Dear Shareholders, Our Shared Purpose
As the good hands, we empower customers with protection to help them achieve their hopes and dreams. We provide affordable, simple, and connected protection solutions. We create opportunity for our team, economic value for our shareholders, and improve communities.
Our behaviors include collaborating early and often to develop and implement comprehensive solutions, challenging ideas to leverage collective expertise, providing clarity for expected outcomes, and offering feedback that is candid, actionable, and independent of hierarchy.
Our values are centered on integrity, inclusive diversity & equity, and collective success. We focus on customers by anticipating and exceeding service expectations at low costs, strive to be the best at protecting customers and developing talent, and are bold with original ideas to beat the competition. We aim to earn attractive returns by providing customer value, proactively accepting risk, and using analytics.
Dear Shareholders, A Purpose-Driven Company Powered by Purpose-Driven People
People are the key to success. The pandemic has changed the ways and places that people work. Allstate is adapting to these changes by approaching employees as customers who are team members. Employees are “purchasing” a career opportunity that includes professional growth, compensation, flexibility, inclusivity, and an opportunity to make a difference. They “pay” for this with their expertise, engagement, and commitment.
Flexibility to work remotely or hybrid is an increasingly important part of the employee value proposition. Over 80% of U.S. employees choosing remote work, significantly reducing real estate costs but impacting collaboration and belonging. New ways of collaborating and creating a sense of belonging are being developed given the extent of remote work. Allstate’s culture is a foundation for success so this legacy must be protected while adapting to a new work environment.
Inclusive diversity and equity also drive belonging and commitment and improve business outcomes. Allstate’s leadership position was advanced with improvements in representation, business practices, and community engagement. These results were delivered by a team that successfully dealt with business challenges, innovated, and managed leadership transitions. The Board of Directors provides invaluable wisdom and perspective to help an outstanding team.
Adapting to the Present While Building for the Future
Allstate rapidly responded to a difficult operating environment in 2022 to mitigate negative financial results while staying on course to build a low-cost digital protection company. Financial results were below expectations with a net loss of $1.4 billion that resulted from auto insurance underwriting losses and a decline in the value of public equity investments. A comprehensive plan to increase auto insurance margins is well underway and margins are expected to increase. Despite these challenges, the strategies to increase market share in personal property-liability and expand protection offerings are on track. Allstate is creating a better future for customers, shareholders, team members, and communities.
2022 Operating Performance
The decline in financial performance did not reflect the agility and precision of operating results. The underwriting loss was generated from auto insurance as costs to repair and replace cars and settle third-party liability claims increased by over 15% from the prior year. Increases in the estimates for auto losses from pre-2022 claims also negatively impacted 2022 results. The comprehensive program to improve auto insurance margins includes Allstate brand rate increases of 16.9%, expense reductions, tighter underwriting standards, and adapting claims practices to a high inflation environment.
Homeowners insurance continued its industry-leading performance generating $681 million of underwriting income, while growing policies in force by 1.4%. Investment results were strong in a difficult year. A proactive approach to investing reduced exposure to higher interest rates, which avoided $2 billion of declines in the portfolio’s market value. While the overall portfolio had a negative 4% return for the year, this was better than the Bloomberg Intermediate Bond and the S&P 500 equity indices which declined by 9% and 18%, respectively.
The Protection Services businesses served more customers with broader protection and had strong operating results. Protection Plans’ written premiums increased by 5% to $1.9 billion and had $150 million of Adjusted Net Income (ANI). Health and Benefits generated $222 million of ANI. Shareholders received cash of $3.4 billion of which $926 million was dividends, which were increased by 5% per share. Relative ownership per share increased by 6.1% in 2022 reflecting share repurchases.
Creating the Future
Allstate seeks to create the future, not just react to trends. Transformative Growth in the property-liability business will improve the customer value proposition with affordable, simple, and connected protection. Becoming the lowest cost auto and home insurer will increase market share but requires significant operational changes, which are well underway.
Transformative Growth has five components and Allstate made significant progress in 2022. Improving Customer Value Proposition – Affordability was improved by lowering operating expenses. A new, digital auto insurance product was launched in two states and is expected to become available to about one-third of the U.S. through direct distribution in 2023.
Expand and Enhance Distribution – Allstate brand products are available through Allstate agents, call centers, and online with pricing that reflects the cost and value of each channel. National General continues to expand its relationship with independent agents. Lower Customer Acquisition Costs – Strides were made in improving marketing effectiveness, which will be critical when marketing increases as auto insurance profitability improves. Build New Technology Ecosystems – A new product management system was deployed with the new auto insurance product, increasing agility and enabling the eventual retirement of legacy technology systems. Enhance Organizational Capabilities - Digital, analytical, and technology capabilities were expanded to accelerate transformation. Focus on improving decision clarity enhanced execution.
The Protection Services businesses also focused on creating the future. Protection Plans expanded into the furniture category and new international markets, building on its success in consumer electronics with U.S. retailers. Health and Benefits is implementing a new operating platform and expanding from worksite offerings to direct sales to individuals. Identity Protection upgraded its technology platform and expanded protection offerings.
Climate Strategy
Increased severe weather, the transition to a lower carbon economy, and higher societal expectations of business require us to incorporate climate change into strategy and operating plans. Climate change affects all four stakeholders covered by Our Shared Purpose.
Customers need affordable protection from severe weather and greater resiliency and disaster response capacity. Electrification of the auto fleet also needs to be reflected in auto insurance coverages. Shareholders require a sustainable business that adapts to external changes while delivering growth and attractive returns. New investment opportunities will be realized with the transition to a lower carbon economy.
Allstaters value the opportunity to help customers, seize new business opportunities, and improve society since these lead to professional growth and stable employment. Communities want businesses to utilize their capabilities to create a better future and they reward them by buying their products.
Allstate has successfully adapted to increased severe weather change for over a quarter of a century. As a result, the homeowners business provides coverage to more than 7 million homes, and paid out over $11.4 billion in catastrophe losses while averaging $644 million of underwriting income annually over the last five years. Allstate also helped create public risk sharing pools in Florida, Texas, and California to provide customers with affordable protection for uninsurable risks.
Expertise and relationships are being expanded to find attractive investment opportunities from the transition to a lower carbon economy. In 2022, a commitment was made to achieve net zero emissions for Scope 1 and 2 measures by 2030. Scope 3 measures that cover the investment portfolio currently lack consistency and therefore these targets will not be established until 2025.
Corporate Stewardship
Allstate is one of the largest “main street” protection companies in the U.S., serving over 189 million policyholders. We have grown into this responsibility since the first policy insured a 1930 Studebaker 92 years ago by focusing on customers and broadly defining our role in society. Our Shared Purpose and the Societal Engagement Framework provide clarity and structure to assess trade-offs between conflicting objectives. Allstate’s legacy is built on the fortitude to lead when needed, while limiting our role to the requirements of Our Shared Purpose.
The Allstate Foundation is also embedded in our history with 70 years of improving communities. Last year thousands of non-profits were supported to disrupt the cycle of relationship abuse, empower youth through service, and advance economic mobility for people of color.
Your support makes it possible for Allstate to build on this legacy, be forward-looking, and live Our Shared Purpose. Together we are making a difference in the world!
Tom Wilson
Chair, President, and CEO
Letter from Independent Directors
April 10, 2023
Fellow Shareholders,
2022 was a year of adaptations and persistence for Allstate. The external environment presented challenges with high inflation and declining investment values that negatively impacted earnings and economic value. Allstate has a long history of successfully navigating challenging environments and last year was no different with rapid adaptation of the annual plan while maintaining long-term value creation. This past year the Board was focused on short- and long-term priorities, risk and return, human capital, and environmental, social, and governance (“ESG”) issues. As we approach the 2023 annual meeting, this letter highlights the Board’s independent oversight of Allstate’s Shared Purpose.
Operating Performance
Maintaining Allstate's operational excellence and performance is necessary for long-term growth and value creation. In 2022, operating results deteriorated with a net loss of $1.4 billion and an adjusted net loss of $262 million, reflecting an underwriting loss in auto insurance and a valuation decline of equity investments. Consequently, increased Board time was spent overseeing management's actions to improve profitability. Management is successfully implementing a comprehensive profit improvement plan with Allstate brand auto insurance rate increases of 16.9%. Strong operating performance in most other businesses, coupled with the capital freed up from the divestiture of the life and annuity businesses, supported the return of $3.4 billion to shareholders in 2022 through dividends and share repurchases.
Driving Long-Term Growth
Management and the Board also focused on long-term growth while adapting to dramatic cost increases and a volatile market. Transformative Growth, a multi-year initiative to increase personal property-liability market share and expand protection offered to customers, remains at the forefront of Allstate's strategy. The Board continued its oversight of this important strategic initiative, which made substantial progress in 2022. A new automobile insurance product using state-of-the-art technology was introduced in two states with an improved customer experience and reduced costs.
Providing Effective Risk Oversight
Board oversight of risk and return practices are also critical to long-term value creation. We regularly review the company’s risks related to strategic direction, financial markets, environmental sustainability, human capital, culture, and investment risks. The Board assessed risks presented by Transformative Growth, compensation programs, and financial controls and also focused on the impacts of inflation, reinsurance utilization, geopolitical risk, policyholder retention, and climate change. Additionally, the Board oversaw Allstate's security and data privacy programs. We supplemented our oversight with external independent resources in several important areas – compensation, cybersecurity, Board composition, and pay equity. We enhanced oversight of the independent auditors by reviewing their internal control process to ensure independence and public company oversight and completed a request for information from alternative auditors.
The Board also ensures we have the capabilities, experience, and processes to provide appropriate oversight and guidance with respect to Allstate’s strategy, business results, diversity, culture, and societal engagement. Board and individual director performance is evaluated throughout the year. Monica Turner joined the Board, bringing extensive strategic expertise with consumer-focused brands and outstanding operational leadership capabilities, which will enhance the value added by our Board.
Sustainable Performance and ESG
Allstate's purpose is to empower customers with protection, provide opportunities to team members, create attractive returns for shareholders, and improve communities. Achieving all of these is critical to sustainable success but requires focus and clarity to balance between objectives. Allstate's focus on climate, data privacy, and equity are based on a Societal Engagement Framework, which is used to evaluate, prepare, and communicate Allstate’s participation in societal issues. This framework evaluates issues on five criteria: importance to our ability to serve customers, level of Allstate’s expertise, ability to effect change, impact on stakeholders, and risk-adjusted returns.
Allstate has actively addressed the impacts of climate change on its customers for over 25 years by advocating for strong catastrophe disaster preparation and response, effective building standards, and adequate risk-sharing mechanisms. This year we established greenhouse gas emission reduction targets for Allstate’s operations with the goal to achieve net zero emissions for direct, indirect, and value-chain greenhouse gas emissions by 2030. Investment capabilities have also been expanded to improve risk-adjusted returns by participating in the transition to a low-carbon economy. The Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) reports highlight this progress.
Prioritizing Human Capital
Allstate’s employees and agents are essential to driving future success. Several important human capital initiatives were reviewed with the Board and advanced during the year:
Inclusive Diversity and Equity (IDE) – Progress was made in all three components of the multi-year IDE strategy: Representation, Business Practices, and Community Engagement. Racial and gender representation increased across the company. Diverse supplier relationships were expanded. Allstate continues to be an active participant in OneTen, a cross-industry effort to create one million family-sustaining jobs in America. We also completed our annual independent external pay equity analysis and publicly disclosed our EEO-1 report.
Succession Planning – Allstate's breadth and depth of talent is critical to achieving Our Shared Purpose. The Board reviews senior leadership and CEO succession from both an enterprise and individual perspective in multiple sessions throughout the year.
Compensation – Compensation plans are tightly linked to a broad set of performance measures. Incentive compensation plans include performance on IDE and Transformative Growth implementation. Senior leadership’s annual incentives were substantially reduced given the net loss in 2022.
Your view is important to us, and we value your continued investment and support. We believe Allstate is positioned for success in the coming year and remain confident in the company's ability to accelerate sustainable growth and profitability and focus on ensuring Allstate fulfills its obligations to you, the customers, and the broader community. Thank you for trusting us to oversee the long-term sustainability of Allstate.
Donald E. Brown
Siddharth N. (Bobby) Mehta
Judith A. Sprieser
Kermit R. Crawford
Jacques P. Perold
Perry M. Traquina
Richard T. Hume
Andrea Redmond
Monica Turner
Margaret M. Keane
Gregg M. Sherrill
Notice of 2023 Annual Meeting of Shareholders
Items of Business
Board Recommendation
Election of 12 directors
FOR each nominee
See pages 18-25
Say-on-pay: advisory vote on the compensation of the named executives
FOR
See pages 61-86
Say-on-frequency: advisory vote on the frequency of future advisory votes on the compensation of the named executives
EVERY YEAR
See page 107
Ratification of appointment of Deloitte & Touche LLP as Allstate’s independent registered public accountant for 2023
FOR
See pages 108-111
In addition, any other business properly presented may be acted upon at the meeting.
By Order of the Board,
Christine DeBiase
Secretary
April 10, 2023
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 23, 2023
The Notice of 2023 Annual Meeting, Proxy Statement, and 2022 Annual Report and the means to vote by Internet are available at proxyvote.com.
Participating in our Annual Meeting
How can I vote at the meeting? You may vote during the annual meeting by following the instructions available on the meeting website during the meeting. Whether or not you participate in the annual meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described in these proxy materials.
How can I ask a question at the meeting? This year’s shareholders’ question and answer session will include questions submitted in advance of, and questions submitted live during, the annual meeting. You may submit a question in advance of the meeting beginning at 8:30 a.m. Central time on May 19, 2023, and until 11:59 p.m. Central time on May 22, 2023, at www.proxyvote.com after logging in with your 16-digit control number. Once past the login screen, click on “Question for Management,” typing your question and clicking “Submit.” Alternatively, questions may be submitted during the annual meeting through www.virtualshareholdermeeting.com/ALL2023, by typing your question into the “Ask a Question” field and clicking “Submit.” We will try to answer as many questions as time permits. We reserve the right to edit profanity or other inappropriate language and to exclude questions regarding topics that are not pertinent to meeting matters or company business. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition. Any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints will be posted online at www.allstateinvestors.com.
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Read the whole letter here.
