Wilson looks outside for good hands

By Steve Daniels

Allstate Corp. CEO Thomas Wilson has reshuffled his executive ranks in a bid to recharge the insurer's growth engines.

In an unusual step for Allstate, Mr. Wilson hired three executives from outside the company to run its auto and life insurance businesses and oversee marketing.

Joseph Lacher Jr., lured from insurer Travelers Cos. to run Allstate's core auto and homeowners' insurance unit, is charged with reversing the company's loss of marketshare to Progressive Corp. and Geico. The new head of Allstate's life insurance unit, Matthew Winter, formerly of American International Group Inc., is responsible for executing Allstate's long-stalled strategy to sell retirement products to Allstate's 17 million auto and homeowners' insurance customers.

Another key hire, General Motors Corp. alum Mark LaNeve, will set Allstate's marketing strategy, a key role in the advertising-dependent auto business dominated by Geico's cheeky lizard and Progressive's lipstick-adorned wisecracker Flo.

The move to bring in outside talent underscores the rising pressure on Mr. Wilson, 52, an Allstate veteran named CEO three years ago. He's hoping the new executives can spark a revival that will lift Allstate's moribund shares, which trade at less than the company's book value. If the shares continue to languish, analysts say, Mr. Wilson's job could be on the line and Allstate could attract interest from acquirers.

"If we don't see some success, then you could see some clamoring for change at the CEO slot," says Meyer Shields, insurance analyst at Stifel Nicolaus & Co. in Baltimore. He gives the company less than a year to demonstrate it's moving in the right direction.

Potential buyers of Allstate are few given its size as the second-largest U.S. auto insurer, but analysts say European insurance giants such as Switzerland's Zurich Financial Services Group Ltd., which owns Farmers Insurance in the United States, and Germany's Allianz S.E. could be interested if the stock price remains low. Even Warren Buffett's Berkshire Hathaway Inc., which owns Washington, D.C.-based Geico, can't be ruled out if it wants to expand in the business and add Allstate's thousands of captive agents to Geico's direct-sales expertise, Mr. Shields says.

"I think it would be a very attractive acquisition," says Clifford Gallant, insurance analyst at Keefe Bruyette & Woods Inc. in New York. "For the few players in the world who could do it, it could be interesting."

An Allstate spokeswoman says the company doesn't comment on merger speculation, nor could it comment on its plans, citing a regulatory "quiet period" ahead of its Feb. 11 earnings report. Representatives of Zurich and Allianz decline to comment. Berkshire didn't respond to a request for comment.

Investors expect Allstate, which sells mainly through its agents, to ramp up direct-selling efforts on the Internet and strengthen its ties with independent agents, who sell policies from a large array of insurers. Mr. Lacher is experienced with independent agents, which is how Hartford, Conn.-based Travelers markets its auto policies.

In life insurance, a traditionally low-return business that was mainly responsible for the company's $1.68-billion net loss in 2008, Messrs. Wilson and Winter have yet to articulate a strategy. Mr. Wilson has said he still believes Allstate can convert large numbers of auto and home insurance customers into buyers of annuities and mutual funds.

"It is a year where they need to get their house in order across most of their businesses," says J. Paul Newsome, an analyst at Sandler O'Neill & Partners Inc. in Chicago.

TRAILING PROGRESSIVE

Allstate's stock trails Ohio-based Progressive's, which fetches more than twice the company's book value because of rapid growth fueled by direct marketing.

Mr. Wilson noted last month at a Goldman Sachs Group Inc. conference in New York that Allstate would trade at $53 (rather than today's $30) if the stock were valued at its historic norm of 1.6 times book value. He told the group he's waiting for signs of a stronger economic recovery before resuming stock repurchases, which would boost the stock price. And he said the dividend, which Allstate cut in half early last year, will rise as earnings improve.

"Our valuation has significant upside potential," he said. "As we execute our operating priorities, shareholder value will grow."

Copyright 2010 Crain Communications Inc. All Rights Reserved.

A service of YellowBrix, Inc.

Article Source: 
Crain's Chicago Business
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Posted : Thursday 28 January 2010 13:15 | FinReg21 Editor

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