News Currents

Allstate releasing 700 employees

The Chicago Tribune reported that Allstate Corp., the nation’s second-biggest auto and homeowner’s insurer after Bloomington-based State Farm Insurance Cos., will be offering a voluntary termination program to employees as a way to cut expenses.

Northbrook, Ill.-based Allstate recently posted a record quarterly loss in the wake of Hurricanes Katrina and Rita and also announced last month that it had purchased billions of dollars in reinsurance to help cover auto and personal property claims nationwide arising from future hurricanes, earthquakes and other disasters.

The reinsurance will help to reduce the volatility of Allstate’s future earnings but will cost about $600 million a year-triple what it currently pays.

At the same time, Allstate disclosed that it was studying “the efficiencies of its operations and cost structure,” according to its president, Thomas Wilson.

In a memo sent Jan. 24, the company told employees of the voluntary termination plan.

Spokesman Mike Trevino said that he expects the workforce in the home office complex to be reduced by about 10 percent, or 600 to 700 workers.

The buyout offer is being made mostly to salaried workers in the Northbrook corporate office. Employees who accept the offer will be let go no later than May 31. Allstate has about 9,000 workers in the Chicago area.

In October, the insurer was stung by a third-quarter loss of $1.55 billion, its largest quarterly hit as a publicly traded firm, because of hurricane costs of $3.06 billion.

The company didn’t have reinsurance in Louisiana or Mississippi, states hit hard by Katrina.

Allstate also has warned that it will hike premiums in certain markets to cover its higher costs.

It has said, however, that Chicago-area residents, whose chances of facing a natural disaster are slim, should not expect to see their insurance premiums rise. Separately, Allstate, the biggest seller of homeowner’s insurance in New York, confirmed this month that it has stopped writing new homeowner’s policies in eight coastal counties in that state, including those containing New York City and Long Island.