key factor of brand
loyalty
Direct interaction may
increase the Promoter Score
by 20 percentage points
Millennials Brand Significance Product Mix
8. 8
Allstate Protectionās highest potential brands are well-positioned
to capitalize on the digital economyās customer-centric trends
Sources: Allstate 10-K, Squaretrade.com
Value
Proposition
Coverage
Distribution
Strategy
āYouāre in Good Handsā
Customer relationship is
personal, respectful, and
meaningful
Cater to individual
preferences and utilize
different capabilities for
distinct customer segments
Provide independent
warranties for consumer
electronics and major
appliances
One stop shop for personal
insurance lines
Growth
Potential
Protection for computers,
home entertainment,
smartphones, cameras,
appliances, and more
Direct-to-consumer strategy
with hassle-free, 24/7
customer service and record
satisfaction ratings
Excellent growth
opportunities in niche
insurance markets
Affordable, direct-to-
consumer insurance is
increasingly more popular
Premium insurance will
remain relevant as it
maintains relationships with
affluent customers
Independent agents offer
personalized customer
service and elicit high
satisfaction ratings
Direct-to-consumer strategy
with convenient, speedy, and
easy user experience online
and by phone
Primarily vehicle and
property insurance with
select alternative offerings
9. 9
However, as subsidiaries consistently underperform, Allstateās
bottom line is also increasingly pressured by DTC channels
Sources: Allstate 10-K
$(1,000)
$(500)
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2011 2012 2013 2014 2015 2016
NetOperatingIncome($mm)
Allstate Esurance Squaretrade
10. 10
Meanwhile, Allstateās trustworthy name continues to earn high
consumer satisfaction ratings relative to other industry giants
Sources: J.D. Power Rankings
891
886
874
867 867
863 862 861
858 857
853
833
800
810
820
830
840
850
860
870
880
890
900
The Hartford Erie
Insurance
Nationwide Allstate Farmers Progressive Travelers Liberty
Mutual
GEICO 21st Century State Farm Esurance
ConsumerSatisfactionRating
Average
12. 12Sources: PWC, McKinsey Insights, KPMG, Deloitte
Looking ahead, as automation disrupts mobility trends, existing
personal auto insurance premiums will decrease 60% by 2040
ā¢ Accident proof technology will
decrease accidents by 90% .
ā¢ Driverless vehicles might force
auto insurers to shift the core of
their business model, from
protecting private customers to
insuring car manufacturers.
ā¢ Vehicle ownership is declining as
50% of 18-34 year old drivers
already use shared mobility
models
ā¢ Product and premium mix for
passenger vehicles shift from
individual to commercial buyers
ā¢ Increase in shared mobility
models results in an increase in
commercial lines.
ā¢ Commercial lines will represent
49% of market premiums by
2030 and 67% by 2040
Autonomous Car Shared Mobility Commercial Lines
$0
$50
$100
$150
$200
$250
2015 2020 2025 2030 2035 2040
PremiumNeed($bn)
Personally owned driver-driven Shared driver-driven Personally owned autonomous Shared Autonomous
Expected Premium Need in Personal Auto
13. 13
These trends, due to new technology in auto manufacturing,
seriously threaten Allstateās dependence on personal auto lines
Sources: Allstate 10-K, McKinsey Insights, Waymo, KPMG
Allstateās Premiums Earned for Auto Insurance is Prone to Dramatic Decline
Risk Reduction Factors
LiDAR Sensors
Telematics
Technology Impact
Liability Shift
68% of
Premiums
Earned
Tesla crash rates have dropped 40% since
Autopilot was introduced in 2015
Recent Crash
Rates
Vehicle manufacturers and tech
companies are aiming to introduce
driverless cars in 2020-22
Driverless
Concept
McKinsey estimates self-driving cars
could eliminate 90% of auto accidents
Driverless
Crash Rates
Auto insurance
accounts for 42%
of Property and
Casualty insurance
80% of auto claims
are collision claims
Personal auto
insurance could
shrink 60% by 2040
$21,264
$8,506
$-
$5,000
$10,000
$15,000
$20,000
$25,000
2016 2040
($12,758)
15. 15
Allstate can improve operations and hedge auto by consolidating
major brands and partnering with the future of transportation
Days
65%
Solution: Forward-looking Ecosystem
Distribution: Underperforming Brands Product Mix: Dependence on Auto Lines
Problem: Threatening consumer trends and disruptive technology
Brand Consolidation Auto Insurance Partnership
Brand Loyalty Distribution Strategy Waymo
Brand consolidation will
produce an additional $200 mm
in annual profits by 2021
Allstate can successfully
integrate and consolidate
independent brands by 2020
2020$
Cannibalization, agent recoil,
and customer trust risks
have been addressed
Impact Risks Implementation
āYouāre in Good Handsā
Allstate name is associated with trust
and customer satisfaction
Expand brand loyalty to lower-end
services
Ecosystem that incorporates products
for all consumer bases
More organized expansion strategy,
allowing for acquisition flexibility
Decrease advertising expenses
Rideshare taxi service
Offer software, vehicle fleet, and
passenger per ride insurance
Allstate offers crucial data sources for
human driving habits
17. 17
Allstate needs to consolidate key independent brands to improve
organization, adapt to evolving trends, and allow room for growth
Product Diversity &
Consumer Choice
Consolidated Services
Primary Brand Trust
Allstate
Corp.
Allstate
Agent-based
Allstate
Digital
Direct-to-
consumer
Allstate
Technology
Niche
Economic Spectrum$$$ $
18. 18
The consolidated brand concept creates an ecosystem that will
drive organic growth and eliminate subsidiary inefficiencies
Sources: Allstate 10-K, NY Times, Bain Report, Squaretrade
Organic Growth Operational Enhancements
Advertising and Other G&A CostsEcosystem Advantage Cross Selling Strategy
An ecosystem reinvents customer
relationships in the insurance industry
Build customer brand loyalty by offering
convenient digital and traditional
distribution channels
Diversify product offerings and making
product selection more accessible across
subsidiaries
Net Promoter Scores jump 20 to 30
points in an ecosystem
Ecosystem framework integrates a
comprehensive and diverse customer
base
Over 525,000 Esurance customers
Over 238,000 Squaretrade customers
Potential to move this expansive
customer base to premium policies in
the long term
Brand recognition and respect is key to
attracting and retaining policy holders
Transfer of resources boosts Allstate
marketing efforts by 31% instantly
Allstate Advertising 2017: $59.7 mm
Esurance Advertising 2017: $18.6 mm
Following brand consolidation, Esurance
advertising costs can be redirected to
bolster Allstateās presence
Allstateās advertising dollars have
recently declined relative to competitors
in the P&L insurance industry
Impact
More convenient and
personalized insurance
packages will boost satisfaction
Timeline offerings will maintain
relationships with customers,
ensuring lasting revenue growth
Organic growth of direct-to-
consumer policies will boost
margins significantly
More effective use of capital
will improve margins and
solidify Allstateās reputation
A wider breadth of offerings will
bring valuable millennials into
the Allstate family
Allocation of advertising
dollars to a single organization
will improve brand loyalty
$$ $
20. 20
Partnering with Waymo to offer ābackseatā insurance quells
consumer fears in a rapidly advancing transportation atmosphere
Sources: AlixPartners, AAA, Business Insider
By 2020, Tech and Motor companies will
implement self driving technology in one of two
manners: rideshare or direct
55% 84% 78%
Unlikely to consider
a driverless car
Fear ādropped callā
phenomenon or other
software malfunction
Would trust the technology
more if developed by a
software giant
Stiff Customer Segmentation Issues are Faced Across Generations
Partner to Mitigate Consumer Fears: Backseat Insurance
Googleās autonomous car project
Trusted organization with
competent engineers
Rideshare taxi service
Insurance partnership with Waymo
Insure the software, vehicle fleet, and
passengers on a per ride basis
Allstateās brand builds trust
āYouāre in Good Handsā
21. 21
ā¢ Shift from personal to
commercial lines for Allstate
ā¢ Data on human driving behavior
ā¢ DriveSense
ā¢ Arity
ā¢ Brings light to data on human
errors
ā¢ Completes image of the driving
experience
This strategy hedges Allstateās exposure to personal auto, while
improving Waymoās rider experience and algorithm development
ā¢ Sensory awareness
ā¢ Algorithms are enhanced
through machine learning
ā¢ Computers learn from
mistakes
ā¢ Neural Network: vehicle
āmindsā learn from each other
Inputs to Autonomous Vehicles Critical Value-Adds from Allstate
Whatās Insured Data TransmissionCost Structure
ā¢ Software
ā¢ Vehicle fleet
ā¢ Passenger
23. 23
Successful consolidation will net an additional $216 mm in annual
underwriting income by 2021
Sources: Allstate 10-K, Bloomberg
Projected Operating Income ($mm)
Scenario Current State Base Case ($mm) Recommendation ($mm)
Premiums Earned $30,377 $32,957 $38,560
Losses and Expenses $29,085 $31,794 $37,181
Underwriting Income $1,292 $1,162 (-$130) $1,378 (+$86)
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Base Case Recommendation
25. 25
5 11 11 5 14 54
Low price experts
Univolveds
Price-conscious
advice hunters
Self servicers
Active shoppers
Non-price conscious customers
Price conscious customers
Allstate can mitigate the risks of consolidation by emphasizing
diversity of services and improving agent-carrier relations
Sources: EY
Risks Mitigation Strategies
Price and Brand Conscious Customers
The Agent Problem
Highlight
diversification of
services
Ensure advanced
coverage for higher
price
Allow customization
of insured products
10 32 44 12 1
Agent Perception of Direct-to-Consumer Future
No threat
at all
Little
Threat
Some
Threat
A Lot of
Threat
Full
Threat
80% would consider giving up a role
in servicing to focus on sales and
growth
Incorporate
Agent into Sales
and Growth
40% question their preparedness to
meet the needs of the next
generation
Prepare agents
for the transition
34% want the carrier to have better
communication with the agent or
broker
Ensure better
carrier-agent
relations
26. 26Sources: NCSL, PWC, MIT, Self Driving Coalition for Safer Streets
Allstate can mitigate risks of consumer distrust and emerging
market conditions by publicly addressing the strategy
Risks
Consumer Distrust
Market Restrictions Due to Government Regulation
Mitigation Strategies
Advertising
Lobbying
Autonomous Vehicles
Promote autonomous vehicles in
states with legislature
ļ¼ Self Driving Coalition for
Safer Streets
ļ¼ Partner with other
interested companies
ļ¼ Use data of states with
legislature to prove benefits
and safety
Build trust through
relatable advertisements
Increase customer
awareness of the
technologies benefits
Use successful data to
improve consumer
confidence
Partner with Waymo to
give customer a āTest
Driveā
23 22
5
Not yet considered Enacted Pending Executive Order
States with Autonomous Vehicle Registration
Allstateās Intentions
54%
28%
of consumers say that
autonomous cars are
dangerous
of consumers say
autonomous vehicles are
susceptible to hacking
53% of consumers say they are
scared of self-driving cars
Sensitivity
Benefitstocompany
Self-
Reported
Digital
Exhaust
Profiling
Data
Sell to 3rd
Parties
Targeted
Marketing
Improve
Product
or Service
Use
Data
Type
28. 28
Continue
exploration of
adjacent
markets
Officially
introduce the
product
alongside
rideshare taxis
Launch
marketing
campaign to
inform the
public
Secure formal
partnership
with Waymo
Establish team
dedicated to
product
development
Within three years, Allstate can effectively consolidate its existing
brands and begin repositioning for impending auto disruption
Short Term: Brand Consolidation
Long Term: Auto Insurance Partnership
2018
Conduct market
research to
discover consumer
sentiment
Gauge internal
sentiment and
calm resistance
Integration of
management
teams
2019
Launch marketing
campaign to
introduce strategic
initiative
Educate market of
the changeās
implications
Begin integrating
policy holders into
the Allstate
infrastructure
2020
Fully integrate
major
independent
brands
Utilize technology
to drive direct-to-
consumer growth
Continue
exploring
innovation
strategies
Phase 1:
Market Research
and Preparation
Phase 2:
Official Launch
Phase 3:
Comprehensive
Integration
29. 29
Allstateās brand consolidation offers immediate tangible impact,
while the auto segment transformation defends its position
Brand Consolidation
Observed
Issue
Auto Insurance Partnership
Objectives
Solution
Impact
ā¢ Major independent brands, primarily Esurance
and Squaretrade, are not profitable
ā¢ Esurance performs poorly and lacks brand
recognition relative to other low-cost insurers
ā¢ Automated vehicles and the sharing economy
threaten traditional auto insurance
ā¢ Allstateās annual revenue and income are
heavily reliant on auto lines
ā¢ Improve profitability by eliminating cost
inefficiencies and expanding cross selling
ā¢ Eliminate sources of confusion
ā¢ Increase consumer satisfaction
ā¢ Hedge risk associated with Allstateās
dependence on personal auto insurance
ā¢ Innovate to remain competitive in the insurance
industry
ā¢ Consolidate brands under Allstate
ā¢ Offer both low cost, direct-to-consumer policies
and premium, agent-to-consumer policies
ā¢ Implement cross-selling strategies
ā¢ Partner with Waymo, Googleās autonomous
driving project
ā¢ Alleviate concerns with ābackseat insuranceā
ā¢ Support tech development with driver data
ā¢ Consistent growth over Allstate Protectionās
base case
ā¢ Net additional ~$200 mm in annual
underwriting income by 2021
ā¢ Repositioned to capture future markets
ā¢ Defend position as industry leader
31. 31
Appendix A: Historical Financial Performance
Sources: Allstate 10-K
Historical Loss and Expense Ratios
2012 2013 2014 2015 2016
Allstate Loss Ratio 0.683 0.636 0.658 0.687 0.703
Allstate Expense Ratio 0.255 0.263 0.257 0.247 0.246
Allstate Combined Ratio 0.938 0.899 0.915 0.934 0.949
Esurance Loss Ratio 0.772 0.785 0.768 0.751 0.758
Esurance Expense Ratio 0.427 0.390 0.409 0.352 0.317
Esurance Combined Ratio 1.199 1.175 1.177 1.103 1.075
Squaretrade Loss Ratio 0.725 0.660 0.654 0.647 0.710
Squaretrade Expense Ratio 0.761 0.567 0.440 0.415 0.392
Squaretrade Combined Ratio 1.486 1.227 1.094 1.061 1.101
Consolidated Financial Performance ($mm)
2012 2013 2014 2015 2016
Total Premiums $ 25,699 $ 26,570 $ 27,873 $ 29,289 $ 30,378
Total Policy Benefits $ 17,641 $ 17,086 $ 18,493 $ 20,209 $ 21,455
Total Selling General & Admin Exp. $ 6,742 $ 7,179 $ 7,421 $ 7,443 $ 7,630
Underwriting Income $ 1,317 $ 2,304 $ 1,959 $ 1,637 $ 1,292
32. 32
Appendix B: Consolidated Income Statement (Base vs. Model)
Sources: Allstate 10-K
Base Case ($mm)
2017 2018 2019 2020 2021
Total Premiums $ 30,937 $ 31,682 $ 32,298 $ 32,776 $ 32,957
Total Policy Benefits $ 22,095 $ 22,717 $ 23,249 $ 23,597 $ 23,712
Total Selling General & Admin Exp. $ 7,727 $ 7,866 $ 7,977 $ 8,058 $ 8,071
Underwriting Income $ 1,114 $ 1,099 $ 1,072 $ 1,119 $ 1,173
Recommendation ($mm)
2017 2018 2019 2020 2021
Total Premiums $ 30,937 $ 31,816 $ 33,621 $ 35,848 $ 38,560
Total Policy Benefits $ 22,095 $ 22,818 $ 24,212 $ 25,825 $ 27,763
Total Selling General & Admin Exp. $ 7,727 $ 7,850 $ 8,285 $ 8,796 $ 9,413
Underwriting Income $ 1,114 $ 1,146 $ 1,124 $ 1,226 $ 1,383
33. 33
Appendix C: Projected Premiums Earned
Sources: Allstate 10-K
Projected Premiums Earned ($mm)
2017 2018 2019 2020 2021
Allstate Premiums $ 28,955 $ 29,621 $ 31,191 $ 33,156 $ 35,576
Esurance Premiums $ 1,697 $ 1,867 $ 2,054 $ 2,259 $ 2,485
Squaretrade Premiums $ 285 $ 328 $ 377 $ 434 $ 499
Total Premiums $ 30,938 $ 31,816 $ 33,622 $ 35,849 $ 38,560
Assumptions: Premiums
5Y CAGR 1Y CAGR Base Growth 2018 Growth 2019 Growth 2020 Growth 2021 Growth
Allstate Premiums 1 2.9% 1.8% 2.3% 2.3% 5.3% 6.3% 7.3%
Esurance Premiums 2 11.4% 2.2% 4.0% 10.0% 10.0% 10.0% 10.0%
Squaretrade Premiums 3 44.5% 4.7% 4.0% 15.0% 15.0% 15.0% 15.0%
1. We expect Allstate Premiums to increase over the next 5 years as the brand consolidation enable cross-selling strategies and the
ecosystem attracts younger generations.
2. We expect Esurance Premiums to grow at an accelerated rate due to their incorporation under the Allstate brand as well as the
expansion of the Direct to Consumer market as a whole.
a. Nike recently expanded Direct to Consumer channels, which grew sales at 30%. Considering Nike operates in the retail
space, we took a percentage of their growth to use as a proxy.
3. We expect Squaretrade Premiums to grow at a higher rate due to the reasons listed in 2, as well as the growth of the niche
insurance market.
34. 34
Appendix D1: Projected Loss and Expense Ratios
Projected Loss and Expense Ratios
2017 2018 2019 2020 2021
Allstate Loss Ratio 0.711 0.714 0.717 0.717 0.716
Allstate Expense Ratio 0.246 0.247 0.248 0.248 0.248
Allstate Combined Ratio 0.957 0.961 0.965 0.965 0.964
Esurance Loss Ratio 0.762 0.746 0.731 0.717 0.702
Esurance Expense Ratio 0.301 0.240 0.245 0.250 0.255
Esurance Combined Ratio 1.061 0.986 0.976 0.966 0.957
Squaretrade Loss Ratio 0.744 0.759 0.774 0.789 0.805
Squaretrade Expense Ratio 0.381 0.240 0.228 0.217 0.206
Squaretrade Combined Ratio 1.122 0.999 1.002 1.006 1.011
Assumptions: Loss and Expense Ratios
5Y CAGR 1Y CAGR Base Growth 2018 Growth 2019 Growth 2020 Growth 2021 Growth
Allstate Loss Ratio 0.6% 1.2% 0.4% 0.4% 0.4% 0.0% -0.1%
Allstate Expense Ratio -0.7% -0.2% -0.3% 0.5% 0.5% 0.0% 0.0%
Esurance Loss Ratio -0.4% 0.5% -2.0% -2.0% -2.0% -2.0% -2.0%
Esurance Expense Ratio -5.8% -5.1% -5.0% 2.0% 2.0% 2.0% 2.0%
Squaretrade Loss Ratio -0.4% 4.8% 2.0% 2.0% 2.0% 2.0% 2.0%
Squaretrade Expense Ratio -12.4% -2.8% -1.0% -5.0% -5.0% -5.0% -5.0%
35. 35
Appendix D2: Projected Loss and Expense Ratios
Assumptions: Loss and Expense Ratios2
5Y CAGR 1Y CAGR Base Growth 2018 Growth 2019 Growth 2020 Growth 2021 Growth
Allstate Loss Ratio 1 0.6% 1.2% 0.4% 0.4% 0.4% 0.0% -0.1%
Allstate Expense Ratio 2 -0.7% -0.2% -0.3% 0.5% 0.5% 0.0% 0.0%
Esurance Loss Ratio 3 -0.4% 0.5% -2.0% -2.0% -2.0% -2.0% -2.0%
Esurance Expense Ratio 4 -5.8% -5.1% -5.0% 2.0% 2.0% 2.0% 2.0%
Squaretrade Loss Ratio 5 -0.4% 4.8% 2.0% 2.0% 2.0% 2.0% 2.0%
Squaretrade Expense Ratio 6 -12.4% -2.8% -1.0% -5.0% -5.0% -5.0% -5.0%
1. Relatively consistent with the 5 year CAGR and adjusted for the expected decrease in risk in the auto industry as automation
prevents traditional collisions.
2. An initial increase reflects expenses associated with the integration of Esurance and Squaretrade. Subsequently, the growth rate
levels between the elevated growth rate and the base growth rate.
3. Relatively consistent with the 5 year CAGR and adjusted for the expected decrease in risk in the auto industry.
4. Consistent with the 5 year CAGR and 1 year CAGR.
5. The growth of the past five years will taper and will be further reduced by Allstateās risk management resources.
6. Balanced between the 1 and 5 year CAGRs with the assumption that expenses will be reduced by synergies with Allstate brand.