Wilson immediately established a new risk- management process to identify, manage, and reduce Allstate's spread of risks. "Our catastrophe exposure was too high given the amount of capital we had and the impact on our earnings," Wilson explains. "Shareholders were understandably nervous about owning our stock." Simpson concurs: "Had they not reorganized their approach to disaster exposures, they'd have upwards of 40 percent of surplus on the line, pretax, to a 100-year- type catastrophe."

Wilson helped Allstate reorganize its Florida property insurance business into a separate, stand-alone company, Allstate Floridian Insurance Co., thereby reducing the parent's exposure to loss. In shaky California, the company's earthquake policies were stashed in a newly created, privately financed, publicly managed state agency that now provides earthquake insurance to homeowners. Moreover, Wilson ceded Allstate's property losses in excess of $750 million in the United States to the reinsurance market. Says Simpson, "If another Hurricane Andrew came today, the company would lose maybe a half year of earnings, nowhere near 40 percent of its surplus." A.M. Best currently gauges Allstate's financial strength at A-plus, its second-highest rating.

Wilson's maneuverings have played a vital role in Allstate's record-setting financial performance, reflected by its 56 percent stock price growth in 1997 and a $7.2 billion increase in its shareholders' equity over the past three years. With a nod to the picture behind his desk, Wilson chalks it up to the good people around him. "We're just people and capital," he says. "We don't have any patents or own any manufacturing plants. It's not like we can tune this machine up and spit out more car parts. People drive our financial results, and each of them is different, with different personalities, needs, and aspirations.

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