Return on Equity of 17%
The Allstate Corporation (NYSE: ALL) today reported financial
results for the second quarter of 2018.
The Allstate Corporation Consolidated Highlights
Three months ended June 30, Six
months ended June 30,
($ in millions, except per share data
and ratios)
% / pts % /
pts
2018 2017 Change
2018 2017 Change Consolidated
revenues $ 10,099 $
9,813 2.9 $
19,869 $ 19,457
2.1 Net income applicable to common
shareholders 637 550
15.8 1,583
1,216 30.2 per diluted common
share 1.80 1.49
20.8 4.43
3.29 34.7 Adjusted net
income* 675 510
32.4 1,741
1,118 55.7 per diluted common
share* 1.90 1.38
37.7 4.87
3.02 61.3 Return on common
shareholders’ equity (trailing twelve months)
Net income applicable
to common shareholders
17.0 % 13.1 %
3.9 Adjusted net income*
15.8 %
13.5 % 2.3 Book value per
common share
59.16 53.83 9.9
Property-Liability combined ratio
Recorded 94.9 96.6
(1.7 ) 91.5
94.8 (3.3 ) Underlying
combined ratio* (excludes catastrophes, prior year reserve
reestimates and amortization of purchased intangibles)
85.5 84.9 0.6
84.8 84.5
0.3 Property and casualty insurance premiums
written 8,838 8,289
6.6 16,969
16,012 6.0 Catastrophe
losses 906 993
(8.8 ) 1,267 1,774
(28.6 ) Total policies in force (in
thousands)
88,434 74,968 18.0
* Measures used in this release that are not based on accounting
principles generally accepted in the United States of America
(“non-GAAP”) are denoted with an asterisk and defined and
reconciled to the most directly comparable GAAP measure in the
“Definitions of Non-GAAP Measures” section of this document.
“Allstate’s businesses continue to deliver excellent results,
growth is accelerating and we are on pace to achieve 2018’s
operating priorities,” said Tom Wilson, Chairman, President and
Chief Executive Officer of The Allstate Corporation. “Net income
increased to $637 million in the second quarter of 2018 and return
on equity was 17.0% for the latest twelve months. Revenues rose to
$10.1 billion for the quarter, reflecting higher average premiums
and increased policies in force. Better serving customers increased
the net promoter score for most businesses which, when combined
with higher new business levels, supported policy growth for the
Allstate and Esurance Property-Liability businesses, SquareTrade
and Allstate Benefits. Increased profitability reflected
operational excellence, a decline in auto accident frequency and
lower catastrophe losses. We are improving our underlying combined
ratio* outlook range by one point to 85 to 87(1) for the full year
2018,” said Wilson.
_________
(1) A reconciliation of this non-GAAP measure to the combined
ratio, a GAAP measure, is not possible on a forward-looking basis
because it is not possible to provide a reliable forecast of
catastrophes, and prior year reserve reestimates are expected to be
zero because reserves are determined based on our best estimate of
ultimate loss reserves as of the reporting date.
“The strategy to deliver differentiated products to consumers by
leveraging our brands, customer base, technology and capital is
also on track. The Allstate brand is a leader in using technology
and analytics to offer telematics based auto insurance and settle
claims. Esurance is doing the same and has successfully expanded
into homeowners insurance. SquareTrade is on pace with its
acquisition milestones and added 13.2 million policies in twelve
months. While investment income is down slightly in the quarter,
this reflects very strong performance-based returns last year.
Allstate’s Life, Benefits and Annuities businesses are on track to
meet their goals. Shareholders have also benefited from cash
returns of almost three-quarters of a billion dollars in the
quarter through dividends and share repurchases,” concluded
Wilson.
Second Quarter 2018 Results
- Total revenue of $10.1 billion in the
second quarter of 2018 increased 2.9% compared to the prior year
quarter.
- Property and casualty insurance
premiums earned increased 5.5%.
- Life premiums and contract charges
increased 3.6%.
- Net investment income decreased
8.1%.
- Realized capital losses reduced
revenues by $25 million, compared to gains which generated $81
million of revenue in the prior year quarter.
- Net income applicable to common
shareholders was $637 million, or $1.80 per diluted share, in the
second quarter of 2018, compared to $550 million, or $1.49 per
diluted share, in the second quarter of 2017. Adjusted net income*
was $675 million in the second quarter of 2018, compared to $510
million in the second quarter of 2017, driven by higher premiums
earned, lower catastrophe losses, higher favorable prior year
reserve releases and a lower U.S. tax rate, partially offset by
lower net investment income.
- Property-Liability underwriting
income of $416 million was $151 million better than the prior year
quarter. Increased premiums earned, lower catastrophe losses, lower
auto insurance claim frequency and higher favorable non-catastrophe
prior year reserve reestimates were partially offset by higher
claim severity and operating expenses.
- The underlying combined ratio* of 85.5
for the second quarter of 2018 was 0.6 points higher than the prior
year quarter due to increased expenses, primarily related to
compensation linked to operating performance. The underlying loss
ratio* of 60.2 in the second quarter was essentially flat to the
prior year quarter. Second quarter results were better than the
annual outlook range of 86 to 88 as auto insurance profitability
was favorably impacted by a continued reduction in accident
frequency. Given the positive first half 2018 performance, the
underlying combined ratio* is now expected to be within 85 to 87
for the full year of 2018.
- Non-catastrophe prior year reserve
releases of $135 million in the second quarter of 2018 included
continued favorable personal lines auto injury coverages
development and better than anticipated salvage and subrogation
recoveries, partially offset by strengthening in our commercial
business.
Property-Liability Results Three
months ended June 30, Six months ended June 30,
(% to earned premiums)
pts pts
2018 2017 Change
2018 2017 Change Recorded
Combined Ratio 94.9 96.6
(1.7 ) 91.5
94.8 (3.3 ) Allstate Brand Auto
93.0 95.6 (2.6 ) 90.8
93.2 (2.4 ) Allstate Brand Homeowners
98.3 97.2 1.1 89.6
95.4 (5.8 ) Allstate Brand Other
Personal Lines 86.6 90.8 (4.2 )
87.8 91.9 (4.1 ) Esurance
101.9 106.1 (4.2 ) 100.7
104.2 (3.5 ) Encompass 98.4
104.4 (6.0 ) 98.4 108.1
(9.7 )
Underlying Combined Ratio*
85.5 84.9 0.6
84.8 84.5
0.3 Allstate Brand Auto 92.8
92.6 0.2 91.4 91.8
(0.4 ) Allstate Brand Homeowners 63.3
59.8 3.5 63.4 60.5
2.9 Allstate Brand Other Personal Lines 77.3
77.1 0.2 80.3
77.9 2.4 Esurance 95.9
100.5 (4.6 ) 97.1 100.4
(3.3 ) Encompass 85.5 87.6
(2.1 ) 86.7 87.1
(0.4 )
- Allstate brand auto insurance
net written premium grew 5.8% in the second quarter of 2018,
reflecting a 4.0% increase in average premium and a 1.3% increase
in policies in force. Growth in policies in force was driven by
continued improvement in the renewal ratio and higher new issued
applications.
- The recorded combined ratio of 93.0 in
the second quarter of 2018 was 2.6 points better than the prior
year quarter, due to increased premiums earned, lower catastrophe
losses and a broad-based decline in accident frequency, partially
offset by higher severity and expenses, primarily related to agency
and employee compensation costs. The underlying combined ratio* of
92.8 in the quarter was 0.2 points higher than the prior year
quarter.
- Allstate brand homeowners
insurance net written premium increased 5.5% in the second quarter
of 2018 compared to the prior year quarter, due to increased
average premium and policy growth. Policies in force increased 0.8%
compared to the prior year quarter, driven by improvement in the
renewal ratio and increased new issued applications.
- The recorded combined ratio was 98.3 in
the second quarter of 2018, and the underlying combined ratio* of
63.3 was 3.5 points higher than the prior year quarter, mainly
driven by adverse non-catastrophe weather and increased
expenses.
- Allstate brand other personal
lines insurance net written premium of $475 million increased
7.7% in the second quarter of 2018 compared to the prior year
quarter. The recorded combined ratio of 86.6 was 4.2 points better
than the prior year quarter, primarily driven by lower catastrophe
losses. The underlying combined ratio* of 77.3 in the second
quarter of 2018 was 0.2 points higher than the prior year period,
primarily due to higher underlying loss costs partially offset by
increased earned premium.
- Esurance net written premium
grew 12.5% compared to the prior year quarter, reflecting increased
average premium in auto and homeowners insurance, and a 4.1%
increase in total policies in force. Auto policies in force
increased 3.2% due to higher retention and new issued
applications.
- The recorded combined ratio of 101.9 in
the second quarter of 2018 was 4.2 points better than the prior
year quarter, due to improvement in both the loss and expense
ratios. The underlying combined ratio* of 95.9 was 4.6 points
better than the prior year quarter, as both auto and homeowners
insurance results improved.
- Encompass net written premium
declined 3.5% in the second quarter of 2018 compared to the prior
year quarter, reflecting the continued execution of profit
improvement plans. The recorded combined ratio of 98.4 in the
second quarter of 2018 was 6.0 points better than the prior year
quarter, due to lower catastrophe losses and reduced auto insurance
claim frequency, partially offset by a higher expense ratio related
to technology initiatives and lower premiums. The underlying
combined ratio* of 85.5 for the second quarter was 2.1 points
better than the prior year quarter as the improvement in the
underlying loss ratio more than offset a higher expense ratio.
- Service Businesses policies in
force grew to 49.1 million, an increase of 13.0 million compared to
the prior year quarter, driven by SquareTrade. Adjusted net income
of $1 million in the second quarter of 2018 was $9 million better
than the second quarter of 2017, due to improved loss experience at
SquareTrade and Allstate Dealer Services.
Service Businesses Results Three
months ended June 30, Six months ended June 30,
($ in millions)
% / $ % / $
2018 2017 Change
2018 2017 Change Total
Revenues $ 320 $
260 23.1 % $
633 $ 507
24.9 SquareTrade 122 70
74.3 244 129 89.1
Allstate Roadside Services 77 77
— 151 155 (2.6 )
Allstate Dealer Services 100 93
7.5 196 183 7.1
Arity 21 20 5.0 42
40 5.0
Adjusted Net Income /
(Loss) $ 1 $
(8 ) $ 9 $
(4 ) $ (18 ) $ 14
SquareTrade 5 1 4
7 (7 ) 14 Allstate Roadside
Services (5 ) (5 ) — (10 )
(8 ) (2 ) Allstate Dealer Services 4
2 2 6 2
4 Arity (3 ) (6 ) 3
(7 ) (5 ) (2 )
- SquareTrade revenue was $122
million in the second quarter, reflecting policies in force growth
of 13.2 million compared to the second quarter of 2017 and the
adoption of the new revenue recognition accounting standard.
Adjusted net income is not impacted by the new accounting standard
and was $5 million in the second quarter of 2018 due to improved
loss experience.
- Allstate Roadside Services had
revenues of $77 million in the second quarter. The adjusted net
loss of $5 million was comparable to the prior year quarter due to
continued investments in the provider network and technology,
combined with losses from certain wholesale contracts.
- Allstate Dealer Services revenue
grew 7.5% compared to the second quarter of 2017, and adjusted net
income was $4 million, reflecting improvement in loss costs.
- Arity had revenues of $21
million in the second quarter of 2018, largely related to contracts
with affiliates. The adjusted net loss of $3 million represented
continuing investments in business expansion and product
development.
- Allstate Life adjusted net
income was $78 million in the second quarter of 2018, $15 million
higher than the prior year quarter, primarily due to a lower
effective tax rate, higher premiums and increased net investment
income, partially offset by higher contract benefits. Premiums and
contract charges increased 2.2% in the second quarter compared to
the prior year quarter, primarily related to growth in traditional
life insurance and lower reinsurance premiums ceded.
- Allstate Benefits adjusted net
income was $34 million in the second quarter of 2018, $9 million
higher than the prior year quarter, primarily due to increased
premiums, improved benefit ratio on selected products and a lower
effective tax rate, partially offset by higher expenses related to
technology investments. Premiums and contract charges increased
5.2% in the second quarter compared to the prior year quarter, due
to 5.4% growth in policies in force.
- Allstate Annuities adjusted net
income was $44 million in the second quarter of 2018, $21 million
lower than the prior year quarter, primarily due to lower
performance-based investment income.
- Allstate Investments $83 billion
portfolio generated net investment income of $824 million in the
second quarter, which was 8.1%, or $73 million, below the prior
year quarter.
Allstate Investment Results Three
months ended June 30, Six months ended June 30,
($ in millions, except ratios)
% / pts % /
pts
2018 2017 Change
2018 2017 Change Net
investment income $ 824
$ 897 (8.1 )
$ 1,610 $ 1,645
(2.1 ) Market-based investment income(1)
696 672 3.6 1,348
1,330 1.4 Performance-based
investment income(1) 176 263
(33.1 ) 357 394 (9.4 )
Realized capital gains and losses (25 )
81 NM (159
) 215 NM Change in
unrealized net capital gains, pre-tax(2)
(324
) 448 NM
(1,326 ) 779 NM
Total return on investment portfolio 0.5
% 1.8 % (1.3 )
— % 3.4 %
(3.4 )
(1) Investment expenses are not allocated between market-based
and performance-based portfolios with the exception of investee
level expenses.(2) Excludes $1.2 billion adjustment related to the
adoption of recognition and measurement accounting standard in
2018.
NM = not meaningful
- Market-based investments
contributed $696 million of income in the second quarter of 2018,
an increase of 3.6% compared to the prior year quarter, primarily
from higher purchase yields and modest duration extension of our
fixed-income portfolio.
- Performance-based investments
generated income of $176 million in the second quarter of 2018 with
a pre-tax annualized yield of 9.0%. Investment income decreased
33.1% over a very strong prior year quarter, primarily reflecting
more moderate asset appreciation.
- Net realized capital losses were
$25 million in the second quarter of 2018, compared to gains of $81
million in the prior year quarter. Net realized losses for the
quarter primarily related to sales of fixed-income securities,
partially offset by increased valuation of equity investments.
- Unrealized net capital gains
decreased $324 million from the first quarter, as higher market
yields resulted in lower fixed-income valuations.
- Total return on the investment
portfolio was 0.5% for the second quarter of 2018, which included a
stable 1.0% contribution from net investment income, partially
offset by lower fixed income valuations of 0.5%.
Proactive Capital Management
“Allstate returned $722 million of capital to our shareholders
during the second quarter through a combination of $163 million in
common stock dividends and repurchasing $559 million of outstanding
shares. As of June 30, 2018, there was $376 million remaining on
the $2 billion common share repurchase authorization,” said Mario
Rizzo, Chief Financial Officer.
“During the quarter, Allstate redeemed $224 million in
fixed-to-floating rate junior subordinated debentures and repaid
$176 million in senior debentures. Our adjusted net income return
on common shareholders’ equity* of 15.8% for the 12 months ended
June 30, 2018, was an increase of 2.3 points compared to the prior
year period. Book value per diluted common share of $59.16 was 9.9%
higher than June 30, 2017.”
Visit www.allstateinvestors.com to view additional information
about Allstate’s results, including a webcast of its quarterly
conference call and the call presentation. The conference call will
be held at 9 a.m. ET on Thursday, August 2.
Forward-Looking Statements
This news release contains “forward-looking statements” that
anticipate results based on our estimates, assumptions and plans
that are subject to uncertainty. These statements are made subject
to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements do not relate
strictly to historical or current facts and may be identified by
their use of words like “plans,” “seeks,” “expects,” “will,”
“should,” “anticipates,” “estimates,” “intends,” “believes,”
“likely,” “targets” and other words with similar meanings. We
believe these statements are based on reasonable estimates,
assumptions and plans. However, if the estimates, assumptions or
plans underlying the forward-looking statements prove inaccurate or
if other risks or uncertainties arise, actual results could differ
materially from those communicated in these forward-looking
statements. Factors that could cause actual results to differ
materially from those expressed in, or implied by, the
forward-looking statements may be found in our filings with the
U.S. Securities and Exchange Commission, including the “Risk
Factors” section in our most recent annual report on Form 10-K.
Forward-looking statements are as of the date on which they are
made, and we assume no obligation to update or revise any
forward-looking statement.
THE ALLSTATE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data) Three
months ended Six months ended June 30, June
30, 2018 2017 2018
2017 (unaudited) (unaudited)
Revenues Property and
casualty insurance premiums $ 8,460 $ 8,018 $ 16,746 $ 15,977 Life
premiums and contract charges 612 591 1,228 1,184 Other revenue 228
226 444 436 Net investment income 824 897 1,610 1,645 Realized
capital gains and losses: Total other-than-temporary impairment
(“OTTI”) losses (4 ) (47 ) (4 ) (109 ) OTTI losses reclassified
(from) to other comprehensive income — (3 ) (1 ) —
Net OTTI losses recognized in earnings (4 ) (50 ) (5 ) (109 ) Sales
and valuation changes on equity investments and derivatives (21 )
131 (154 ) 324 Total realized capital gains and
losses (25 ) 81 (159 ) 215 10,099 9,813
19,869 19,457
Costs and expenses
Property and casualty insurance claims and claims expense 5,792
5,689 10,941 11,105 Life contract benefits 483 486 987 960 Interest
credited to contractholder funds 165 175 326 348 Amortization of
deferred policy acquisition costs 1,296 1,176 2,569 2,345 Operating
costs and expenses 1,407 1,312 2,762 2,619 Restructuring and
related charges 27 53 49 63 Interest expense 86 83
169 168 9,256 8,974 17,803
17,608 Gain on disposition of operations 2 12
3 14
Income from operations before
income tax expense 845 851 2,069 1,863 Income tax
expense 169 272 418 589
Net
income 676 579 1,651 1,274
Preferred stock dividends 39 29 68 58
Net income applicable to common shareholders $ 637
$ 550 $ 1,583 $ 1,216
Earnings per common share: Net income applicable
to common shareholders per common share – Basic $ 1.82 $
1.51 $ 4.50 $ 3.34
Weighted average
common shares – Basic 349.2 363.6 351.6
364.6
Net income applicable to common shareholders
per common share – Diluted $ 1.80 $ 1.49 $ 4.43
$ 3.29
Weighted average common shares –
Diluted 354.6 369.0 357.2 370.1
Cash dividends declared per common share $ 0.46
$ 0.37 $ 0.92 $ 0.74
THE
ALLSTATE CORPORATION BUSINESS RESULTS ($ in millions,
except ratios) Three months ended Six
months ended June 30, June 30, 2018
2017 2018 2017
Property-Liability Premiums written $ 8,541 $ 8,030
$ 16,385 $ 15,499 Premiums earned $ 8,189 $
7,807 $ 16,208 $ 15,566 Other revenue 184 181 358 348 Claims and
claims expense (5,704 ) (5,607 ) (10,762 ) (10,935 ) Amortization
of deferred policy acquisition costs (1,110 ) (1,032 ) (2,198 )
(2,054 ) Operating costs and expenses (1,118 ) (1,033 ) (2,185 )
(2,051 ) Restructuring and related charges (25 ) (51 ) (46 ) (61 )
Underwriting income 416 265 1,375 813
Net investment income 353 387 690 695 Income tax expense on
operations (157 ) (207 ) (425 ) (475 ) Realized capital gains and
losses, after-tax (12 ) 56 (87 ) 145 Gain on disposition of
operations, after-tax — 6 — 6 Net
income applicable to common shareholders $ 600 $ 507
$ 1,553 $ 1,184 Catastrophe losses $ 906 $ 993
$ 1,267 $ 1,774 Amortization of purchased
intangible assets $ 3 $ 1 $ 4 $ 3
Operating ratios: Claims and claims expense ratio 69.6 71.8 66.4
70.3 Expense ratio (1) 25.3 24.8 25.1 24.5
Combined ratio 94.9 96.6 91.5 94.8
Effect of catastrophe losses on combined ratio 11.1
12.7 7.8 11.4 Effect of prior year reserve
reestimates on combined ratio (1.2 ) (1.1 ) (0.9 ) (1.1 ) Effect of
catastrophe losses included in prior year reserve reestimates on
combined ratio 0.5 (0.1 ) 0.2 — Effect of
Discontinued Lines and Coverages on combined ratio — 0.1
— 0.1
Services Businesses
Premiums written $ 297 $ 259 $ 584 $ 513
Premiums earned $ 271 $ 211 538 411 Intersegment insurance
premiums and service fees 29 28 58 56 Other revenue 16 17 32 33 Net
investment income 6 4 11 7 Claims and claims expense (89 ) (83 )
(182 ) (173 ) Amortization of deferred policy acquisition costs
(113 ) (71 ) (223 ) (139 ) Operating costs and expenses (118 ) (116
) (237 ) (220 ) Restructuring and related charges — (1 ) (1 ) (1 )
Income tax (expense) benefit on operations (1 ) 3 — 8
Adjusted net income (loss) 1 (8 ) (4 ) (18 ) Realized
capital gains and losses, after-tax (1 ) — (4 ) — Amortization of
purchased intangible assets, after-tax (16 ) (15 ) (32 ) (30 ) Net
loss applicable to common shareholders $ (16 ) $ (23 ) $ (40 ) $
(48 )
Allstate Life Premiums and contract charges $
326 $ 319 $ 653 $ 640 Other revenue 28 28 54 55 Net investment
income 130 123 252 243 Contract benefits (195 ) (187 ) (400 ) (382
) Interest credited to contractholder funds (71 ) (71 ) (141 ) (140
) Amortization of deferred policy acquisition costs (31 ) (35 ) (62
) (67 ) Operating costs and expenses (88 ) (86 ) (174 ) (172 )
Restructuring and related charges (2 ) — (2 ) — Income tax expense
on operations (19 ) (28 ) (33 ) (55 ) Adjusted net income 78 63 147
122 Realized capital gains and losses, after-tax (2 ) — (4 ) 1 DAC
and DSI amortization relating to realized capital gains and losses,
after-tax (3 ) (3 ) (5 ) (6 ) Net income applicable to common
shareholders $ 73 $ 60 $ 138 $ 117
(1) Other revenue is deducted from operating costs and
expenses in the expense ratio calculation.
THE ALLSTATE
CORPORATION BUSINESS RESULTS ($ in millions, except
ratios) Three months ended Six months ended
June 30, June 30, 2018 2017 2018
2017 Allstate Benefits Premiums and contract charges
$ 283 $ 269 $ 569 $ 538 Net investment income 19 19 38 36 Contract
benefits (143 ) (143 ) (292 ) (279 ) Interest credited to
contractholder funds (9 ) (9 ) (17 ) (18 ) Amortization of deferred
policy acquisition costs (36 ) (33 ) (77 ) (74 ) Operating costs
and expenses (70 ) (64 ) (142 ) (131 ) Income tax expense on
operations (10 ) (14 ) (17 ) (25 ) Adjusted net income 34 25 62 47
Realized capital gains and losses, after-tax — — (2 )
— Net income applicable to common shareholders $ 34 $
25 $ 60 $ 47
Allstate Annuities
Contract charges $ 3 $ 3 $ 6 $ 6 Net investment income 293 354 583
643 Contract benefits (145 ) (156 ) (295 ) (299 ) Interest credited
to contractholder funds (87 ) (93 ) (174 ) (188 ) Amortization of
deferred policy acquisition costs (2 ) (1 ) (3 ) (3 ) Operating
costs and expenses (9 ) (8 ) (18 ) (17 ) Restructuring and related
charges — (1 ) — (1 ) Income tax expense on operations (9 ) (33 )
(20 ) (47 ) Adjusted net income 44 65 79 94 Realized capital gains
and losses, after-tax 5 (3 ) (18 ) (5 ) Valuation changes on
embedded derivatives not hedged, after-tax — (1 ) 4 (1 ) Gain on
disposition of operations, after-tax 1 — 2 2
Net income applicable to common shareholders $ 50 $
61 $ 67 $ 90
Corporate and Other
Net investment income $ 23 $ 10 $ 36 $ 21 Operating costs and
expenses (12 ) (9 ) (20 ) (17 ) Interest expense (86 ) (83 ) (169 )
(168 ) Income tax benefit on operations 19 31 36 61 Preferred stock
dividends (39 ) (29 ) (68 ) (58 ) Adjusted net loss (95 ) (80 )
(185 ) (161 ) Realized capital gains and losses, after-tax (9 ) —
(10 ) — Business combination expenses, after-tax — —
— (13 ) Net loss applicable to common shareholders $ (104 )
$ (80 ) $ (195 ) $ (174 )
Consolidated net income
applicable to common shareholders $ 637 $ 550
$ 1,583 $ 1,216
THE ALLSTATE CORPORATION
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION June 30, December
31, ($ in millions, except par value data) 2018
2017 Assets (unaudited) Investments: Fixed income
securities, at fair value (amortized cost $56,750 and $57,525) $
56,891 $ 58,992 Equity securities, at fair value (cost $5,846 and
$5,461) 6,888 6,621 Mortgage loans 4,535 4,534 Limited partnership
interests 7,679 6,740 Short-term, at fair value (amortized cost
$3,123 and $1,944) 3,123 1,944 Other 4,125 3,972
Total investments 83,241 82,803 Cash 489 617 Premium installment
receivables, net 5,953 5,786 Deferred policy acquisition costs
4,533 4,191 Reinsurance recoverables, net 8,910 8,921 Accrued
investment income 589 569 Property and equipment, net 1,040 1,072
Goodwill 2,189 2,181 Other assets 3,154 2,838 Separate Accounts
3,271 3,444
Total assets $ 113,369 $
112,422
Liabilities Reserve for property and casualty
insurance claims and claims expense $ 26,623 $ 26,325 Reserve for
life-contingent contract benefits 12,213 12,549 Contractholder
funds 18,888 19,434 Unearned premiums 13,824 13,473 Claim payments
outstanding 894 875 Deferred income taxes 723 782 Other liabilities
and accrued expenses 7,363 6,639 Long-term debt 6,448 6,350
Separate Accounts 3,271 3,444
Total
liabilities 90,247 89,871
Shareholders’
equity Preferred stock and additional capital paid-in, $1 par
value, 95.2 thousand and 72.2 thousand shares issued and
outstanding, $2,380 and $1,805 aggregate liquidation preference
2,303 1,746 Common stock, $.01 par value, 900 million issued, 347
million and 355 million shares outstanding 9 9 Additional capital
paid-in 3,391 3,313 Retained income 45,508 43,162 Deferred ESOP
expense (3 ) (3 ) Treasury stock, at cost (553 million and 545
million shares) (26,818 ) (25,982 ) Accumulated other comprehensive
income: Unrealized net capital gains and losses: Unrealized net
capital gains and losses on fixed income securities with OTTI 83 85
Other unrealized net capital gains and losses 28 1,981 Unrealized
adjustment to DAC, DSI and insurance reserves (57 ) (404 )
Unrealized net capital gains and losses 54 1,662 Unrealized foreign
currency translation adjustments (20 ) (9 ) Unrecognized pension
and other postretirement benefit cost (1,302 ) (1,347 ) Total
accumulated other comprehensive income (1,268 ) 306
Total
shareholders’ equity 23,122 22,551
Total
liabilities and shareholders’ equity $ 113,369 $ 112,422
THE ALLSTATE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in
millions) Six months ended June 30,
2018 2017 Cash flows from operating
activities (unaudited) Net income $ 1,651 $ 1,274 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation, amortization and other non-cash items 248
238 Realized capital gains and losses 159 (215 ) Gain on
disposition of operations (3 ) (14 ) Interest credited to
contractholder funds 326 348 Changes in: Policy benefits and other
insurance reserves (22 ) 228 Unearned premiums 211 34 Deferred
policy acquisition costs (80 ) (65 ) Premium installment
receivables, net (185 ) (51 ) Reinsurance recoverables, net (9 ) 6
Income taxes (257 ) (42 ) Other operating assets and liabilities 51
(393 ) Net cash provided by operating activities 2,090
1,348
Cash flows from investing activities
Proceeds from sales Fixed income securities 19,515 14,521 Equity
securities 3,576 3,430 Limited partnership interests 182 481 Other
investments 135 118 Investment collections Fixed income securities
1,442 2,063 Mortgage loans 315 305 Other investments 235 337
Investment purchases Fixed income securities (20,401 ) (17,214 )
Equity securities (3,901 ) (3,473 ) Limited partnership interests
(873 ) (578 ) Mortgage loans (316 ) (148 ) Other investments (535 )
(532 ) Change in short-term investments, net (512 ) 2,142 Change in
other investments, net (35 ) 107 Purchases of property and
equipment, net (128 ) (146 ) Acquisition of operations (10 ) (1,356
) Net cash (used in) provided by investing activities (1,311 ) 57
Cash flows from financing activities Proceeds from
issuance of long-term debt 498 — Repayments of long-term debt (401
) — Proceeds from issuance of preferred stock 557 — Contractholder
fund deposits 506 515 Contractholder fund withdrawals (997 ) (957 )
Dividends paid on common stock (295 ) (257 ) Dividends paid on
preferred stock (58 ) (58 ) Treasury stock purchases (838 ) (657 )
Shares reissued under equity incentive plans, net 28 108 Other 93
(53 ) Net cash used in financing activities (907 ) (1,359 )
Net (decrease) increase in cash (128 ) 46
Cash at
beginning of period 617 436
Cash at end of
period $ 489 $ 482
Definitions of Non-GAAP Measures
We believe that investors’ understanding of Allstate’s
performance is enhanced by our disclosure of the following non-GAAP
measures. Our methods for calculating these measures may differ
from those used by other companies and therefore comparability may
be limited.
Adjusted net income is net income applicable to common
shareholders, excluding:
- realized capital gains and losses,
after-tax, except for periodic settlements and accruals on
non-hedge derivative instruments, which are reported with realized
capital gains and losses but included in adjusted net income,
- valuation changes on embedded
derivatives not hedged, after-tax,
- amortization of deferred policy
acquisition costs (“DAC”) and deferred sales inducements (“DSI”),
to the extent they resulted from the recognition of certain
realized capital gains and losses or valuation changes on embedded
derivatives not hedged, after-tax,
- business combination expenses and the
amortization of purchased intangible assets, after-tax,
- gain (loss) on disposition of
operations, after-tax, and
- adjustments for other significant
non-recurring, infrequent or unusual items, when (a) the nature of
the charge or gain is such that it is reasonably unlikely to recur
within two years, or (b) there has been no similar charge or gain
within the prior two years.
Net income applicable to common shareholders is the GAAP measure
that is most directly comparable to adjusted net income.
We use adjusted net income as an important measure to evaluate
our results of operations. We believe that the measure provides
investors with a valuable measure of the company’s ongoing
performance because it reveals trends in our insurance and
financial services business that may be obscured by the net effect
of realized capital gains and losses, valuation changes on embedded
derivatives not hedged, business combination expenses and the
amortization of purchased intangible assets, gain (loss) on
disposition of operations and adjustments for other significant
non-recurring, infrequent or unusual items. Realized capital gains
and losses, valuation changes on embedded derivatives not hedged
and gain (loss) on disposition of operations may vary significantly
between periods and are generally driven by business decisions and
external economic developments such as capital market conditions,
the timing of which is unrelated to the insurance underwriting
process. Consistent with our intent to protect results or earn
additional income, adjusted net income includes periodic
settlements and accruals on certain derivative instruments that are
reported in realized capital gains and losses because they do not
qualify for hedge accounting or are not designated as hedges for
accounting purposes. These instruments are used for economic hedges
and to replicate fixed income securities, and by including them in
adjusted net income, we are appropriately reflecting their trends
in our performance and in a manner consistent with the economically
hedged investments, product attributes (e.g. net investment income
and interest credited to contractholder funds) or replicated
investments. Business combination expenses are excluded because
they are non-recurring in nature and the amortization of purchased
intangible assets is excluded because it relates to the acquisition
purchase price and is not indicative of our underlying insurance
business results or trends. Non-recurring items are excluded
because, by their nature, they are not indicative of our business
or economic trends. Accordingly, adjusted net income excludes the
effect of items that tend to be highly variable from period to
period and highlights the results from ongoing operations and the
underlying profitability of our business. A byproduct of excluding
these items to determine adjusted net income is the transparency
and understanding of their significance to net income variability
and profitability while recognizing these or similar items may
recur in subsequent periods. Adjusted net income is used by
management along with the other components of net income applicable
to common shareholders to assess our performance. We use adjusted
measures of adjusted net income in incentive compensation.
Therefore, we believe it is useful for investors to evaluate net
income applicable to common shareholders, adjusted net income and
their components separately and in the aggregate when reviewing and
evaluating our performance. We note that investors, financial
analysts, financial and business media organizations and rating
agencies utilize adjusted net income results in their evaluation of
our and our industry’s financial performance and in their
investment decisions, recommendations and communications as it
represents a reliable, representative and consistent measurement of
the industry and the company and management’s performance. We note
that the price to earnings multiple commonly used by insurance
investors as a forward-looking valuation technique uses adjusted
net income as the denominator. Adjusted net income should not be
considered a substitute for net income applicable to common
shareholders and does not reflect the overall profitability of our
business.
The following tables reconcile net income applicable to common
shareholders and adjusted net income. Beginning January 1, 2018,
the Tax Legislation reduced the U.S. corporate income tax rate from
35% to 21%. Taxes on adjustments to reconcile net income applicable
to common shareholders and adjusted net income generally use a 21%
effective tax rate for 2018 and 35% for 2017 and are reported net
with the reconciling adjustment.
($ in millions, except per share data) Three
months ended June 30, Per diluted
Property-Liability Consolidated common share
2018 2017 2018 2017
2018 2017 Net income applicable to common
shareholders $ 600 $ 507 $ 637 $ 550 $ 1.80 $ 1.49 Realized
capital gains and losses, after-tax 12 (56 ) 19 (53 ) 0.05 (0.14 )
Valuation changes on embedded derivatives not hedged, after-tax — —
— 1 — — DAC and DSI amortization relating to realized capital gains
and losses and valuation changes on embedded derivatives not
hedged, after-tax — — 3 3 — 0.01 Reclassification of periodic
settlements and accruals on non-hedge derivative instruments,
after-tax (1 ) (1 ) (1 ) (1 ) — — Business combination expenses and
the amortization of purchased intangible assets, after-tax 2 1 18
16 0.05 0.04 Gain on disposition of operations, after-tax —
(6 ) (1 ) (6 ) — (0.02 )
Adjusted net income* $ 613
$ 445 $ 675 $ 510 $ 1.90 $ 1.38
Six months ended June 30, Per diluted
Property-Liability Consolidated common share
2018 2017 2018 2017 2018
2017 Net income applicable to common shareholders $
1,553 $ 1,184 $ 1,583 $ 1,216 $ 4.43 $ 3.29 Realized capital gains
and losses, after-tax 87 (145 ) 125 (141 ) 0.35 (0.38 ) Valuation
changes on embedded derivatives not hedged, after-tax — — (4 ) 1
(0.01 ) — DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on embedded derivatives not
hedged, after-tax — — 5 6 0.01 0.02 Reclassification of periodic
settlements and accruals on non-hedge derivative instruments,
after-tax (1 ) (1 ) (1 ) (1 ) — — Business combination expenses and
the amortization of purchased intangible assets, after-tax 3 2 35
45 0.10 0.11 Gain on disposition of operations, after-tax —
(6 ) (2 ) (8 ) (0.01 ) (0.02 )
Adjusted net income* $ 1,642
$ 1,034 $ 1,741 $ 1,118 $ 4.87 $
3.02
Adjusted net income return on common shareholders’ equity
is a ratio that uses a non-GAAP measure. It is calculated by
dividing the rolling 12-month adjusted net income by the average of
common shareholders’ equity at the beginning and at the end of the
12-months, after excluding the effect of unrealized net capital
gains and losses. Return on common shareholders’ equity is the most
directly comparable GAAP measure. We use adjusted net income as the
numerator for the same reasons we use adjusted net income, as
discussed above. We use average common shareholders’ equity
excluding the effect of unrealized net capital gains and losses for
the denominator as a representation of common shareholders’ equity
primarily attributable to the company’s earned and realized
business operations because it eliminates the effect of items that
are unrealized and vary significantly between periods due to
external economic developments such as capital market conditions
like changes in equity prices and interest rates, the amount and
timing of which are unrelated to the insurance underwriting
process. We use it to supplement our evaluation of net income
applicable to common shareholders and return on common
shareholders’ equity because it excludes the effect of items that
tend to be highly variable from period to period. We believe that
this measure is useful to investors and that it provides a valuable
tool for investors when considered along with return on common
shareholders’ equity because it eliminates the after-tax effects of
realized and unrealized net capital gains and losses that can
fluctuate significantly from period to period and that are driven
by economic developments, the magnitude and timing of which are
generally not influenced by management. In addition, it eliminates
non-recurring items that are not indicative of our ongoing business
or economic trends. A byproduct of excluding the items noted above
to determine adjusted net income return on common shareholders’
equity from return on common shareholders’ equity is the
transparency and understanding of their significance to return on
common shareholders’ equity variability and profitability while
recognizing these or similar items may recur in subsequent periods.
We use adjusted measures of adjusted net income return on common
shareholders’ equity in incentive compensation. Therefore, we
believe it is useful for investors to have adjusted net income
return on common shareholders’ equity and return on common
shareholders’ equity when evaluating our performance. We note that
investors, financial analysts, financial and business media
organizations and rating agencies utilize adjusted net income
return on common shareholders’ equity results in their evaluation
of our and our industry’s financial performance and in their
investment decisions, recommendations and communications as it
represents a reliable, representative and consistent measurement of
the industry and the company and management’s utilization of
capital. Adjusted net income return on common shareholders’ equity
should not be considered a substitute for return on common
shareholders’ equity and does not reflect the overall profitability
of our business.
The following tables reconcile return on common shareholders’
equity and adjusted net income return on common shareholders’
equity.
($ in millions) For the twelve months ended
June 30, 2018 2017 Return on
common shareholders’ equity Numerator: Net income
applicable to common shareholders $ 3,440 $ 2,518
Denominator: Beginning common shareholders’ equity (1) $ 19,755 $
18,807 Ending common shareholders’ equity (1) 20,819 19,755 Average
common shareholders’ equity $ 20,287 $ 19,281 Return
on common shareholders’ equity 17.0 % 13.1 %
($ in
millions) For the twelve months ended June 30,
2018 2017 Adjusted net income return on
common shareholders’ equity Numerator: Adjusted net income * $
3,090 $ 2,399 Denominator: Beginning common
shareholders’ equity (1) $ 19,755 $ 18,807 Less: Unrealized net
capital gains and losses 1,526 1,624 Adjusted
beginning common shareholders’ equity 18,229 17,183 Ending
common shareholders’ equity (1) 20,819 19,755 Less: Unrealized net
capital gains and losses 54 1,526 Adjusted ending
common shareholders’ equity 20,765 18,229 Average adjusted common
shareholders’ equity $ 19,497 $ 17,706 Adjusted net
income return on common shareholders’ equity * 15.8 % 13.5 %
_____________
(1) Excludes equity related to preferred stock of $2,303 million
as of June 30, 2018 and $1,746 million as of June 30,
2017 and June 30, 2016.
Combined ratio excluding the effect of catastrophes, prior
year reserve reestimates and amortization of purchased intangible
assets (“underlying combined ratio”) is a non-GAAP ratio, which
is computed as the difference between four GAAP operating ratios:
the combined ratio, the effect of catastrophes on the combined
ratio, the effect of prior year non-catastrophe reserve reestimates
on the combined ratio, and the effect of amortization of purchased
intangible assets on the combined ratio. We believe that this ratio
is useful to investors and it is used by management to reveal the
trends in our Property-Liability business that may be obscured by
catastrophe losses, prior year reserve reestimates and amortization
of purchased intangible assets. Catastrophe losses cause our loss
trends to vary significantly between periods as a result of their
incidence of occurrence and magnitude, and can have a significant
impact on the combined ratio. Prior year reserve reestimates are
caused by unexpected loss development on historical reserves.
Amortization of purchased intangible assets relates to the
acquisition purchase price and is not indicative of our underlying
insurance business results or trends. We believe it is useful for
investors to evaluate these components separately and in the
aggregate when reviewing our underwriting performance. We also
provide it to facilitate a comparison to our outlook on the
underlying combined ratio. The most directly comparable GAAP
measure is the combined ratio. The underlying combined ratio should
not be considered a substitute for the combined ratio and does not
reflect the overall underwriting profitability of our business.
The following tables reconcile the respective combined ratio to
the underlying combined ratio. Underwriting margin is calculated as
100% minus the combined ratio.
Property-Liability
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 94.9 96.6 91.5 94.8 Effect of
catastrophe losses (11.1 ) (12.7 ) (7.8 ) (11.4 ) Effect of prior
year non-catastrophe reserve reestimates 1.7 1.0 1.1
1.1
Underlying combined ratio* 85.5
84.9 84.8 84.5 Effect of prior year
catastrophe reserve reestimates 0.5 (0.1 ) 0.2 —
Allstate brand -
Total
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 94.3 95.7 90.7 93.6 Effect of
catastrophe losses (11.2 ) (12.9 ) (7.9 ) (11.4 ) Effect of prior
year non-catastrophe reserve reestimates 1.7 1.1 1.2
1.3
Underlying combined ratio* 84.8
83.9 84.0 83.5 Effect of prior year
catastrophe reserve reestimates 0.5 (0.1 ) 0.2 —
Allstate brand -
Auto Insurance
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 93.0 95.6 90.8 93.2 Effect of
catastrophe losses (3.1 ) (4.2 ) (1.6 ) (2.8 ) Effect of prior year
non-catastrophe reserve reestimates 2.9 1.2 2.2
1.4
Underlying combined ratio* 92.8
92.6 91.4 91.8 Effect of prior year
catastrophe reserve reestimates (0.1 ) — (0.3 ) (0.1 )
Allstate brand -
Homeowners Insurance
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 98.3 97.2 89.6 95.4 Effect of
catastrophe losses (36.0 ) (38.4 ) (26.7 ) (36.2 ) Effect of prior
year non-catastrophe reserve reestimates 1.0 1.0 0.5
1.3
Underlying combined ratio* 63.3
59.8 63.4 60.5 Effect of prior year
catastrophe reserve reestimates 2.4 — 2.0 —
Allstate brand -
Other Personal Lines
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 86.6 90.8 87.8 91.9 Effect of
catastrophe losses (10.7 ) (13.9 ) (8.6 ) (14.2 ) Effect of prior
year non-catastrophe reserve reestimates 1.4 0.2 1.1
0.2
Underlying combined ratio* 77.3
77.1 80.3 77.9 Effect of prior year
catastrophe reserve reestimates — (0.5 ) (0.3 ) 0.6
Esurance brand -
Total
Three months ended Six months ended June 30,
June 30, 2018 2017 2018
2017 Combined ratio 101.9 106.1 100.7 104.2 Effect of
catastrophe losses (6.2 ) (5.6 ) (3.6 ) (3.7 ) Effect of prior year
non-catastrophe reserve reestimates 0.2 — 0.1 — Effect of
amortization of purchased intangible assets — — (0.1
) (0.1 )
Underlying combined ratio* 95.9 100.5
97.1 100.4 Effect of prior year catastrophe
reserve reestimates 0.2 (0.2 ) 0.1 (0.1 )
Encompass brand -
Total
Three months ended Six months ended
June 30, June 30, 2018 2017
2018 2017 Combined ratio 98.4 104.4
98.4 108.1 Effect of catastrophe losses (15.6 ) (19.0 ) (13.5 )
(21.4 ) Effect of prior year non-catastrophe reserve reestimates
2.7 2.2 1.8 0.4
Underlying combined
ratio* 85.5 87.6 86.7 87.1
Effect of prior year catastrophe reserve reestimates 0.8
(0.7 ) 2.0 —
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180801006073/en/
The Allstate CorporationGreg BurnsMedia Relations(847)
402-5600orJohn GriekInvestor Relations(847) 402-2800
Allstate (NYSE:ALL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Allstate (NYSE:ALL)
Historical Stock Chart
From Apr 2023 to Apr 2024