Esurance remains unprofitable for Allstate, four years after it snatched up the online auto and home insurance provider for $1 billion. At the same time, CEO Thomas Wilson remains optimistic about its potential.
Wilson said he is committed to growing the Esurance business and will continue massive advertising spend to help get the job done.
“We would like to continue to pick up share in that segment, so we continue to invest ahead of what other competitors would invest in terms of advertising as a percentage of revenues,” Wilson said of Esurance during Allstate’s May 5, 2015 first-quarter investor call.
Wilson acknowledged that Allstate could make Esurance profitable “by shutting down advertising and growth.”
That’s not going to happen, Wilson said, “because we want to grow in that segment.”
Allstate said Esurance grew net written premiums by 8.6 percent during the quarter. Policies in force jumped almost 9 percent compared to the 2014 first quarter.
But the division’s recorded combined ratio came in at 117.8. As well, Esurance’s advertising investment “remains significantly above a long-term sustainable level relative to premiums as we grow market share in the self-serve consumer segment,” Allstate said in its earnings disclosure.
Allstate said it has “intentionally slowed” Esurance’s growth until its loss ratio improves, by lowering advertising expenses and taking “pricing and underwriting actions” to make sure the division will ultimately have long-term returns “at acceptable levels.”
At the same time, high-profile advertising deals continue for Esurance, which most recently became Major League Baseball’s exclusive auto insurance partner in a multiyear deal.