FRANK'S BLOG

ALLSTATE SAID TO HAVE USED
NATIONAL CASUALTY FIGURES
THAT DON'T APPLY IN FLORIDA

1. AN ANALYST WORKING AT THE REQUEST OF CFO, TOM GALLAGHER, HAS NOTED THAT ALLSTATE USED NATIONAL LOSS FIGURES INCLUDING WILDFIRES, TORNADOES, HAILSTORM AND BLIZZARDS TO JUSTIFY THEIR REQUESTED RATE INCREASES.
2. THIS USE OF NATIONWIDE FIGURES IS CONSIDERED INCONSISTENT WITH ALLSTATE'S SETTING UP OF SEPARATE FLORIDA SUBSIDIARIES WHICH WERE INTENDED TO SET THE LOSSES IN FLORIDA APART FROM THE PARENT ALLSTATE AND KEEP THE LOSSES FROM AFFECTING THE PARENT COMPANY'S FINANCIAL REPORTS.
3. THE ALLSTATE FIGURES DID NOT TAKE INTO ACCOUNT THE ELIMINATION OF 95,000 POLICIES IN FLORIDA.
4. ALLSTATE PURCHASED A $1.6 BILLION REINSURANCE POLICY FOR MORE THAN $100 MILLION TO HELP PAY CLAIMS THAT ARISE THIS YEAR. THE ANALYST WHO DID THE STUDY SAYS THAT WITHOUT THIS REINSURANCE POLICY ALLSTATE WOULD BE IN A POSITION TO REDUCE ITS RATES RATHER THAN RAISING THEM.
5. THE ANALYST ALSO CLAIMS THAT ALLSTATE USED AN OUTDATED COMPUTER MODEL FOR PROJECTION OF LOSSES DUE TO HURRICANES. HE QUESTIONS WHETHER THIS MODEL IS UP TO CURRENT STANDARDS AND IF IT SHOULD BE UTILIZED TO SUPPORT SUCH A HEFTY INCREASE OF RATES.
6. ALLSTATE ASSUMED AN INFLATION RATE OF 8% PER YEAR, WHICH TRANSLATES INTO EXCESSIVE ESTIMATES OF CLAIMS IN A YEAR.

TO SEE MORE DETAILS GO TO THE PALM BEACH POST ARTICLE BY DAVID SEDORE AT: http://www.palmbeachpost.com/business/content/business/epaper/2005/08/06/a1f_insure_0806.html