Allstate Financial CEO: Allstate Bank No Longer Core to Long-Term Strategy
February 10, 2011 by Lordi Chordas
NORTHBROOK, Ill., Feb 09, 2011 (A. M. Best via COMTEX) —
Allstate Corp. said it is exiting the banking business and entering into a distribution and marketing agreement with Discover Financial Services in which Discover Bank will purchase most of the deposits of Allstate Bank.
As of Sept. 30, 2010, Allstate Bank reported it had $1.1 billion in deposits.
Discover will provide savings accounts, certificates of deposit and money-market products to Allstate customers.
Allstate Financial said it doesn’t intend to originate banking products or services after the transaction closes. Financial terms of the transaction are not considered material, the company said.
Allstate Financial President and Chief Executive Officer Matthew Winter said the company has refocused on insurance, retirement and investment products. “That, combined with the changing regulatory environment, led us to the determination that operating Allstate Bank is no longer core to our long-term strategy.”
The agreement will allow Allstate Financial to “deepen its focus on producing differentiated products for our key markets, strengthening relationships with existing customers and creating profitable growth for Allstate. Our customers will have uninterrupted access to their FDIC-insured deposits and services through Discover, a leading direct bank with a nationally respected brand.”
As part of the distribution and marketing agreement, Allstate affiliates and agents will offer personal savings and money market accounts, CDs and individual retirement account CDs to their customers through Discover. Discover Bank accounts are insured by the FDIC for up to $250,000 per depositor.
Insurance policies and other nonbanking products that customers have with Allstate will be unaffected by the transfer of deposits, the company said. In the next several months, bank customers will receive further notification about timing and the transaction of their accounts.
Allstate Financial said it will continue to offer and administer business loans to Allstate agencies through Allstate Finance Co. LLC.
In 1998, Allstate Bank received its thrift charter; it began offering retail banking products in 2001. The bank offers FDIC-insured CDs, money market accounts, savings accounts, checking accounts, ATM/debit cards and home mortgages.
Direct banking and payment services company Discover Financial Services operates the Discover card and offers personal and student loans, online savings accounts, CDs and money market accounts through its Discover Bank subsidiary.
“For us in the deposit business, our most fertile ground is our existing customer base, and we’ve seen a tremendous response from Discover card members in terms of our deposit offerings. But we also want to build broad awareness for our deposit offerings so we have a very explicit strategy around building marketing relationships with marquee brands like Allstate. So we are very excited about this particular opportunity,” said Steve Olszewski, vice president of deposit products for Discover.
He said the Allstate partnership “gives us the opportunity to access 20 million households through the Allstate network and build awareness for the Discover brand.”
Olszewski said he believes the agreement is “particularly attractive to Allstate because it gives agents an opportunity to broaden the relationship they have with their customers, which is something that many multiline insurers are doing today already with mixed success. I believe we, with a $20 billion deposit base, are able to invest in state-of-the-art online capabilities, mobile capabilities and provide 24/7 wide customer service out of our call centers in Salt Lake City and Phoenix.”
Allstate Insurance Group currently has a Best’s Financial Strength Rating of A+ (Superior).
Allstate (NYSE: ALL | PowerRating) shares were trading at $32.36 on the afternoon of Feb. 9, down 0.61% from the previous close.
(By Lori Chordas, senior associate editor, Best’s Review: Lori.Chordas@ambest.com)