Announces expected third-quarter restructuring and other charges
Allstate, one of the top 5 largest P&C writers in the U.S. has announced its new multi-year Transformative Growth Plan which will focus on increasing the company’s personal property-liability market share through various means including “expanding customer access, improving customer value and investing in marketing and technology.”
As part of the Transformative Growth Plan, the insurer also has announced that it will let go of approximately 3,800 employees. Employees primarily in claims, sales, service, and support functions will be the most affected.
“Implementing this plan is difficult as we still deal with the impact of the pandemic but necessary to provide customers the best value. We have expanded transition support for impacted employees including prioritized internal hiring, extended medical coverage, expanded retraining support, and help in employment searches,” said Tom Wilson, Chair, President and CEO of Allstate.
An example of how the new plan will be implemented is in how the insurer’s customer access has been expanded. Allstate says that it already has merged its Esurance and Allstate brand direct operations which has improved customer value through offering more competitive pricing of its auto insurance.
Allstate says it will discuss additional details on its plan in its third quarter Form 10-Q.
As a result this decision, Allstate says it is expecting “to incur a restructuring charge totaling approximately $290 million, pre-tax, with approximately $210 million to $220 million, pre-tax, to be recognized during the third quarter of 2020, $50 million to $60 million, pre-tax, to be recognized in the fourth quarter of 2020 and any remaining charges to be recognized in the first half of 2021.” Severance and employee benefits costs will comprise roughly $210 million, pre-tax.
According to the insurer, these charges will likely reduce both the company’s net income and adjusted net income. In addition, it expects its real estate exit costs stemming from office closures to be about $80 million, pre-tax.