Allstate is executing a restructuring plan that will axe roughly 3,800 jobs, primarily in claims, sales, service and support.
A “difficult but necessary” situation," says Tom Wilson, Allstate’s President and CEO.
The cuts will bring the number of jobs to the 2015 level of about 41,600 positions.
Contacted by the Insurance Portal, Allstate’s Canadian division declined to disclose the cities, provinces or countries that would be affected by the cuts. The insurer sells home and life insurance in the United States, and P&C insurance in Canada.
This restructuring plan is intended to spur the insurer’s growth and increase its personal property-liability market share. Allstate also intends to reprice its automobile insurance coverage to make it more competitive.
Allstate expects to save some $290 million (M) with these measures. The firm estimates that it can recover between $210 M and $220 M in Q3 2020 and $50 M to $60 M in the fourth quarter of 2020.
The remaining charges can be recognized in Q1 2021. These restructuring expenses will reduce both net income and adjusted net income. Severance and employee benefits are the primary costs, amounting to approximately $210 M before taxes.
Allstate will also close offices, and consequently incur real-estate exit costs of nearly $80 million.
The prospect of consistently low interest rates should impact third-quarter results, Allstate expects. In addition, the insurer is setting aside a premium deficiency reserve for immediate life annuities in the US that will be recognized based on updated investment and actuarial assumptions. These measures will reduce the insurer’s net income, but not its adjusted net income.
In total, Q3 net income will be reduced by approximately $450 million to $550 million, and adjusted net income by $240 million to $280 million.
More details on Allstate’s restructuring will be provided in the third quarter, the insurer said.