NORTHBROOK, Ill., Oct. 27 /PRNewswire-FirstCall/ -- The Allstate
Corporation (NYSE: ALL) today reported financial results for the
third quarter of 2010:
|
|
The Allstate
Corporation Consolidated
Highlights
|
|
|
Three months
ended
September 30,
|
|
($ in millions, except per share
amounts and ratios)
|
2010
|
2009
|
%
Change
|
|
Consolidated
revenues
|
$ 7,908
|
$ 7,582
|
4.3
|
|
Net income
|
367
|
221
|
66.1
|
|
Net income per diluted
share
|
0.68
|
0.41
|
65.9
|
|
Operating income*
|
452
|
538
|
(16.0)
|
|
Operating income per diluted
share*
|
0.83
|
0.99
|
(16.2)
|
|
Book value per
share
|
35.48
|
32.29
|
9.9
|
|
Book value per share, excluding
the impact of unrealized net capital gains and losses on fixed
income securities*
|
33.38
|
32.44
|
2.9
|
|
Catastrophe
losses
|
386
|
407
|
(5.2)
|
|
Property-Liability combined
ratio
|
95.9
|
94.7
|
1.2
pts
|
|
Property-Liability combined
ratio excluding the effect of catastrophes and prior year reserve
reestimates ("underlying combined ratio")*
|
89.2
|
88.0
|
1.2
pts
|
|
* Measures used in this release
that are not based on accounting principles generally accepted in
the United States of America ("non-GAAP") are defined and
reconciled to the most directly comparable GAAP measure and
operating measures are defined in the
"Definitions of Non-GAAP and Operating Measures" section of this
document.
|
|
|
|
|
|
"Our strategies to create shareholder value in an uncertain
economic climate continue to generate positive results," said
Thomas J. Wilson, chairman,
president and chief executive officer of The Allstate Corporation.
"Net income of $367 million
showed strong growth over the prior year third quarter and second
quarter of this year.
"Profitability at Allstate Protection remains strong, with the
underlying combined ratio consistently meeting our annual outlook
range. We remain comfortable with our range of 88 to 90 for
the year. Overall policies in force declined, but standard
auto new issued applications improved as we implemented new
marketing and growth initiatives. Allstate Financial's net
and operating income improved this quarter from a year ago,
reflecting progress on its strategic repositioning.
"Book value per share rose 7% during the quarter to $35.48 at September 30,
2010 reflecting profitability and strong investment
results," said Wilson.
Consolidated Financial Results
Allstate's third quarter 2010 net income was $367 million, or $0.68 per diluted share, compared to $221 million in the third quarter of 2009,
primarily due to lower realized capital losses in 2010 versus 2009.
Operating income was $452
million, or $0.83 per diluted
share, in the third quarter of 2010 compared to $538 million in the same period of 2009,
reflecting a decline in Property-Liability partly offset by
increases in Allstate Financial.
Property-Liability Profitability Is a Source of Financial
Strength
Property-Liability remained a source of financial strength for
the company while beginning to implement growth plans.
Allstate's Property-Liability business produced an underlying
combined ratio within the company's full-year outlook range of 88
to 90. The underlying combined ratio, which excludes
catastrophes and prior year reserve reestimates, was 89.2 in the
third quarter of 2010 compared to 88.0 in the same period of 2009,
due to a higher expense ratio and increases in claim frequencies.
The recorded combined ratio was 95.9 for the third quarter of
2010, compared to 94.7 in the third quarter of 2009.
Catastrophe losses totaled $386
million during the third quarter of 2010, reflecting 29
events with losses of $371 million.
This compares to catastrophe losses of $407 million for the third quarter of 2009.
Catastrophe losses added 5.9 points to the combined ratio
during the third quarter of 2010.
Property-Liability premiums written* declined 0.6% in the third
quarter of 2010 compared to the prior year quarter. Allstate
brand growth of 0.2% was more than offset by a 16.7% decline in the
Encompass brand, reflecting actions to improve profitability.
Allstate brand standard auto premiums written declined 0.5% for
the third quarter of 2010 compared to the prior year third quarter.
This decline was driven by a 1.7% decline in policies in
force, reflecting a 0.4 point decline in retention to 88.7%, partly
offset by a 2.5% increase in new issued applications from the prior
year third quarter. Average premium increased 1.4% during the
third quarter when compared to the prior year quarter.
Allstate's Customer Loyalty Index (CLI) as of September 30, 2010 declined slightly from the
prior quarter of 2010. The Allstate brand standard auto
combined ratio was 93.2, an increase of 0.5 points from the third
quarter of 2009, due to higher claim frequencies.
Allstate brand homeowners premiums written for the third quarter
of 2010 increased 2.4% compared to the same period a year ago, as a
7.2% increase in average premium was partly offset by a 4.1%
decline in policies in force. Rate increases averaging 4.2%
in 15 states were approved during the third quarter, as Allstate
took actions to improve returns and lessen the volatility of
homeowners results. The combined ratio was 104.7 in the third
quarter of 2010 compared to 98.3 in the third quarter a year ago,
primarily due to unfavorable prior year reserve reestimates and a
higher expense ratio. Unfavorable prior year reserve
reestimates in the third quarter of 2010 included a litigation
settlement of $70 million.
The Property-Liability expense ratio for the third quarter of
2010 was 25.1 compared to 24.7 in the prior year third quarter,
primarily due to higher marketing expenditures.
Allstate Financial Strategy Gaining Traction
Allstate Financial made significant progress on its goals to
produce higher returns, reduce concentrations in products with
returns dependent on investment spread, and serve its customers by
focusing on Allstate agencies and the Allstate Workplace Division.
Consistent with this strategy, premiums and deposits* on
mortality and morbidity (underwritten) products increased 8.6% when
compared to the third quarter of 2009, while deposits on annuities
declined by 30.3% compared to the prior year period. Premiums
and deposits trends reflect premium growth in the Allstate
Workplace Division and Allstate agencies, and the discontinuation
earlier this year of new business through financial
institutions.
Allstate Financial operating income was $108 million in the third quarter of 2010
compared to $95 million in the prior
year third quarter. The increase was due to a higher
investment spread and lower amortization of deferred acquisition
costs (DAC), partly offset by higher operating costs and expenses
and a lower benefit spread. The investment spread increased
to $127 million in the third quarter
of 2010 from $109 million in the
prior year third quarter. The change reflected decreased
interest credited to contractholder funds, partly offset by lower
net investment income. DAC amortization declined primarily
due to a lower amortization rate on fixed annuities.
Operating costs and expenses rose as product distribution and
marketing costs, employee benefits, and certain acquisition-related
expenses increased. The benefit spread declined 2.8% from the
prior year third quarter due to an increase in contract benefits on
immediate annuities, reflecting favorable mortality experience in
the third quarter of 2009, partly offset by growth in accident and
health products.
Allstate Financial reported net income of $85 million in the third quarter of 2010 compared
to a net loss of $38 million in the
2009 quarter. Net income reflected after-tax net realized
capital losses, including the impact of deferred acquisition costs
and deferred sales inducements of $18
million in the third quarter of 2010 compared to
$133 million in the third quarter of
2009.
Strong Returns From Investment Portfolio
Allstate's consolidated investment portfolio was $102.2 billion at September 30, 2010, up $2.3 billion from June 30,
2010, as strong investment returns more than offset impacts
from reductions in Allstate Financial's contractholder funds.
Investment returns reflect lower interest rates, improved
equity markets, and significant cash flow generated by the
portfolio. Allstate's net unrealized gain at September 30, 2010 was $2.7 billion, pre-tax, compared to a net
unrealized gain of $400 million,
pre-tax, at June 30, 2010 and a net
unrealized loss of $2.5 billion,
pre-tax, at September 30, 2009.
Net realized capital loss for the third quarter of 2010 was
$144 million, pre-tax, compared to
$519 million in the prior year third
quarter, with lower impairment write-downs, higher gains on sales
and lower derivative losses driving the improvement.
Impairment write-downs of $137
million were primarily related to residential and commercial
real estate exposure. Net realized gains from sales of
$319 million were due to sales of
fixed income and equity securities.
Derivative net losses totaled $285
million in the third quarter of 2010 and were driven
primarily by Allstate's risk management actions. Declining
interest rates resulted in $181
million of derivative losses, which were significantly less
than the increases in the portfolio's fixed income valuations
during the period. Favorable valuations on equity securities
were also significantly greater than the $115 million of derivative losses related to
equity market hedges.
As part of the company's ongoing strategy to manage exposure to
certain portfolio segments, reductions of municipal fixed income
securities totaled $2.4 billion of
amortized cost and reductions of commercial real estate totaled
$484 million of amortized cost during
the third quarter of 2010.
Net investment income for the third quarter of 2010 was
$1.0 billion, 7.3% less than the
third quarter of 2009 and 4.2% less than the second quarter of
2010. These declines primarily resulted from lower interest
rates, risk reduction actions related to municipal bonds and
commercial real estate, and duration management actions taken to
protect the portfolio from rising interest rates. Net
investment income in the Property-Liability portfolio totaled
$284 million in the third quarter of
2010, a 12.9% decline from the third quarter of 2009 and an 8.4%
decrease from the second quarter of 2010. Allstate
Financial's net investment income was $707
million, a 5.0% decline from the third quarter of 2009 and a
2.2% decline from the second quarter of 2010.
Capital Position Continues to Improve
"The combination of higher net income and favorable investment
returns resulted in a 15% increase in book value during the first
nine months of 2010," said Don
Civgin, senior vice president and chief financial officer.
"Our capital position continues to improve, providing us with
greater flexibility in achieving our strategic priorities to
improve customer loyalty, reinvent protection and retirement, and
grow our businesses."
Book value per share grew to $35.48 per share at September 30, 2010 compared to $33.24 at June 30,
2010 and $30.84 at
December 31, 2009. Book value
increased during the third quarter as higher shareholders' equity
reflected improved investment valuations. Statutory surplus
at September 30, 2010 is an estimated
$15.1 billion for Allstate Insurance
Company, including $3.2 billion at
Allstate Life Insurance Company. This compares to Allstate
Insurance Company statutory surplus of $14.9
billion at June 30, 2010 and
$14.8 billion at September 30, 2009. Deployable assets at
the holding company level increased to $3.5
billion at September 30, 2010,
reflecting $400 million of dividends
from Allstate Insurance Company during the third quarter.
Visit www.allstateinvestors.com to view additional information
about Allstate's third quarter results, including a webcast of its
quarterly conference call and the presentation used in the call.
The conference call will be held at 9
a.m. ET on Thursday, October 28,
2010.
The Allstate Corporation (NYSE: ALL) is the nation's largest
publicly held personal lines insurer. Widely known through
the "You're In Good Hands With Allstate®" slogan, Allstate is
reinventing protection and retirement to help more than 17 million
households insure what they have today and better prepare for
tomorrow. Consumers access Allstate insurance products (auto,
home, life and retirement) and services through Allstate agencies,
independent agencies, and Allstate exclusive financial
representatives in the U.S. and Canada, as well as via www.allstate.com and
1-800 Allstate®.
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
($ in millions, except per share
data)
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Property-liability
insurance premiums
|
$
|
6,499
|
$
|
6,535
|
$
|
19,515
|
$
|
19,677
|
|
Life and annuity premiums
and contract charges
|
|
548
|
|
482
|
|
1,637
|
|
1,460
|
|
Net investment
income
|
|
1,005
|
|
1,084
|
|
3,104
|
|
3,368
|
|
Realized capital gains
and losses:
|
|
|
|
|
|
|
|
|
|
Total other-than-temporary
impairment losses
|
|
(99)
|
|
(539)
|
|
(637)
|
|
(1,735)
|
|
Portion of loss recognized
in other comprehensive income
|
|
(68)
|
|
147
|
|
(91)
|
|
301
|
|
Net other-than-temporary
impairment losses recognized in earnings
|
|
(167)
|
|
(392)
|
|
(728)
|
|
(1,434)
|
|
Sales and other realized
capital gains and losses
|
|
23
|
|
(127)
|
|
(215)
|
|
884
|
|
Total realized capital
gains and losses
|
|
(144)
|
|
(519)
|
|
(943)
|
|
(550)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,908
|
|
7,582
|
|
23,313
|
|
23,955
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
Property-liability
insurance claims and claims expense
|
|
4,603
|
|
4,573
|
|
14,109
|
|
14,295
|
|
Life and annuity contract
benefits
|
|
445
|
|
382
|
|
1,372
|
|
1,176
|
|
Interest credited to
contractholder funds
|
|
445
|
|
496
|
|
1,358
|
|
1,636
|
|
Amortization of deferred
policy acquisition costs
|
|
1,006
|
|
1,023
|
|
2,969
|
|
3,649
|
|
Operating costs and
expenses
|
|
828
|
|
744
|
|
2,446
|
|
2,247
|
|
Restructuring and related
charges
|
|
9
|
|
35
|
|
33
|
|
112
|
|
Interest
expense
|
|
91
|
|
106
|
|
275
|
|
291
|
|
|
|
7,427
|
|
7,359
|
|
22,562
|
|
23,406
|
|
Gain on disposition of
operations
|
|
9
|
|
2
|
|
12
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before
income tax expense
|
|
490
|
|
225
|
|
763
|
|
555
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
123
|
|
4
|
|
131
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
367
|
$
|
221
|
$
|
632
|
$
|
336
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share -
Basic
|
$
|
0.68
|
$
|
0.41
|
$
|
1.17
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares -
Basic
|
|
540.9
|
|
539.9
|
|
540.6
|
|
539.5
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share -
Diluted
|
$
|
0.68
|
$
|
0.41
|
$
|
1.16
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares -
Diluted
|
|
543.0
|
|
541.5
|
|
542.7
|
|
540.5
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per
share
|
$
|
0.20
|
$
|
0.20
|
$
|
0.60
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION
|
|
SEGMENT
RESULTS
|
|
($ in millions, except
ratios)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Property-Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
written
|
$
|
6,767
|
$
|
6,810
|
$
|
19,665
|
$
|
19,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned
|
$
|
6,499
|
$
|
6,535
|
$
|
19,515
|
$
|
19,677
|
|
Claims and claims
expense
|
|
(4,603)
|
|
(4,573)
|
|
(14,109)
|
|
(14,295)
|
|
Amortization of deferred
policy acquisition costs
|
|
(915)
|
|
(943)
|
|
(2,754)
|
|
(2,832)
|
|
Operating costs and
expenses
|
|
(706)
|
|
(642)
|
|
(2,074)
|
|
(1,911)
|
|
Restructuring and related
charges
|
|
(9)
|
|
(31)
|
|
(34)
|
|
(88)
|
|
Underwriting
income
|
|
266
|
|
346
|
|
544
|
|
551
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
284
|
|
326
|
|
898
|
|
1,004
|
|
Periodic settlements and
accruals on non-hedge derivative instruments
|
|
(2)
|
|
(2)
|
|
(4)
|
|
(8)
|
|
Income tax expense on
operations
|
|
(154)
|
|
(169)
|
|
(390)
|
|
(343)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
394
|
|
501
|
|
1,048
|
|
1,204
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized capital gains and
losses, after-tax
|
|
(69)
|
|
(188)
|
|
(261)
|
|
(373)
|
|
Gain on disposition of
operations, after-tax
|
|
4
|
|
--
|
|
4
|
|
--
|
|
Reclassification of
periodic settlements and accruals on non-hedge
|
|
|
|
|
|
|
|
|
|
derivative
instruments, after-tax
|
|
2
|
|
1
|
|
3
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
331
|
$
|
314
|
$
|
794
|
$
|
836
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe
losses
|
$
|
386
|
$
|
407
|
$
|
1,670
|
$
|
1,741
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
ratios:
|
|
|
|
|
|
|
|
|
|
Claims and claims
expense ratio
|
|
70.8
|
|
70.0
|
|
72.3
|
|
72.6
|
|
Expense
ratio
|
|
25.1
|
|
24.7
|
|
24.9
|
|
24.6
|
|
Combined
ratio
|
|
95.9
|
|
94.7
|
|
97.2
|
|
97.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
catastrophe losses on combined ratio
|
|
5.9
|
|
6.2
|
|
8.6
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of prior
year reserve reestimates on combined ratio
|
|
0.2
|
|
(0.7)
|
|
(0.9)
|
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
catastrophe losses included in prior year reserve reestimates
on
|
|
|
|
|
|
|
|
|
|
combined ratio
|
|
(0.6)
|
|
(1.2)
|
|
(0.7)
|
|
(0.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
Discontinued Lines and Coverages on combined ratio
|
|
0.3
|
|
0.3
|
|
0.1
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Allstate
Financial
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
62,915
|
$
|
61,891
|
$
|
62,915
|
$
|
61,891
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and
deposits
|
$
|
1,011
|
$
|
1,033
|
$
|
3,134
|
$
|
3,965
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and contract
charges
|
$
|
548
|
$
|
482
|
$
|
1,637
|
$
|
1,460
|
|
Net investment
income
|
|
707
|
|
744
|
|
2,161
|
|
2,327
|
|
Periodic settlements and
accruals on non-hedge derivative instruments
|
|
10
|
|
2
|
|
38
|
|
--
|
|
Contract
benefits
|
|
(445)
|
|
(382)
|
|
(1,372)
|
|
(1,176)
|
|
Interest credited to
contractholder funds
|
|
(446)
|
|
(497)
|
|
(1,359)
|
|
(1,559)
|
|
Amortization of deferred
policy acquisition costs
|
|
(101)
|
|
(108)
|
|
(200)
|
|
(347)
|
|
Operating costs and
expenses
|
|
(118)
|
|
(99)
|
|
(354)
|
|
(325)
|
|
Restructuring and related
charges
|
|
--
|
|
(4)
|
|
1
|
|
(24)
|
|
Income tax expense on
operations
|
|
(47)
|
|
(43)
|
|
(180)
|
|
(111)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
108
|
|
95
|
|
372
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized capital gains and
losses, after-tax
|
|
(25)
|
|
(151)
|
|
(360)
|
|
(239)
|
|
DAC and DSI accretion
(amortization) relating to realized capital gains
|
|
|
|
|
|
|
|
|
|
and losses,
after-tax
|
|
7
|
|
18
|
|
9
|
|
(132)
|
|
DAC and DSI unlocking
relating to realized capital gains and losses, after-tax
|
--
|
|
--
|
|
(18)
|
|
(224)
|
|
Reclassification of
periodic settlements and accruals on non-hedge
|
|
|
|
|
|
|
|
|
|
derivative
instruments, after-tax
|
|
(7)
|
|
(1)
|
|
(25)
|
|
--
|
|
Gain on disposition of
operations, after-tax
|
|
2
|
|
1
|
|
4
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
85
|
$
|
(38)
|
$
|
(18)
|
$
|
(346)
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
Other
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
$
|
14
|
$
|
14
|
$
|
45
|
$
|
37
|
|
Operating costs and
expenses
|
|
(95)
|
|
(109)
|
|
(293)
|
|
(302)
|
|
Income tax benefit on
operations
|
|
31
|
|
37
|
|
96
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(50)
|
|
(58)
|
|
(152)
|
|
(160)
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized capital gains and
losses, after-tax
|
|
1
|
|
3
|
|
8
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(49)
|
$
|
(55)
|
$
|
(144)
|
$
|
(154)
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
$
|
367
|
$
|
221
|
$
|
632
|
$
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
($ in millions, except par value
data)
|
|
September
30,
|
|
December
31,
|
|
|
|
2010
|
|
2009
|
|
Assets
|
|
(unaudited)
|
|
|
|
Investments:
|
|
|
|
|
|
Fixed income securities,
at fair value (amortized cost $80,786 and $81,243)
|
$
|
83,193
|
$
|
78,766
|
|
Equity securities, at
fair value (cost $3,447 and $4,845)
|
|
3,707
|
|
5,024
|
|
Mortgage loans
|
|
6,961
|
|
7,935
|
|
Limited partnership
interests
|
|
3,454
|
|
2,744
|
|
Short-term, at fair value
(amortized cost $2,776 and $3,056)
|
|
2,776
|
|
3,056
|
|
Other
|
|
2,123
|
|
2,308
|
|
Total
investments
|
|
102,214
|
|
99,833
|
|
Cash
|
|
500
|
|
612
|
|
Premium installment receivables,
net
|
|
4,981
|
|
4,839
|
|
Deferred policy acquisition
costs
|
|
4,671
|
|
5,470
|
|
Reinsurance recoverables,
net
|
|
6,597
|
|
6,355
|
|
Accrued investment
income
|
|
847
|
|
864
|
|
Deferred income taxes
|
|
670
|
|
1,870
|
|
Property and equipment,
net
|
|
922
|
|
990
|
|
Goodwill
|
|
874
|
|
875
|
|
Other assets
|
|
1,799
|
|
1,872
|
|
Separate Accounts
|
|
8,459
|
|
9,072
|
|
Total
assets
|
$
|
132,534
|
$
|
132,652
|
|
Liabilities
|
|
|
|
|
|
Reserve for property-liability
insurance claims and claims expense
|
$
|
19,294
|
$
|
19,167
|
|
Reserve for life-contingent
contract benefits
|
|
13,955
|
|
12,910
|
|
Contractholder funds
|
|
48,936
|
|
52,582
|
|
Unearned premiums
|
|
10,001
|
|
9,822
|
|
Claim payments
outstanding
|
|
733
|
|
742
|
|
Other liabilities and accrued
expenses
|
|
5,945
|
|
5,726
|
|
Long-term debt
|
|
5,909
|
|
5,910
|
|
Separate Accounts
|
|
8,459
|
|
9,072
|
|
Total
liabilities
|
|
113,232
|
|
115,931
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Preferred stock, $1 par value,
25 million shares authorized, none issued
|
|
--
|
|
--
|
|
Common stock, $.01 par value,
2.0 billion shares authorized and 900 million issued,
538 million and 537
million shares outstanding
|
|
9
|
|
9
|
|
Additional capital
paid-in
|
|
3,165
|
|
3,172
|
|
Retained income
|
|
31,781
|
|
31,492
|
|
Deferred ESOP expense
|
|
(45)
|
|
(47)
|
|
Treasury stock, at cost (362
million and 363 million shares)
|
|
(15,755)
|
|
(15,828)
|
|
Accumulated other comprehensive
income:
|
|
|
|
|
|
Unrealized net capital
gains and losses:
|
|
|
|
|
|
Unrealized net
capital losses on fixed income securities with OTTI
|
|
(200)
|
|
(441)
|
|
Other unrealized
net capital gains and losses
|
|
1,919
|
|
(1,072)
|
|
Unrealized
adjustment to DAC, DSI and insurance reserves
|
|
(427)
|
|
643
|
|
Total
unrealized net capital gains and losses
|
|
1,292
|
|
(870)
|
|
Unrealized foreign
currency translation adjustments
|
|
54
|
|
46
|
|
Unrecognized pension and
other postretirement benefit cost
|
|
(1,227)
|
|
(1,282)
|
|
Total accumulated other
comprehensive income (loss)
|
|
119
|
|
(2,106)
|
|
Total shareholders'
equity
|
|
19,274
|
|
16,692
|
|
Noncontrolling
interest
|
|
28
|
|
29
|
|
Total
equity
|
|
19,302
|
|
16,721
|
|
Total liabilities and
equity
|
$
|
132,534
|
$
|
132,652
|
|
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
($ in millions)
|
|
Nine months
ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
Cash flows from operating
activities
|
|
(unaudited)
|
|
Net income
|
$
|
632
|
$
|
336
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation, amortization
and other non-cash items
|
|
55
|
|
(87)
|
|
Realized capital gains and
losses
|
|
943
|
|
550
|
|
Gain on disposition of
operations
|
|
(12)
|
|
(6)
|
|
Interest credited to
contractholder funds
|
|
1,358
|
|
1,636
|
|
Changes in:
|
|
|
|
|
|
Policy benefits and other
insurance reserves
|
|
143
|
|
(460)
|
|
Unearned
premiums
|
|
172
|
|
6
|
|
Deferred policy
acquisition costs
|
|
(138)
|
|
471
|
|
Premium installment
receivables, net
|
|
(137)
|
|
(108)
|
|
Reinsurance recoverables,
net
|
|
(229)
|
|
(101)
|
|
Income taxes
|
|
178
|
|
1,175
|
|
Other operating assets and
liabilities
|
|
58
|
|
103
|
|
Net
cash provided by operating activities
|
|
3,023
|
|
3,515
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Proceeds from sales
|
|
|
|
|
|
Fixed income
securities
|
|
17,345
|
|
16,098
|
|
Equity
securities
|
|
4,262
|
|
4,636
|
|
Limited
partnership interests
|
|
387
|
|
293
|
|
Mortgage
loans
|
|
121
|
|
140
|
|
Other
investments
|
|
98
|
|
429
|
|
Investment
collections
|
|
|
|
|
|
Fixed income
securities
|
|
3,672
|
|
3,947
|
|
Mortgage loans
|
|
784
|
|
1,093
|
|
Other
investments
|
|
96
|
|
99
|
|
Investment purchases
|
|
|
|
|
|
Fixed income
securities
|
|
(20,712)
|
|
(22,694)
|
|
Equity
securities
|
|
(2,721)
|
|
(5,991)
|
|
Limited partnership
interests
|
|
(1,040)
|
|
(674)
|
|
Mortgage loans
|
|
(55)
|
|
(23)
|
|
Other
investments
|
|
(99)
|
|
(54)
|
|
Change in short-term
investments, net
|
|
104
|
|
5,437
|
|
Change in other investments,
net
|
|
(464)
|
|
(144)
|
|
Disposition of
operations
|
|
7
|
|
12
|
|
Purchases of property and
equipment, net
|
|
(114)
|
|
(143)
|
|
Net
cash provided by investing activities
|
|
1,671
|
|
2,461
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Proceeds from issuance of
long-term debt
|
|
-
|
|
1,003
|
|
Repayment of long-term
debt
|
|
(1)
|
|
(1)
|
|
Contractholder fund
deposits
|
|
2,297
|
|
3,252
|
|
Contractholder fund
withdrawals
|
|
(6,779)
|
|
(9,485)
|
|
Dividends paid
|
|
(322)
|
|
(434)
|
|
Treasury stock
purchases
|
|
(5)
|
|
(3)
|
|
Shares reissued under equity
incentive plans, net
|
|
26
|
|
2
|
|
Excess tax benefits on
share-based payment arrangements
|
|
(7)
|
|
(6)
|
|
Other
|
|
(15)
|
|
8
|
|
Net cash used in financing
activities
|
|
(4,806)
|
|
(5,664)
|
|
Net (decrease) increase in
cash
|
|
(112)
|
|
312
|
|
Cash at beginning of
period
|
|
612
|
|
415
|
|
Cash at end of
period
|
$
|
500
|
$
|
727
|
|
|
|
|
|
|
|
|
Definitions of Non-GAAP and Operating Measures
We believe that investors' understanding of Allstate's
performance is enhanced by our disclosure of the following non-GAAP
and operating financial measures. Our methods for calculating
these measures may differ from those used by other companies and
therefore comparability may be limited.
Operating income is net income (loss), 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 operating income,
- amortization of DAC and DSI, to the extent they resulted from
the recognition of certain realized capital gains and losses,
- 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 (loss) is the GAAP measure that is most directly
comparable to operating income.
We use operating 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, gain (loss) on disposition of
operations and adjustments for other significant non-recurring,
infrequent or unusual items. Realized capital gains and
losses 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, operating 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 operating 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. Non-recurring items are excluded
because, by their nature, they are not indicative of our business
or economic trends. Accordingly, operating 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 operating 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. Operating income is
used by management along with the other components of net income
(loss) to assess our performance. We use adjusted measures of
operating income and operating income per diluted share in
incentive compensation. Therefore, we believe it is useful
for investors to evaluate net income (loss), operating 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 operating 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 operating income as the denominator. Operating
income should not be considered as a substitute for net income
(loss) and does not reflect the overall profitability of our
business.
The following tables reconcile operating income and net income
(loss) for the three months and nine months ended September 30, 2010 and 2009.
|
|
For the three months
ended
September 30,
|
|
Property-Liability
|
|
Allstate
Financial
|
|
Consolidated
|
|
Per diluted
share
|
|
($ in millions, except per share
data)
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Operating income
|
$
|
394
|
$
|
501
|
$
|
108
|
$
|
95
|
$
|
452
|
$
|
538
|
$
|
0.83
|
$
|
0.99
|
|
Realized capital gains and
losses
|
|
(107)
|
|
(290)
|
|
(38)
|
|
(234)
|
|
(144)
|
|
(519)
|
|
|
|
|
|
Income tax benefit
|
|
38
|
|
102
|
|
13
|
|
83
|
|
51
|
|
183
|
|
|
|
|
|
Realized capital gains and
losses, after-tax
|
|
(69)
|
|
(188)
|
|
(25)
|
|
(151)
|
|
(93)
|
|
(336)
|
|
(0.17)
|
|
(0.62)
|
|
DAC and DSI accretion relating
to realized
capital gains and losses,
after-tax
|
|
--
|
|
--
|
|
7
|
|
18
|
|
7
|
|
18
|
|
0.01
|
|
0.04
|
|
Reclassification of periodic
settlements and accruals
on non-hedge derivative
instruments, after-tax
|
|
2
|
|
1
|
|
(7)
|
|
(1)
|
|
(5)
|
|
--
|
|
--
|
|
--
|
|
Gain on disposition of
operations, after-tax
|
|
4
|
|
--
|
|
2
|
|
1
|
|
6
|
|
1
|
|
0.01
|
|
--
|
|
Net income (loss)
|
$
|
331
|
$
|
314
|
$
|
85
|
$
|
(38)
|
$
|
367
|
$
|
221
|
$
|
0.68
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months
ended
September 30,
|
|
Property-Liability
|
|
Allstate
Financial
|
|
Consolidated
|
|
Per diluted
share
|
|
($ in millions, except per share
data)
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Operating income
|
$
|
1,048
|
$
|
1,204
|
$
|
372
|
$
|
245
|
$
|
1,268
|
$
|
1,289
|
$
|
2.34
|
$
|
2.38
|
|
Realized capital gains and
losses
|
|
(403)
|
|
(403)
|
|
(553)
|
|
(156)
|
|
(943)
|
|
(550)
|
|
|
|
|
|
Income tax benefit
(expense)
|
|
142
|
|
30
|
|
193
|
|
(83)
|
|
330
|
|
(56)
|
|
|
|
|
|
Realized capital gains and
losses, after-tax
|
|
(261)
|
|
(373)
|
|
(360)
|
|
(239)
|
|
(613)
|
|
(606)
|
|
(1.13)
|
|
(1.12)
|
|
DAC and DSI accretion
(amortization) relating to
realized capital gains and
losses, after-tax
|
|
--
|
|
--
|
|
9
|
|
(132)
|
|
9
|
|
(132)
|
|
0.01
|
|
(0.24)
|
|
DAC and DSI unlocking relating
to
realized capital gains and
losses, after-tax
|
|
--
|
|
--
|
|
(18)
|
|
(224)
|
|
(18)
|
|
(224)
|
|
(0.03)
|
|
(0.42)
|
|
Reclassification of periodic
settlements and accruals
on non-hedge derivative
instruments, after-tax
|
|
3
|
|
5
|
|
(25)
|
|
--
|
|
(22)
|
|
5
|
|
(0.04)
|
|
0.01
|
|
Gain on disposition of
operations, after-tax
|
|
4
|
|
--
|
|
4
|
|
4
|
|
8
|
|
4
|
|
0.01
|
|
0.01
|
|
Net income (loss)
|
$
|
794
|
$
|
836
|
$
|
(18)
|
$
|
(346)
|
$
|
632
|
$
|
336
|
$
|
1.16
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income (loss) is calculated as premiums
earned, less claims and claims expense ("losses"), amortization of
DAC, operating costs and expenses and restructuring and related
charges as determined using GAAP. Management uses this
measure in its evaluation of the results of operations to analyze
the profitability of our Property-Liability insurance operations
separately from investment results. It is also an integral
component of incentive compensation. It is useful for
investors to evaluate the components of income separately and in
the aggregate when reviewing performance. Net income (loss)
is the most directly comparable GAAP measure. Underwriting
income (loss) should not be considered as a substitute for net
income (loss) and does not reflect the overall profitability of our
business. A reconciliation of Property-Liability underwriting
income (loss) to net income (loss) is provided in the "Segment
Results" page.
Combined ratio excluding the effect of catastrophes and prior
year reserve reestimates ("underlying combined ratio") is a
non-GAAP ratio, which is computed as the difference between three
GAAP operating ratios: the combined ratio, the effect of
catastrophes on the combined ratio and the effect of prior year
non-catastrophe reserve reestimates on the combined ratio.
The most directly comparable GAAP measure is 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 and prior year reserve reestimates. These 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. 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 2010 combined ratio
excluding the effect of catastrophe losses and prior year reserve
reestimates. The combined ratio excluding the effect of
catastrophes and prior year reserve reestimates should not be
considered a substitute for the combined ratio and does not reflect
the overall underwriting profitability of our business. A
reconciliation of the combined ratio excluding the effect of
catastrophes and prior year reserve reestimates to the combined
ratio is provided in the following table.
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Combined ratio excluding the
effect of catastrophes and prior year reserve reestimates
("underlying combined ratio")
|
89.2
|
|
88.0
|
|
88.8
|
|
88.1
|
|
Effect of catastrophe
losses
|
5.9
|
|
6.2
|
|
8.6
|
|
8.8
|
|
Effect of prior year
non-catastrophe reserve reestimates
|
0.8
|
|
0.5
|
|
(0.2)
|
|
0.3
|
|
Combined ratio
|
95.9
|
|
94.7
|
|
97.2
|
|
97.2
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe
reserve reestimates
|
(0.6)
|
|
(1.2)
|
|
(0.7)
|
|
(0.7)
|
|
|
|
|
|
|
|
|
|
|
|
In this news release, we provide our outlook range on the 2010
combined ratio excluding the effect of catastrophe losses and prior
year reserve reestimates. A reconciliation of this measure to
the combined ratio is not possible on a forward-looking basis
because it is not possible to provide a reliable forecast of
catastrophes. Future 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.
Book value per share, excluding the impact of unrealized net
capital gains and losses on fixed income securities, is a ratio
that uses a non-GAAP measure. It is calculated by dividing
shareholders' equity after excluding the impact of unrealized net
capital gains and losses on fixed income securities and related
DAC, DSI and life insurance reserves by total shares outstanding
plus dilutive potential shares outstanding. Book value per
share is the most directly comparable GAAP measure.
We use the trend in book value per share, excluding the impact
of unrealized net capital gains and losses on fixed income
securities, in conjunction with book value per share to identify
and analyze the change in net worth attributable to management
efforts between periods. We believe the non-GAAP ratio is
useful to investors because it eliminates the effect of items that
can fluctuate significantly from period to period and are generally
driven by economic developments, primarily capital market
conditions, the magnitude and timing of which are generally not
influenced by management, and we believe it enhances understanding
and comparability of performance by highlighting underlying
business activity and profitability drivers. We note that
book value per share, excluding the impact of unrealized net
capital gains and losses on fixed income securities, is a measure
commonly used by insurance investors as a valuation
technique. Book value per share, excluding the impact of
unrealized net capital gains and losses on fixed income securities,
should not be considered as a substitute for book value per share,
and does not reflect the recorded net worth of our business.
The following table shows the reconciliation.
|
|
($ in millions, except per share
data)
|
|
As of
September 30,
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Book value per
share
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Shareholders'
equity
|
$
|
19,274
|
$
|
17,505
|
|
Denominator:
|
|
|
|
|
|
Shares outstanding and dilutive
potential shares outstanding
|
|
543.3
|
|
542.1
|
|
Book value per share
|
$
|
35.48
|
$
|
32.29
|
|
|
|
|
|
|
|
Book value per share, excluding
the impact of unrealized net capital gains and losses on fixed
income securities
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Shareholders'
equity
|
$
|
19,274
|
$
|
17,505
|
|
Unrealized net
capital gains and losses on fixed income securities
|
|
1,138
|
|
(81)
|
|
Adjusted shareholders'
equity
|
$
|
18,136
|
$
|
17,586
|
|
Denominator:
|
|
|
|
|
|
Shares outstanding and
dilutive potential shares outstanding
|
|
543.3
|
|
542.1
|
|
Book value per share, excluding
the impact of unrealized net capital gains and losses on fixed
income securities
|
$
|
33.38
|
$
|
32.44
|
|
|
|
|
|
|
|
|
Premiums written is the amount of premiums charged for
policies issued during a fiscal period. Premiums earned is a
GAAP measure. Premiums are considered earned and are included
in financial results on a pro-rata basis over the policy period.
The portion of premiums written applicable to the unexpired
terms of the policies is recorded as unearned premiums on our
Condensed Consolidated Statements of Financial Position. A
reconciliation of premiums written to premiums earned is presented
in the following table.
|
|
($ in millions)
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Premiums written
|
$
|
6,767
|
$
|
6,810
|
$
|
19,665
|
$
|
19,694
|
|
Increase in Property-Liability
unearned premiums
|
|
(319)
|
|
(315)
|
|
(184)
|
|
(48)
|
|
Other
|
|
51
|
|
40
|
|
34
|
|
31
|
|
Premiums earned
|
$
|
6,499
|
$
|
6,535
|
$
|
19,515
|
$
|
19,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and deposits is an operating measure that we use
to analyze production trends for Allstate Financial sales. It
includes premiums on insurance policies and annuities and all
deposits and other funds received from customers on deposit-type
products including the net new deposits of Allstate Bank, which we
account for under GAAP as increases to liabilities rather than as
revenue. The following table illustrates where premiums and
deposits are reflected in the condensed consolidated financial
statements.
|
|
($ in millions)
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Total premiums and
deposits
|
$
|
1,011
|
$
|
1,033
|
$
|
3,134
|
$
|
3,965
|
|
Deposits to contractholder
funds
|
|
(730)
|
|
(802)
|
|
(2,297)
|
|
(3,252)
|
|
Deposits to separate
accounts
|
|
(25)
|
|
(27)
|
|
(76)
|
|
(83)
|
|
Change in unearned premiums and
other adjustments
|
|
34
|
|
28
|
|
104
|
|
96
|
|
Life and annuity
premiums (1)
|
$
|
290
|
$
|
232
|
$
|
865
|
$
|
726
|
|
|
|
(1) Life and annuity contract
charges in the amount of $258 million and $250 million for the
three months ended September 30, 2010 and 2009, respectively, and
$772 million and $734 million for the nine months ended September
30, 2010 and 2009, respectively, which are also revenues recognized
for GAAP, have been excluded from the table above, but are a
component of the Condensed Consolidated Statements of Operations
line item life and annuity premiums and contract charges.
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements and Risk Factors
This news release contains forward-looking statements about our
outlook for the combined ratio excluding the effect of catastrophes
and prior year reserve reestimates for 2010. These statements
are subject to the Private Securities Litigation Reform Act of 1995
and are based on management's estimates, assumptions and
projections. Actual results may differ materially from those
projected based on the risk factors described below.
- Premiums written and premiums earned, the denominator of the
underlying combined ratio, may be materially less than projected.
Policyholder attrition may be greater than anticipated
resulting in a lower amount of insurance in force.
- Unanticipated increases in the severity or frequency of
standard auto insurance claims may adversely affect our
underwriting results. Changes in the severity or frequency of
claims may affect the profitability of our Allstate Protection
segment. Changes in bodily injury claim severity are driven
primarily by inflation in the medical sector of the economy and
litigation. Changes in auto physical damage claim severity
are driven primarily by inflation in auto repair costs, auto parts
prices and used car prices. The short-term level of claim
frequency we experience may vary from period to period and may not
be sustainable over the longer term. A decline in gas prices,
increase in miles driven, and higher unemployment are examples of
factors leading to a short-term frequency change. A
significant long-term increase in claim frequency could have an
adverse effect on our underwriting results.
We undertake no obligation to publicly correct or update any
forward-looking statements. This news release contains
unaudited financial information.
SOURCE The Allstate Corporation
Copyright . 27 PR Newswire