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  • mpressings mpressings Feb 9, 2011 11:20 AM Flag

    Allstate Bank another failed effort by this management group

    With your way of thinking, a company would never try any new venture -- or have the sense to exit it if warranted. Allstate Bank was begun in a much different business and regulatory environment. It amassed a very large amount of deposits in only a short time. Ten years later, the market is very different and it makes sense to make adjustments in business operations. That's what successful companies do. What's the problem?

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    • The change in regulation caused Allstate to exit, but the Bank never really took off. The deposits were the efforts of their captive agency force, who were asked to sell cd's, which they did.

    • Successful companies don't just take a "flyer" on this. They factor in their cost of capital, they come up with projections, they end up making money, instead of sinking money down a hole. That did not happen here. There was a mention of losses not being "material". There was no mention of Discover paying a premium, and having to capitalize goodwill (meaning the bank was worth more than their book value). No, this was no success. It was a complete and utter failure. Of course, now, a day later, earnings are out, and we see yet another barometer of TW's savy in running an American Icon.

      • 1 Reply to contra_trader_16
      • The bank was the SPV for their "high end" customers (suckers) for ILS (Insurance Linked Securities) for example Willow Re (now in default).
        http://www.dailybail.com/john-boehners-1998-glass-steagall-flashback-would-you-like-a.html

        Their losses are not related to a "hail storm cat" but rather a "financial cat", for example, investments in subprime mortgages, credit default swaps transactions, rewriting "reinsurance" into insurance linked securities that default, and derivatives.

        Where is their "reinsurance" that every homeowner pays for in premiums? Where is their "reinsurance recoverables"?
        What NO reinsurance AGAIN?
        Oct. 18, 2007 Catastrophe claims cut Allstate's third-quarter profits- Medill Reports by Patrick Temple-West
        Oct. 22, 2008 Travelers soothes investors: Allstate post loss - Reuters by Lilla Zuill
        August 4, 2010 Allstate's net income drops 63 pct
        AP - behind the numbers, the drop was a result of steep investment losses related primarily to derivatives, which Allstate uses to hedge against risks such as interest-rate fluctuations.

        Yet somehow Allstate seems to always have enough income to repurchase shares.
        11-9-2010 Allstate announces plans to repurchase $1 Billion in shares by March 2012. Bloomberg by Hugh Son

        Go figure

 
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