UPDATE: Allstate Warns Agents Of Errors In Tax Forms, Reports

Allstate Corp. (ALL) warned its insurance agents Friday it had discovered separate errors in their tax documents and the year-end reports that show data used to calculate their annual bonuses.

The mistakes come a month after the company made a separate miscalculation that underreported January commissions. The latest errors set off a new uproar among Allstate's sales force, where some agents were already up in arms about plans to cut their base pay.

The error in the tax documents--the "Form 1099" that shows each agent's 2011 income--in some cases provided incorrect information about how much agents had been paid, and in other cases listed pay data belonging to another agent. A spokeswoman said about 4,700 of their agency-owners were affected, out of about 11,000.

The company told agents they may have to file an amended tax return if they had already paid their taxes, and promised to reimburse them for the cost of resubmitting their returns.

The second mistake, which the company said was unrelated, was in a December performance report that shows figures that will be used to calculate annual bonuses. The errors included misstated policy counts and premiums, according to a notice posted on the computer system used by agents.

The Allstate spokeswoman, Meghann Dowd, said the company wouldn't know whether the mistakes had under- or over-estimated those figures until it re-ran the reports.

Allstate hadn't yet told agents what their bonuses would be. The company has pulled the report from the computer system that agents use, and told the agents it will tell them what their bonuses will be on Feb. 14.

Dowd said the company anticipates paying the bonus, which has historically been distributed around Feb. 14, on Feb. 23. Under the agents' contracts, the bonuses must be paid by March 15, Dowd said.

The January error involved a report that alerts agents to their monthly commissions. Before Allstate acknowledged its error, agents complained their monthly pay had fallen by 20% or more in some cases, adding that they were worried about paying January expenses.

The report was amended, and the monthly commissions were paid on time.

Allstate agents are classified as independent contractors, not employees, and must cover their own costs, including the salaries of their staff.

Even before the mistakes, many of the company's agents were already on edge about upcoming changes in the way their commissions are calculated. The company partially backed down from its proposed changes in December amid the outcry, but it still plans to cut base commissions for agents by 10% in 2013, while increasing the amount that agents can earn in bonuses.

Agents again took to independent and in-house Internet message boards on Friday to complain about the latest errors. One agent on the in-house board called the mistakes "despicable," adding, "we need to do something to get this fixed. We need to demand an outside audit, we need some upper [management] heads to roll on this."

Jim Fish, the executive director of the National Association of Professional Allstate Agents, said agents are "very untrusting of the company at this moment in time. It seems like blunder after blunder."

Fish's group is unaffiliated with Allstate and is often critical of the company.

In the notice posted on its agent computer system Friday, the company said Allstate's "leaders understand and apologize for the anxiety, concern and inconvenience that both of these issues may cause some agency owners." It told agents the issues "are receiving leadership's undivided attention until they are resolved."

Dowd said the issues were found "as part of our regular due diligence" and wouldn't affect the company's fourth-quarter or first-quarter results.

-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com

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