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Esurance's April Fools' ad more than just a joke

Esurancemay not, as its early April Fools'Day joke implied, be selling election insurance, but the segment's faux advertisementhad a motive that went beyond generating a few laughs.

The supposedproduct, as it was revealed in a March 31 release, protects people's abandoned homesfor the next four years while they flee the United States following a presidentialelection. More seriously, it served as a clever (and inexpensive) way to help expandthe number of consumers that identify the Esurance brand with , in addition to theprivate-passenger auto products through which it has built its reputation as oneof the leaders in the direct-to-consumer channel.

A reviewof 2015 statutory financials finds that EsuranceInsurance Co., EsuranceProperty & Casualty Insurance Co. and Esurance Insurance Co. of New Jersey combined to generatealmost $37 million in homeowners direct premiums written, up 155.7% from 2014. Statutorydata as reported on the state pages of annual statement does not distinguish betweenowner-occupied, tenant or mobile homeowners business, and Esurance's efforts inthe renters market predated those in the owner-occupied business.

"We'rehaving a great success in cross-selling homeowners" business, said AllstateChairman and CEO Thomas Wilson II with respect to the Esurance segment during anappearance at an investor conference in December 2015, according to a of his remarks.

The Esurancecompanies produced homeowners direct premiums written of $1,000 or more from 31states in 2015. Premium volume exceeded $1 million in 13 states. Illinois was theirsingle-largest state for homeowners business, with 2015 direct premiums writtenof nearly $5.7 million. In 2014, they generated homeowners premium volume of morethan $1 million in only four states, led by $2.8 million in Illinois.

The Esurancecompanies generated no homeowners business in 2015 from 12 states that combinedto account for $655.3 million of its 2015 private auto direct premiums written,suggesting that they possess significant room for further expansion from a geographicalperspective. Esurance Insurance Co., for instance, has filed to begin writing owner-occupiedhomeowners business in Maryland, a state in which the Esurance companies generatedprivate auto direct premiums written of nearly $20.5 million. Following a seriesof objections by the Maryland Insurance Administration, the is currently scheduled to take effectin September.

The expansioninto new states comes in addition to the opportunities for growth in the marketsthey have already been active. The Esurance companies' 2015 homeowners growth ratesin the three largest states from 2014, Illinois, Colorado and Ohio, topped 100%.

The largeyear-over-year gains in premium volume aside, Esurance's homeowners offerings continuedto account for little more than a rounding error in the context of Allstate's overallpremium writings in the business line. The Allstate group produced $7.93 billionin homeowners direct premiums written in 2015, second-highest in the U.S. marketbehind only the group led by StateFarm Mutual Automobile Insurance Co. The Allstate group's homeownersgrowth rate totaled 2.8% overall and 2.5% when excluding the Esurance business.

The Esurancesubgroup as consolidated by SNL generated private auto direct premiums written of$1.56 billion in 2015, which accounted for approximately 7.8% of the overall Allstategroup's writings in that business. The year-over-year growth rate of 5.3% was theslowest the Esurance companies had achieved since 2011, the year in which Allstateacquired them. TheAllstate group's overall growth rate of nearly 5.5% in the private auto line, basedon direct premiums written as reported in statutory filings, was the highest ithad achieved since 2005.

SNL consolidatesP&C groups as they currently exist, including the impact of completed acquisitions.When excluding historical results attributable to the Esurance companies, whichwere unaffiliated with Allstate at the time, the 2005 private auto growth rate totaled6.3%.

Allstateexecutives have identified BerkshireHathaway Inc.'s GEICO Corp.,United Services Automobile Associationand Progressive Corp. asEsurance's primary competitors in the direct channel. USAA ranked as the nation'sfifth-largest homeowners insurer in 2015. It was one year ago that Progressive dramaticallyexpanded its capabilities in the homeowners market through the completion of its acquisition of a majority ownershipstake in the holding company for a group that includes American Strategic Insurance Corp.

GEICOcontinues to steer clear of the homeowners market, choosing to refer customers toother carriers that are active in the market, including subsidiaries of , American Family Mutual Insurance Co., Liberty Mutual Holding Co. Inc., National General Holdings Corp. and Travelers Cos. Inc., through GEICO Insurance Agency.