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The Allstate Corporation Message Board

  • Corporate_Analyzer Corporate_Analyzer Jun 27, 1999 11:36 PM Flag

    I've researched a Co. with a 400%......

    likely return, during the next 4-6 months (WRAP).
    This is not hype or P&D. I have analyzed Wrapsters
    Inc. in great depth and detail since their IPO in
    January. I have been in constant contact with their
    management and IR Dept. All of their efforts, are now in the
    process of being realized. Follow these five URL's, and
    make your own decision. Your time and DD (due
    diligence) will be well rewarded.

    Note: I have heard from both the CEO and
    V.P. of Operations. They will be releasing news on
    several acquisitions and strategic alliances, of which,
    they are in current progress. The first, 'a major
    competitor' acquisition, of 5-6 million dollars (which has
    already been financed) will be finalized in the first two
    weeks of July. (Wrapsters Inc. has been in a quiet
    period for the past 2 months on this deal) This will be
    the building block for 10-12 other deals, which are
    to proceed behind it.

    The stock trades, on
    next to no volume and has little public exposure. The
    current float is amazingly low, at 600,000 shares. IMO
    the stock will sky-rocket on any and all news to
    come. They are in the process of having over 100
    company/franchisee restaurants, open within the next nine months.

    Two of the individuals, running and financing
    this company (Thomas E. Metzger and Clyde E. Culp
    III), have some of the best background and credentials
    I have seen, for this industry.

    are also, in the process of opening a major
    E-Commerce site: Offering everything from
    vitamins to supplements, including a massive information
    data base on all health issues: Health News, Health
    Nutrition, Family Health, Health Resources, Health &
    Wellness. (As of conversation on 6/25/99, with the Investor
    relations Department, this is going to be very monumental
    and has had 6 months of R&D into it). The launch date
    is projected in the month of July.


    For further information you can contact:

    Investor Relations: Pete Scott or Ed Koziol
    (407) 658-7760

    Wrapsters, Inc., Atlanta
    Thomas E.
    Metzger, FMP
    President / CEO
    Phone: (770) 346-9897
    (ext. 2)

    Steven J. Devine
    V.P. Operations
    Phone: (770)
    346-9897 (ext. 3)

    P.S. If your undecided, just keep (WRAP)
    under favorites and look for the first major company
    news, to start coming out in July.


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    • My intuition, but no empirical data, suggests
      that you make a good point here. Selling on price
      would seem to result in lower retention over the long
      haul. Some of the folks who have posted on the
      Progressive message board recently may actually have some
      data. I'll ask there.

      You make a weaker point
      when you argue the deterioration in GEICO's
      underwriting profit, because I think the underlying economic
      reality is that all major auto writers' economic results
      are deteriorating, but still remain profitable. GEICO
      is simply reporting more deterioration than
      Allstate. This does not necessarily mean that competition
      is hurting GEICO more than Allstate. Indeed we
      probably need to wait a few quarters (or years) to "get
      all the results."

      Regarding agents, I don't
      see that much value added in my dealings, but that
      may be because I work in the industry so I don't need
      much hand-holding.

    • Geico on Friday reported a pre-tax underwriting
      profit of $20 million for the first six months of 1999
      versus $154 million in

    • Allstate has one of the lower underwriting
      expense ratios in the industry. I will give you Geico
      does shave some points by selling direct and not
      paying agent commissions. However, as much as people on
      the board want to complain about agents, they do add
      value to the customer and that is what is being

      I don't really have any hard numbers on Geico's
      retention, however, playing in the game where you sell
      direct and sell price you will attract the shoppers and
      they will tend to turn over more often. The loyalty
      does not exist in this segment. Higher turnover will
      result in more expense.

      It may be awhile until we
      get all the results, but Geico has shown
      deterioration in its combined ratio in the most recent few
      quarters......more to come, stay tuned as pricing tightens up.

    • So how do we know that Warren won't go for
      cross-selling once he's picked up most of the younger
      generation, as they age and want insurance for homes and
      such? Yes, I know GEICO is a one-trick pony, but
      there's no saying he can't buy a full range P&C insurer.
      Hmm, the way ALL stock is going, the rumors about him
      buying ALL might actually come true ;') Look for a
      Bloody Monday in the management suites if he does. Or at
      least the liberal use of golden parachutes.

      another subject entirely. This is now the time to invest
      in the Asian market, which everyone thinks is dead.
      The Asian Tigers are roaring back. This is from our
      friend Loy Weston, an old Asia hand who founded KFC
      Japan and Pacific Roasters LTD from scratch, along with
      a string of successful businesses, besides writing
      for WSJ and The Economist, and who knows a Lot more
      about Asia than those dopey "consultants" everyone
      hires to blow them full of smoke. Loy says the time is
      now. He will soon be coming out with a book on the
      subject. It is going to print as we speak and will be well
      worth perusing. We will notify everyone of the
      publisher when it is out.

      Of course, the one wild
      card in Asia is the North Korean missile program, but
      that's a wild card all over since their missles will
      soon be able to reach Chicago. And with famine and a
      faltering economy, the first thing dictators like to do is
      divert attention with a nice little war.

    • I've heard recently where Allstate has one of the
      lowest overall expense ratios in the industry now. Geico
      was 5% lower. Each percent, though, represents a big
      bunch of money to the bottom line.

      Someone on
      this board a few months ago said Geico's renewal ratio
      was in the high 70%'s, not very good. When you live
      by price alone, you die by price. I would believe
      ALL would be in the mid-high 80%'s.

      As far as
      underwriting ... they either have a very different view of the
      statistics, or are just willing to throw a lot of money at
      the business today to grow market share. Geico, for
      example, will take our non-standard customer straight into
      their preferred (even with 1 cite) without a problem
      (at least for now). Two people I know of have made
      this change to Geico. We'll be getting them back next
      year once they meet our requirements of having had
      prior "preferred" coverage. On this board we always
      hear from either company people from agents or claims;
      how about a word from an underwriting person? I was
      told by an underwriter once that ALL is one of the few
      companies that can track the origin of business into the
      "preferred" sector
      and whether it came from a "preferred"
      or "non-standard" prior.
      The overall losses in
      "preferred" are weighted heavily by losses from the customers
      having come from the prior "non-standard" side. So the
      decision was made to make the requirements for
      "non-standard" prior into "preferred" much more difficult in
      order to hold down losses and therefore future rates on
      "preferred". We've been doing this for years and by now you'd
      think there'd be enough stats to see if this decision
      was valid. No other company I know of has followed
      ALL's lead in making going to "preferred" as difficult
      as ALL, e.g., see Geico example above!

      always thought there must be some awfully compelling
      valid statistics for ALL to have made and stuck with
      this decision.
      On one hand ALL's had this 8-10%
      growth goal, yet continues to make qualifying super
      difficult. Grow profitably, not just grow.

      It's an
      interesting subject ... let's hear from an underwriter.

    • The problem with this argument is that GEICO's
      underwriting expense ratio is much lower than Allstate's -- I
      forget the actual number, but I think it is about 10
      points lower. When LAE is taken into account, the gap
      becomes even wider.

      So as long as GEICO is not a
      much worse underwriter than ALL, and assuming GEICO's
      service, fraud prevention, etc. do not lag far behind
      Allstate's, GEICO can most certainly get away with this
      strategy without losing older insureds over the long-run.
      A hint at how GEICO might be performing along these
      criteria would be to look at the company's persistency
      rates relative to Allstate's. If they are similar, this
      would seem to provide evidence that GEICO is doing fine
      in these other areas. Actually, if Allstate's
      insureds are older on average than GEICO's, then I believe
      that one should expect a lower persistency rate for
      GEICO all other things being equal because I believe
      that younger auto insureds are more likely to switch
      carriers than older ones.

      Any comments appreciated,
      especially ones about persistency.

    • of companies that we'll have to take a "wait and
      see" attitude with. After all, they are mimicing
      GEICO's underwriting and pricing stategies and they too
      are a one-bullet gun in that they only sell

      One might ask, if Allstate is so severely overpriced
      on young drivers and other companies are taking them
      in left and right, without regard to underwriting
      guidelines (which is definitely NOT the case it appears to
      be) what will be the overall effect on the loss
      ratio? After all, they take in less in premiums because
      they don't have to pay an agency force. But, the cost
      of each claim is relatively the same from company to
      company. Parts and labor costs are the same.
      Administrative expenses may be less but parts and labor are the

      Young drivers, as we all know, are the most volatile.
      So, it defies logic that one or two companies are
      going to take these higher risks on their books without
      restriction. I believe they call it anti-selection, don't

      Kris brings up some good points. Young drivers can't
      be developed into long-term customers by either of
      these two companies because they can't meet their
      long-term insurance needs.

      I, for one, can't wait to
      see how it all plays out in the long run. I can smell
      a consolidation of the insurance industry in the
      wind and usually that means the big get bigger.

    • and neither does Ed Liddy.

      I guess we will
      have to wait to see if the GEICO gamble pays off.
      However, first off, I am not so sure you will find that
      much of a better deal for young drivers with

      Logic tells me that if you get more than your fair
      share of this market by "underpricing" it you have to
      have higher rates on other classes of business
      (married, families, more expensive cars, increased incomes,
      etc.)....Now with the GEICO business model of turning
      insurance into a commidity without having an agent to
      service the policy an needs of the customer those that
      choose GEICO are probably more price sensitive. If they
      get a good rate as a young driver they will be with
      GEICO then, but as they age the better deal will be
      elsewhere. So you lose money while the drivers are young and
      then they leave you when they get to the time in their
      life cycle when they are relatively "over

      Also, another reason this is a bad strategy for GEICO,
      but might be more successful for ALL.....GEICO is a
      one-trick pony. Auto Only......when these young drivers
      they are attracting age, buy a home, have children,
      need to protect assets with a Homeowners Policy, an
      Umbrella policy, a life policy, variable annuities, Can't
      get this with GEICO. This geive even more likelihood
      that the young driver will say yes to GEICO for the
      rate break as a youngster, but will leave own the

      So as I said earlier, Mr. Buffet does not
      set the rates, but if he did and thought this was a
      winning strategy then my answer to your question is YES,
      he is stupid. (I guess you might be seeing that is
      the GEICO combined ratio though).

    • Hey Jim;
      That website (www.wallstreet.addr.
      com)you told me about was really the best financial
      website ever! specially the STOCK PICKS FROM ALL OVER THE
      NET section was very useful for me.
      But for
      portfolio tracking and messgae boards I prefer Yahoo
      Thanks again!

    • I'd like to weigh in on this business of ALL's
      higher rates for young drivers. I'm not going to argue
      the demographics, but is it competitive? GEICO is
      capturing younger drivers with better rates and clever,
      cartoony ads. It is said this is bad underwriting that
      will bite them in the end. But is Warren Buffett
      really that stupid? I'd wager he's smarter than Ed
      Liddy. He's getting an entire younger generation, which
      will increase their incomes, get married, buy extra
      and more expensive cars, have families, etc -- but
      who won't be buying Allstate -- and people tend to
      stick with their insurers. Seems to me that a long-term
      Blue Chip investment should be in a company that looks
      to the future like this.

      By the way, thanks
      for the lack of insults. With twenty million
      customers, some claims are Bound to slip through the cracks
      and not every complainer is a crook. At that time,
      injured parties have the RIGHT to complain in our free
      society. They also have the right to hire a lawyer,
      although Allstate seems to think this is a crime. If you
      read the Constitution, we have a Purposely adversarial
      justice system. The Founders knew you can't trust any
      large institution, corporate or government, to look out
      for your own best interests. Thus, we are allowed our
      hired guns. It may be unpleasant and costly, but the
      alternative is dictatorship. Maybe Allstate should just
      factor in this cost of doing business in a free society,
      instead of acting outraged and giving out all this "evil
      lawyer" brainwash, or worse yet acting as if the
      policyholder has done something Wrong by listening to all this
      bad press and taking the initiative to protect his

      Yes, it would be better if things were
      settled amicably, but for every case where an individual
      has called in lawyers first, you can find one where
      Allstate (as in our case) has called in lawyers first. We
      were dealing with bald lies from their lawyers for
      nearly a year before it hit us that we should get one --
      duhh -- so much for "litigous" policyholders. Most
      people Don't like having to hire a lawyer and if given
      even a vaguely fair break will avoid it.

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