Thomas J. Wilson collects old photographs. On the wall behind his desk at the Northbrook, Illinois, headquarters of Allstate Insurance Co. hangs one such photo, featuring a gaggle of kids a century ago, their faces exhibiting a range of personalities. "The picture helps me remember that everybody is different and has different needs," says Wilson, CFO of the personal lines insurer, which had $24.9 billion in revenues last year.

The 40-year-old Wilson built Allstate's finance department from scratch. The insurer-- since 1931 a subsidiary of retailing giant Sears, Roebuck and Co.--became a fully independent public company in 1995, following a successful initial public offering. Characterized in countless commercials as "the good-hands people," Allstate needed some good hands of its own to erect a modern finance department. Wilson, a Sears vice president of strategy and analysis, got the nod.

Days into his new job, Wilson learned Allstate's finance organization had never performed such traditional assignments as allocating capital, accessing capital markets, managing mergers and acquisitions, or even conforming to the Securities and Exchange Commission's reporting requirements.

"I had some great people, but they didn't know much about the public market or external reporting," says Wilson. "They didn't really know how to borrow money or set up a commercial-paper program. Everyone thought I'd go out and hire a seasoned treasurer to get the house in order, but I wanted to send a signal that I believed in our people."

So Wilson tapped Jim Zils, a 22-year Allstate finance and marketing veteran, to tackle treasury. He also hired two assistant treasurers, one of whom had been a treasurer before, to fill in skill gaps. One took over cash management and capital markets, the other acquisitions. "I stacked the deck for Jim and put him at the top," Wilson explains. "He's been embedded in this organization for so long, he can maneuver around it. A new guy couldn't do this."

Leveraging Expertise
With his staff assembled, Wilson contemplated Allstate's financial structure and footing. A newcomer to insurance, he questioned everything, says Jerry D. Choate, Allstate's chairman and CEO. "Tom is someone who doesn't necessarily accept the way things have been done previously, even though things may be looking OK," says Choate. "He's always asking the difficult questions, not only in his own shop but throughout the organization."

One of his first musings was over what businesses made the most financial sense. At the time of the IPO, Allstate owned what Choate and Wilson deemed noncore subsidiaries, including a mortgage insurer, a reinsurer, and a large commercial lines facility. "We decided to strengthen the franchise through a renewed focus on the customer," Wilson says. "As a result, we sold the noncore assets and focused strategically on auto insurance, homeowners, life insurance, and some personal savings products."

"Tom latched on to the fact that Allstate is a company with two or three enormous strengths," says Chris Cole, a managing director at Goldman, Sachs & Co., which the insurer hired to sell its large commercial lines operations and which led the IPO of the mortgage insurer. "There were things that didn't fit with the company's image as a personal lines insurer--good companies that were not central to its new operating philosophy. Tom drove the process of peeling off these noncore assets, and expertly engineered each sale." The divestitures brought in net proceeds of some $550 million.

Wilson also ran herd on three recent acquisitions to expand the company's market, product line, and geographic reaches, including a $400 million deal for the Canadian nonstandard auto insurer Pembridge, which offers auto insurance to difficult-to-insure customers.

The acquisitions and divestitures were part of Allstate's rebranding effort. "We had tremendous, unaided brand recognition, but we didn't have strong attributes defining us in the public consciousness," Wilson says. "Largely, that was because we hadn't identified the attributes we wanted the public to perceive when they contemplated the company. We established these--loyalty, caring claims service, clear and simple policy language, and solid advice. If we can live these attributes, we'll make a ton of money."

With Allstate's brand equity clarified and strengthened, Wilson and his team next set about building a capital allocation process that would link the company's capital decisions to its redefined strategic and operating plans. "Typically, a business-unit head came in with a plan in the fall for [capital needs] the next year, but never got around to discussing the economics of that plan--the long-term drivers," he notes. "Now they make their recommendations in midsummer, and justify them by explaining the economic returns they expect to get, the key things that will drive that, and, most important, their commitment to all this. They then have until November to write up a formal plan." Allstate requires that all plans put forth be measured on a quarterly basis.

The Demons Within
In building the finance organization, though, Wilson had to wrestle with Allstate's past demons, particularly the financial aftermath of Hurricane Andrew in 1992. Two billion dollars in losses racked up by the storm blew Allstate two rungs down the ratings ladder at A.M. Best Co. "They dropped to an A-minus, our fourth-highest level indicating financial strength, below what we consider to be superior," says Eric Simpson, senior vice president of the Oldwick, New Jersey­based rating agency.

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