North American insurer Allstate Corporation has announced more detail on the impacts of its multi-year Transformative Growth Plan, including the laying off of 3800 workers.
The insurer says the goal of the Transformative Growth Plan programme is to increase personal property-liability market share by expanding customer access, improving customer value and investing in marketing and technology. The company said that customer access has been expanded by merging the Esurance and Allstate brand direct operations, while improving customer value includes improving the competitive price position of automotive insurance, “which requires cost reductions to maintain margins”.
Allstate is achieving this cost reduction by laying off workers, announcing a restructuring plan “which will impact approximately 3800 employees primarily in claims, sales, service and support functions”.
“Implementing this plan is difficult as we still deal with the impact of the pandemic but necessary to provide customers the best value,” said Tom Wilson, Chair, President and CEO of Allstate. “We have expanded transition support for impacted employees including prioritised internal hiring, extended medical coverage, expanded retraining support and help in employment searches.”
As a result of these actions, Allstate said it expects to incur a pre-tax restructuring charge of approximately US$290 million, spread across the last half of 2020 and the first half of 2021. The charge, which will reduce both the net income and adjusted net income of the company, consist of severance and employee benefits (US$210 million) and real estate exit costs (US$80 million) resulting from office closures.
Allstate said that the expectation that interest rates will remain low will also impact third quarter earnings. A premium deficiency reserve for immediate annuities with life contingencies will be recognised given updated investment and actuarial assumptions, which will reduce net income but not adjusted net income. The annual review of assumptions for life insurance, other annuities and Discontinued Lines and Coverages will reduce both net income and adjusted net income.
In total, these items will reduce pre-tax net income by approximately US$450 to $550 million, and adjusted pre-tax net income by approximately US$240 to $280 million.