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MAYHEM FINAL TIME

Feb 18, 2017

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Minneapolis Mayhem

Wheaton College

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12.75%

6.85%2.61%

77.79%

State Farm

American Family

Allstate

Other Competitors

Written Premiums Rank: 11th (Twin Cities Business)

Allstate has Slight Market Share in Minnesota

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Minneapolis Mayhem is Long-Term Growth

Future Growth

Marketing Allocation

Snapchat

New Properties

Advisor Education

Advisor Selection

New IIF

Margin

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Most Uninsured Generation

Growing Population

in Twin Cities

Little Insurance

Knowledge

1 in 4 New Residents are Millennials

38% of Total Population

64% Own Car Insurance 44% Own Renter’s

Insurance $170 Billion Purchase Power

37% Don’t understand Renter’s Insurance

1 in 3 assumed cost of $1,000/year

Target:Millennials

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Conscientious Growth =

AGP x (1- Loss Ratio) New IIF

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Low New IIFLow Underwriting Margin

High New IIFLow Underwriting Margin

Low New IIFHigh Underwriting Margin

High New IIFHigh Underwriting Margin

Selected Advisor Distribution

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• Margin: A• New IIF

Auto: B-

Paulette Cobb

• Margin: A+• New IIF

Auto: C+

Kendra Phelps

• Margin: A• New IIF

CoHo: C-

Wesley McKinney

• Margin: A-• New IIF Auto

and CoHo: B+

Yolanda Burton

• Margin: A-• New IIF Auto

and CoHo: C+

Julie Morton

Focus on Auto and CoHo to reach Millennials

AutoCoHoBoth

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8 Advisors with Two Main Themes

“Millennials don’t understand insurance. They aren’t going to pay me more to have something they don’t get.”

-Charles Fritz“Most are very independent and do everything via mobile phone and email. The importance of advisor interaction has been lost.” -Tom Baecker

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Millennials Love to Bundle

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Snapchat Connects Allstate to Millennials

100 Million Users

216,000 in Minneapolis

73% of Young Adults likely to open Snap from known brand

33% of Millennials

1%

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Same Message. New Medium.

Minneapolis Mayhem

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Red Buttons Are Bothersome

• Notifications increase levels of dopamine• Compelling message that cannot be missed– Just like email

• “It's like the world's smallest slot machine"

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Advisors With Identity

Snapchat promotes 5 Advisors to 200,000 Millennials

Users recognize value of Trusted Advisor and quality coverage

New Internet leads driven through link embedded in

Snapchat

Advisors become celebritiesBook Size Increases

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Imagine

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AT&T Sees Value. Allstate Should as Well.

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Exclusive Advisor Marketing in the Twin Cities

Key FactsOnly 37% with Renter’s Insurance1,480 New UnitsAllstate growth of 18.8% last year

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Advisor Mentorship Helps Everyone

Quarterly SeminarsCorporate ConnectionLearning from Success

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100,000 Impressions per Month2% Conversion Rate for Exclusive Advisor

Marketing

Total New Policies 3,718Auto 2,312Coho 1,406

Additional 0.61% Millennial Market By 2016

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Customer Acquisition Cost:

3,718 Millennials

$11,287,990Premium Increase

ROI Over 20 Years:

11.05%

$123.36

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Millennials are not an option, they are a necessity for Allstate’s future.

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Appendix• Slide 2

– http://www.ci.minneapolis.mn.us/www/groups/public/@cped/documents/webcontent/wcms1p-131362.pdf

– http://tcbmag.com/lists-and-research/big-book?djoPage=view_html&aliaspath=%2FLists-and-Research%2FBIG-Book&djoPid=18847

• Slide 4– http://time.com/money/3178364/millennials-insurance-why-resist-coverage/– http://www.propertycasualty360.com/2014/09/24/this-is-why-millennials-arent-

buying-insurance-fro– http://www.investopedia.com/articles/personal-finance/051914/insurance-

millennials.asp– http://www.adweek.com/news/advertising-branding/attention-brands-how-you-get-

millennials-you-160575

• Tables in Appendix:– The numbers for New IIF were taken directly from the data as distributed by Allstate.

The calculations for Underwriting Margin as calculated by line are: AGP+(1-(Loss Ratio/100)).

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Millennials Need Insurance

Opportunities• Ages 21-34• Minneapolis Population 38%• Most underinsured generation• $170 Billion purchase powerThreats• Lost Now. Lost Forever. Fiercely brand loyal• Uninformed about the industry

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Gap in Millennial Proportions

Millennial Adult Twin Cities Population

National Auto Coverage for Millennials

29%

13%

72%

87%

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Agent Auto Home CohoPaulette Cobb 190$ 800$ 162$ Kendra Phelps 181$ 857$ 176$ Wesley Mckinney 175$ 807$ 159$ Yolanda Burton 173$ 785$ 134$ Julie Morton 157$ 656$ 150$ Market Average 157$ 694$ 138$

Underwriting Margin

Agent Auto Home CoHo TotalPaulette Cobb 176 121 157 454Kendra Phelps 141 121 124 386Wesley Mckinney 155 62 60 277Yolanda Burton 229 126 114 469Julie Morton 161 64 69 294Market Average 209 112 114 435

New Items in Force

Below Average IIF combined with Above Average Underwriting

Margins

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NEW ITEMS IN FORCE

UNDERWRITING MARGIN

11.5% 13.2%

-8.1%-17.5%

AUTO COHO

12.5%

-11.8%

HOME

Selected Trusted Advisor Percentages over or under our key metrics

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• Slide 6:– Grades for agents given by

shown scales – Score found by dividing by

market average

1.25 A+1.15 A1.05 A-0.95 B+0.85 B0.75 B-0.65 C+0.55 C0.45 C-

New IIF Scale1.2 A+1.1 A

1 A-0.9 B+0.8 B0.7 B-0.6 C+0.5 C0.4 C-

Underwriting Margin Scale

• Previous Slide over/under chart:• The Percentages were calculated by dividing the averages of the five key

trusted advisors by the market averages and then subtracting one. ((Advisor average New IIF/ Market Averages) – 1). ((Advisor average Underwriting Margin/Market Averages)-1).

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• Slide 9– Why consumers are sticking to Brands:– http://www.aabri.com/manuscripts/131651.pdf– http://books.google.com/books?

hl=en&lr=&id=r_TSY5sxnO8C&oi=fnd&pg=PT10&dq=quantify+brand+loyalty+apple&ots=Av-Lncw-X4&sig=kTAWhAFCaF4FBY0QQ-BQCl4GsKY#v=onepage&q&f=false

– http://www.forbes.com/sites/marketshare/2011/11/27/is-brand-loyalty-the-core-to-apples-success-2/

– “Firstly, you have to build relationships with your customers. And that means being trustworthy and transparent. You do that by embracing the Internet and social media. You can start blogging. You can talk directly to people on Twitter. You can use Facebook to show who’s behind your logo.”

– 2,275 iPhone owners polled and found a staggering 59% admitted “blind loyalty” to the handset

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• Slide 10– http://expandedramblings.com/index.php/snapchat-statistics/– http://www.wsj.com/articles/snapchat-discussing-new-content-service-with-advertisers-

and-media-firms-1408486739– http://techcrunch.com/2014/08/11/snapchat-is-now-the-3-social-app-among-

millennials/– http://www.jpost.com/Blogs/Unleavened-Media/Snapchat-The-Next-Great-Advertising-

Platform-372863– http://socialdistillery.com/brands-can-use-snapchat/

• Slide 12– https://www.psychologytoday.com/blog/brain-wise/201209/why-were-all-addicted-

texts-twitter-and-google– http://www.theatlantic.com/health/archive/2012/07/exploiting-the-neuroscience-of-

internet-addiction/259820/• Slide 16:

– http://www.ci.minneapolis.mn.us/www/groups/public/@cped/documents/webcontent/wcms1p-131362.pdf - Rental Market in Minneapolis

– http://www.iii.org/fact-statistic/renters-insurance - 37% covered on Renters’ Insurance

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• Slide 18– The breakdown was calculated as follows: Auto = (Total Auto for Key advisors/Total Auto

and CoHo) x 3718. CoHo = (Total CoHo for Key advisors/Total Auto and CoHo) x 3718. – http://fusion.net/story/47528/snapchat-discover-could-be-the-biggest-thing-in-news-

since-twitter/ - 2/3 of Snappers use it daily– http://fusion.net/story/47528/snapchat-discover-could-be-the-biggest-thing-in-news-

since-twitter/ - Discover is brand-building tool with no way to click through– http://www.adweek.com/news/technology/facebook-ad-clicks-are-shifting-mobile-so-

why-arent-conversions-162356 - Facebook Conversion rates for mobile are .3% which is lower than 1.1% for desktop. However, the volume of mobile clicks is much higher.

– 100,000 Impressions per month times the conversion rate of .3% yields 300 policies monthly. Over the span of a year, this amounts to a policy increase of 3,600 through Snapchat.

– With 1,480 units in the 2Q of 2014, that is approximately 5,920 new units per year. If we get to pitch to one person per unit, that amounts to 5,920 renters coming through. If we can convert 2%, that comes to an additional 118 covered under renters’ insurance.

– http://www.ci.minneapolis.mn.us/www/groups/public/@cped/documents/webcontent/wcms1p-131362.pdf - This report contains the data on the 2Q of 2014 where 784 new units were permitted for construction. 1,480 in the metro area.

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Snapchat Pulse (Price per view $0.30)12 Monthly Pulses with 100,000 Views 360,000$ Discretionary Funds 75,000$

Total 435,000$ Exclusive Advisor Marketing

Materials - 10,000 brochures at $0.50 each 5,000$ Discretionary Funds - Online leads 15,000$

Total 20,000$ Advisor to Advisor Mentoring

Travel Expenses - Flight, hotel, car 2,800$ Reimbursements - $70 a day for food 840$

Total 3,640$ Total Expenses 458,640$

One Year Expense ReportMinneapolis Mayhem

Cost of acquiring a customer : $123.36

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• Slide 19:– Twenty year projection table taking into account the

5 Trusted Advisors’ Auto and CoHo AGP and retention rates proportional to their current business breakdown

– The calculations: The projections were calculated as follows: year 1 = (Avg. AGP Auto x number of new Auto policies) + (Avg. AGP CoHo x new CoHo policies). Subsequent years took the previous total and proportionally multiplied the portions dedicated to either increased Auto or CoHo policies by the average Key Trusted Advisor retention rates for each line.

• Slide 19 and Expense Report:• http://digiday.com/platforms/5-things-learned-snapchat-discover/ - Snapchat Discover

pricing of 15 cents per view• http://www.expedia.com – price for travel, hotel, and car in Minneapolis of $700 per trip• $70 per day food budget• Snapchat: $0.30 per view x 100,000 views = $30,000 per month x 12 months = $360,000• Price per customer Snapchat: $435,000/3,600 customers = $120.83• Price per customer Exclusive Advisor: $20,000/ 118 customers = $169.49

Period: Revenue Total Revenue1 $ 1,437,335.88 $ 1,437,335.88 2 $ 1,269,619.32 $ 2,706,955.19 3 $ 1,121,472.88 $ 3,828,428.07 4 $ 990,613.01 $ 4,819,041.09 5 $ 875,022.63 $ 5,694,063.72 6 $ 772,919.99 $ 6,466,983.70 7 $ 682,731.27 $ 7,149,714.97 8 $ 603,066.28 $ 7,752,781.25 9 $ 532,697.06 $ 8,285,478.31

10 $ 470,538.92 $ 8,756,017.24 11 $ 415,633.75 $ 9,171,650.99 12 $ 367,135.23 $ 9,538,786.22 13 $ 324,295.80 $ 9,863,082.02 14 $ 286,455.11 $ 10,149,537.13 15 $ 253,029.89 $ 10,402,567.02 16 $ 223,504.92 $ 10,626,071.93 17 $ 197,425.09 $ 10,823,497.02 18 $ 174,388.40 $ 10,997,885.42 19 $ 154,039.76 $ 11,151,925.18 20 $ 136,065.52 $ 11,287,990.71

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• Slide 19:• Allstate’s countrywide general selling and administrative expense per dollar of

income is $0.239. The underwriting margin given the average AGP and retention rates of our five key trusted advisors weighted along the auto and CoHo lines is $4,901,705. Taking into account that 23.9% of that is general, administrative, and selling expenses, the net income of this project is $3,730,197.

• Return on Investment is calculated by a time value of money calculation. Future value = $3,925,879. Present value = the costs of $458,640. The time period is 20 years. The return on investment calculated this way is 11.05%.

• Why Rent?• http://www.trulia.com/trends/2014/12/housings-millennial-mismatch/

– Rent insurance is certainly not as lucrative as other departments. However, trends are changing among millennials. Many 21-34 year olds are living in areas that are unaffordable for housing, but still rent affordable. The “mismatch” leaves them with a decision, move or stay renting.

• http://www.cnbc.com/id/101650590– Financial crisis dramatically changed perception of homeownership– Lack of credit/Qualifying for Mortgage– In 2012, 35 percent of renters surveyed said they were renting in order to make themselves

financially ready to own; that dropped to just 26 percent in 2013.