NORTHBROOK, Ill., Oct. 31, 2011 /PRNewswire/ -- The Allstate
Corporation (NYSE: ALL) today reported financial results for the
third quarter of 2011:
|
|
The Allstate
Corporation Consolidated Highlights
|
|
|
Three months
ended
September
30,
|
|
($ in millions, except per share
amounts and ratios)
|
2011
|
2010
|
%
Change
|
|
Consolidated
revenues
|
$ 8,242
|
$ 7,908
|
4.2
|
|
Net income
|
165
|
367
|
(55.0)
|
|
Net income per diluted
share
|
0.32
|
0.68
|
(52.9)
|
|
Operating income*
|
84
|
452
|
(81.4)
|
|
Operating income per diluted
share*
|
0.16
|
0.83
|
(80.7)
|
|
Book value per
share
|
35.56
|
35.48
|
0.2
|
|
Book value per share, excluding
the impact of
unrealized net
capital gains and losses on
fixed income
securities*
|
33.39
|
33.38
|
--
|
|
Catastrophe
losses
|
1,077
|
386
|
179.0
|
|
Property-Liability combined
ratio
|
104.8
|
95.9
|
8.9
pts
|
|
Property-Liability combined
ratio excluding the
effect of
catastrophes and prior year reserve
reestimates
("underlying combined ratio")*
|
89.2
|
89.2
|
--
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.
|
|
|
"Maintaining auto insurance profitability and proactively
managing our investment portfolio enabled us to overcome an
increase of $691 million in
catastrophe losses from the third quarter of 2010 and still earn a
profit," said Thomas J. Wilson,
chairman, president and chief executive officer of The Allstate
Corporation. "Progress was made in improving auto insurance
profitability in New York and
Florida and raising underlying
returns in homeowners insurance. A small decline in auto
insurance policies during the last twelve months is related to the
impact of improving profitability in New
York and Florida and a 4%
decline in homeowners policies. The Property-Liability underlying
combined ratio of 88.9 for the first three quarters of 2011
continued to compare favorably with our full-year guidance range of
88 to 91.
"Allstate Financial's results were solid and investment results
were also strong in the quarter. Allstate Financial's
operating income increased 24.1% from the prior year third quarter
to $134 million in the third quarter
of 2011 reflecting improved margins and lower expenses. These
improvements were partially offset by the managed reduction in the
size of the fixed annuity business. Proactive risk and return
strategies enabled us to maintain the portfolio yield, realize net
capital gains and increase the absolute level of fixed income
unrealized gains in the quarter.
"We completed the $1 billion share
repurchase program in the third quarter, and the acquisition of
Esurance and Answer Financial in early October," Wilson
concluded.
Property-Liability Impacted by Catastrophe Losses, Underlying
Profitability Within Guidance
Allstate's Property-Liability combined ratio for the third
quarter of 2011 was 104.8, reflecting the previously reported
catastrophe losses of $1.1 billion,
or 16.7 points. During the period, Allstate experienced 23
catastrophe loss events, including Hurricane Irene and Tropical
Storm Lee. Excluding catastrophe losses and prior year
reserve reestimates, the Property-Liability underlying combined
ratio was 89.2 during the third quarter of 2011, consistent with
the third quarter of 2010. Total Allstate brand policies in
force declined as of September 30,
2011 compared to the prior year quarter driven by standard
auto and homeowners declines, but were partly offset by growth in
the Emerging Business lines and Canada.
Allstate brand standard auto premiums written* declined by 0.8%
from the prior year third quarter as increased average premiums
were offset by lower policies in force. Average gross premium
increased 1.1% in the third quarter of 2011 compared to the third
quarter of 2010, as rate increases were partially offset by reduced
volumes in New York and
Florida where average premiums are
above the countrywide average. Policies in force declined
during the quarter, consistent with the company's expectation, as
growth was balanced with a focus on maintaining auto profitability.
New issued applications declined 13.2% in the quarter when
compared to the prior year, while retention improved to 89.1 from
88.7 in the third quarter of last year. The Allstate brand
standard auto combined ratio was 94.2, 1.0 points higher than the
third quarter of 2010.
Allstate brand homeowners premiums written increased 1.5% in the
third quarter of 2011 compared to the same period a year ago, as a
5.0% increase in average gross premium was partly offset by a 4.2%
decline in policies in force. Rate increases averaging 13.9%
were approved in 15 states during the third quarter, as Allstate
continued to take actions to improve homeowners returns.
Policies in force declined reflecting restrictions in new
business and, to a lesser degree, the decision not to offer
continuing coverage to some policyholders. The Allstate brand
homeowners combined ratio was 131.9 for the third quarter of 2011
as catastrophe losses impacted the combined ratio by 55.8 points.
Excluding the impact of catastrophes and prior year reserve
reestimates, the Allstate brand homeowners underlying combined
ratio was 73.3 in the third quarter of 2011, compared to 75.0 in
the third quarter of 2010.
Allstate Financial Strategy Produces Improved Financial
Results
Allstate Financial's strategy of reducing concentration in, and
improving the profitability of, investment spread products,
expanding the sales of underwritten products through Allstate
agencies and growing Allstate Benefits resulted in improved
financial results. Operating income increased to $134 million in the third quarter, which was
24.1% above the third quarter of 2010. Net income increased
to $183 million in the third quarter
of 2011 compared to $85 million in
the same quarter of 2010.
Allstate Financial premiums and contract charges were
essentially flat to the prior year quarter as growth in
underwritten products was offset by a decline in annuity sales.
Premiums and contract charges on products sold through
Allstate agencies were 5.3% higher than the prior year quarter.
Deferred fixed annuity contractholder funds declined
$4.0 billion, or 13.4%, as of
September 30, 2011 compared to
September 30, 2010, as surrenders and
maturities outpaced new sales. Allstate Benefits' premiums
and contract charges were 2.7% higher than the third quarter of
2010.
Operating income was $26 million
higher than the third quarter of 2010 as increases in the
investment spread and lower expenses were only partly offset by
declines in the benefit spread. The investment spread
increased 11.8% to $142 million in
the third quarter when compared to the prior year third quarter, as
actions to improve investment portfolio yields and lower crediting
rates on annuities and interest-sensitive life insurance more than
offset the effect of a continued decline in spread-based business
in force. The benefit spread decreased to $134 million in the third quarter from
$141 million in the 2010 third
quarter, due primarily to unfavorable mortality experience on
annuities and life insurance, partly offset by higher profitability
and growth at Allstate Benefits and higher contract charges on
interest-sensitive life insurance. The improvement in net
income was due to net realized capital gains in the third quarter,
versus net realized capital losses in the third quarter of last
year, and increased operating income.
Proactive Management of Investment Portfolio Maintains Yield
and Return
Allstate's proactive management of risk and return during the
first nine months of 2011 was focused on enhancing yields and total
risk adjusted returns. The fixed income yields were
maintained, despite lower interest rates, by increasing corporate
bond allocations, reducing investments in government securities and
slightly lengthening duration. Interest rate derivative
positions, which were used for overall risk management purposes in
2010, were also terminated in 2011. Additional actions to
manage risk included reducing select exposures to municipal bonds
and European Union banks and reallocating portions of below
investment grade exposures from structured securities to high-yield
corporate bonds.
Allstate's consolidated investment portfolio totaled
$97.5 billion at September 30, 2011 compared to $100.5 billion at December
31, 2010, as the Allstate Financial portfolio declined in
size with the reduction in the fixed annuity business. Net
investment income was $994 million
for the third quarter of 2011, which was 1.1% below the prior year
quarter primarily due to lower portfolio balances. The total
portfolio yield was 4.5% for the third quarter of 2011, which was
higher than the prior year quarter and consistent with the second
quarter of 2011. Net realized capital gains for the third
quarter of 2011 were $264 million,
pre-tax, compared to a net realized capital loss of $144 million, pre-tax, in the third quarter of
2010. Realized gains in the current year quarter were
primarily due to sales of foreign government and U.S. Treasury
securities, which were partly offset by losses on the valuation of
interest rate derivatives resulting from lower interest rates and
impairments on real estate-related and equity securities.
Net unrealized capital gains totaled $2.4
billion, pre-tax, at September 30,
2011 compared to $1.4 billion
at December 31, 2010, as the benefit
of lower interest rates was only partially offset by realized
gains.
Share Repurchases Total $308
Million, Completing $1 Billion
Program
"We completed our share repurchase program during the third
quarter bringing total share repurchases to $20 billion over the last 17 years," said
Don Civgin, executive vice president
and chief financial officer. Allstate repurchased shares
totaling $308 million during the
third quarter of 2011, completing the $1
billion share repurchase program authorized in November of
2010.
Statutory surplus at September 30,
2011 was an estimated $14.4
billion for Allstate Insurance Company, including
$3.7 billion at Allstate Life
Insurance Company. This compares to Allstate Insurance
Company statutory surplus of $15.1
billion at June 30, 2011 and
$15.4 billion at December 31, 2010. During the third quarter
of 2011, Allstate Insurance Company paid a $200 million dividend to the holding company.
Deployable assets at the holding company level totaled
$3.4 billion at September 30, 2011 compared to $3.5 billion at June 30,
2011 and $3.8 billion at
December 31, 2010.
"Book value per share totaled $35.56 at September 30,
2011, compared to $35.95 at
June 30, 2011 and $35.48 at September 30,
2010. Strong auto profitability, realized capital
gains and an increase in unrealized gains on the fixed income
portfolio so far this year have offset the impact of high
catastrophe losses and a decline in the value of our equity
portfolio," Civgin concluded.
Visit www.allstateinvestors.com to view additional information
about Allstate's results, including a webcast of its quarterly
conference call and the presentation discussed on the call.
The conference call will be held at 9
a.m. ET on Tuesday, November
1.
The Allstate Corporation (NYSE: ALL) is the nation's largest
publicly held personal lines insurer known for its "You're In Good
Hands With Allstate®" slogan. Now celebrating its 80th
anniversary as an insurer, Allstate is reinventing protection and
retirement to help nearly 16 million households insure what they
have today and better prepare for tomorrow. Consumers access
Allstate insurance products (auto, home, life and retirement) and
services through Allstate agencies, independent agencies, and
Allstate exclusive financial representatives in the U.S. and
Canada, as well as via
www.allstate.com and 1-800 Allstate®.
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
($ in millions, except per share
data)
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Property-liability
insurance premiums
|
$
|
6,432
|
$
|
6,499
|
$
|
19,337
|
$
|
19,515
|
|
Life and annuity premiums
and contract charges
|
|
552
|
|
548
|
|
1,668
|
|
1,637
|
|
Net investment
income
|
|
994
|
|
1,005
|
|
2,996
|
|
3,104
|
|
Realized capital gains
and losses:
|
|
|
|
|
|
|
|
|
|
Total other-than-temporary
impairment losses
|
|
(197)
|
|
(99)
|
|
(435)
|
|
(637)
|
|
Portion of
loss recognized in other comprehensive income
|
|
(6)
|
|
(68)
|
|
(37)
|
|
(91)
|
|
Net other-than-temporary
impairment losses recognized
in
earnings
|
|
(203)
|
|
(167)
|
|
(472)
|
|
(728)
|
|
Sales and other realized
capital gains and losses
|
|
467
|
|
23
|
|
889
|
|
(215)
|
|
Total realized capital
gains and losses
|
|
264
|
|
(144)
|
|
417
|
|
(943)
|
|
|
|
8,242
|
|
7,908
|
|
24,418
|
|
23,313
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
Property-liability
insurance claims and claims expense
|
|
5,132
|
|
4,603
|
|
15,963
|
|
14,109
|
|
Life and annuity contract
benefits
|
|
455
|
|
445
|
|
1,331
|
|
1,372
|
|
Interest credited to
contractholder funds
|
|
405
|
|
445
|
|
1,240
|
|
1,358
|
|
Amortization of deferred
policy acquisition costs
|
|
1,122
|
|
1,006
|
|
3,191
|
|
2,969
|
|
Operating costs and
expenses
|
|
825
|
|
828
|
|
2,465
|
|
2,446
|
|
Restructuring and related
charges
|
|
8
|
|
9
|
|
28
|
|
33
|
|
Interest
expense
|
|
92
|
|
91
|
|
275
|
|
275
|
|
|
|
8,039
|
|
7,427
|
|
24,493
|
|
22,562
|
|
Gain (loss) on disposition of
operations
|
|
--
|
|
9
|
|
(17)
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
before income tax expense
(benefit)
|
|
203
|
|
490
|
|
(92)
|
|
763
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
38
|
|
123
|
|
(156)
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
165
|
$
|
367
|
$
|
64
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share -
Basic
|
$
|
0.32
|
$
|
0.68
|
$
|
0.12
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares -
Basic
|
|
512.0
|
|
540.9
|
|
520.4
|
|
540.6
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share -
Diluted
|
$
|
0.32
|
$
|
0.68
|
$
|
0.12
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares -
Diluted
|
|
514.2
|
|
543.0
|
|
522.9
|
|
542.7
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per
share
|
$
|
0.21
|
$
|
0.20
|
$
|
0.63
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION
|
|
SEGMENT
RESULTS
|
|
($ in millions, except
ratios)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Property-Liability
|
|
|
|
|
|
|
|
|
|
Premiums
written
|
$
|
6,728
|
$
|
6,767
|
$
|
19,554
|
$
|
19,665
|
|
Premiums earned
|
$
|
6,432
|
$
|
6,499
|
$
|
19,337
|
$
|
19,515
|
|
Claims and claims
expense
|
|
(5,132)
|
|
(4,603)
|
|
(15,963)
|
|
(14,109)
|
|
Amortization of deferred
policy acquisition costs
|
|
(907)
|
|
(915)
|
|
(2,719)
|
|
(2,754)
|
|
Operating costs and
expenses
|
|
(696)
|
|
(706)
|
|
(2,111)
|
|
(2,074)
|
|
Restructuring and related
charges
|
|
(8)
|
|
(9)
|
|
(30)
|
|
(34)
|
|
Underwriting
(loss) income
|
|
(311)
|
|
266
|
|
(1,486)
|
|
544
|
|
Net investment
income
|
|
298
|
|
284
|
|
892
|
|
898
|
|
Periodic settlements and
accruals on non-hedge derivative instruments
|
|
(5)
|
|
(2)
|
|
(12)
|
|
(4)
|
|
Income tax benefit
(expense) on operations
|
|
39
|
|
(154)
|
|
321
|
|
(390)
|
|
Operating income
(loss)
|
|
21
|
|
394
|
|
(285)
|
|
1,048
|
|
Realized capital gains and
losses, after-tax
|
|
15
|
|
(69)
|
|
47
|
|
(261)
|
|
Gain on disposition of
operations, after-tax
|
|
--
|
|
4
|
|
--
|
|
4
|
|
Reclassification of
periodic settlements and accruals on non-hedge
|
|
|
|
|
|
|
|
|
|
derivative instruments,
after-tax
|
|
4
|
|
2
|
|
8
|
|
3
|
|
Net income
(loss)
|
$
|
40
|
$
|
331
|
$
|
(230)
|
$
|
794
|
|
Catastrophe
losses
|
$
|
1,077
|
$
|
386
|
$
|
3,749
|
$
|
1,670
|
|
Operating
ratios:
|
|
|
|
|
|
|
|
|
|
Claims and claims
expense ratio
|
|
79.8
|
|
70.8
|
|
82.6
|
|
72.3
|
|
Expense
ratio
|
|
25.0
|
|
25.1
|
|
25.1
|
|
24.9
|
|
Combined
ratio
|
|
104.8
|
|
95.9
|
|
107.7
|
|
97.2
|
|
Effect of
catastrophe losses on combined ratio
|
|
16.7
|
|
5.9
|
|
19.4
|
|
8.6
|
|
Effect of prior
year reserve reestimates on combined ratio
|
|
(1.8)
|
|
0.2
|
|
(1.1)
|
|
(0.9)
|
|
Effect of
catastrophe losses included in prior year reserve reestimates
on
|
|
|
|
|
|
|
|
|
|
combined ratio
|
|
(0.7)
|
|
(0.6)
|
|
(0.5)
|
|
(0.7)
|
|
Effect of
Discontinued Lines and Coverages on combined ratio
|
|
0.2
|
|
0.3
|
|
0.1
|
|
0.1
|
|
Allstate
Financial
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
59,068
|
$
|
62,915
|
$
|
59,068
|
$
|
62,915
|
|
Premiums and contract
charges
|
$
|
552
|
$
|
548
|
$
|
1,668
|
$
|
1,637
|
|
Net investment
income
|
|
682
|
|
707
|
|
2,060
|
|
2,161
|
|
Periodic settlements and
accruals on non-hedge derivative instruments
|
|
18
|
|
10
|
|
54
|
|
38
|
|
Contract
benefits
|
|
(455)
|
|
(445)
|
|
(1,331)
|
|
(1,372)
|
|
Interest credited to
contractholder funds
|
|
(395)
|
|
(446)
|
|
(1,232)
|
|
(1,359)
|
|
Amortization of deferred
policy acquisition costs
|
|
(101)
|
|
(101)
|
|
(317)
|
|
(200)
|
|
Operating costs and
expenses
|
|
(105)
|
|
(118)
|
|
(324)
|
|
(354)
|
|
Restructuring and related
charges
|
|
--
|
|
--
|
|
2
|
|
1
|
|
Income tax expense on
operations
|
|
(62)
|
|
(47)
|
|
(189)
|
|
(180)
|
|
Operating
income
|
|
134
|
|
108
|
|
391
|
|
372
|
|
Realized capital gains and
losses, after-tax
|
|
142
|
|
(25)
|
|
207
|
|
(360)
|
|
Valuation changes on
embedded derivatives that are not hedged, after-tax
|
|
(4)
|
|
--
|
|
1
|
|
--
|
|
DAC and DSI (amortization)
accretion relating to realized capital gains and
|
|
|
|
|
|
|
|
|
|
losses and
valuation changes on embedded derivatives that are not
|
|
|
|
|
|
|
|
|
|
hedged,
after-tax
|
|
(78)
|
|
7
|
|
(109)
|
|
9
|
|
DAC and DSI unlocking
relating to realized capital gains and losses, after-tax
|
--
|
|
--
|
|
1
|
|
(18)
|
|
Reclassification of
periodic settlements and accruals on non-hedge
|
|
|
|
|
|
|
|
|
|
derivative
instruments, after-tax
|
|
(12)
|
|
(7)
|
|
(35)
|
|
(25)
|
|
Gain (loss) on disposition
of operations, after-tax
|
|
1
|
|
2
|
|
(10)
|
|
4
|
|
Net income
(loss)
|
$
|
183
|
$
|
85
|
$
|
446
|
$
|
(18)
|
|
Corporate and
Other
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
$
|
14
|
$
|
14
|
$
|
44
|
$
|
45
|
|
Operating costs and
expenses
|
|
(116)
|
|
(95)
|
|
(305)
|
|
(293)
|
|
Income tax benefit on
operations
|
|
31
|
|
31
|
|
94
|
|
96
|
|
Operating
loss
|
|
(71)
|
|
(50)
|
|
(167)
|
|
(152)
|
|
Realized capital gains and
losses, after-tax
|
|
13
|
|
1
|
|
15
|
|
8
|
|
Net
loss
|
$
|
(58)
|
$
|
(49)
|
$
|
(152)
|
$
|
(144)
|
|
Consolidated net
income
|
$
|
165
|
$
|
367
|
$
|
64
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
($ in millions, except par
value data)
|
|
September
30,
|
|
December
31,
|
|
|
|
2011
|
|
2010
|
|
Assets
|
|
(unaudited)
|
|
|
|
Investments:
|
|
|
|
|
|
Fixed income securities, at fair
value (amortized cost $73,935 and $78,786)
|
$
|
76,394
|
$
|
79,612
|
|
Equity securities, at fair value
(cost $4,252 and $4,228)
|
|
4,157
|
|
4,811
|
|
Mortgage loans
|
|
6,956
|
|
6,679
|
|
Limited partnership
interests
|
|
4,407
|
|
3,816
|
|
Short-term, at fair value
(amortized cost $3,517 and $3,279)
|
|
3,517
|
|
3,279
|
|
Other
|
|
2,094
|
|
2,286
|
|
Total investments
|
|
97,525
|
|
100,483
|
|
Cash
|
|
1,026
|
|
562
|
|
Premium installment receivables,
net
|
|
4,988
|
|
4,839
|
|
Deferred policy acquisition
costs
|
|
4,444
|
|
4,769
|
|
Reinsurance recoverables,
net
|
|
6,720
|
|
6,552
|
|
Accrued investment
income
|
|
854
|
|
809
|
|
Deferred income taxes
|
|
792
|
|
784
|
|
Property and equipment,
net
|
|
908
|
|
921
|
|
Goodwill
|
|
874
|
|
874
|
|
Other assets
|
|
2,037
|
|
1,605
|
|
Separate Accounts
|
|
6,791
|
|
8,676
|
|
Total assets
|
$
|
126,959
|
$
|
130,874
|
|
Liabilities
|
|
|
|
|
|
Reserve for property-liability
insurance claims and claims expense
|
$
|
20,395
|
$
|
19,468
|
|
Reserve for
lifecontingent contract
benefits
|
|
14,308
|
|
13,482
|
|
Contractholder funds
|
|
43,776
|
|
48,195
|
|
Unearned premiums
|
|
10,002
|
|
9,800
|
|
Claim payments
outstanding
|
|
960
|
|
737
|
|
Other liabilities and accrued
expenses
|
|
6,691
|
|
5,564
|
|
Long-term debt
|
|
5,907
|
|
5,908
|
|
Separate Accounts
|
|
6,791
|
|
8,676
|
|
Total liabilities
|
|
108,830
|
|
111,830
|
|
|
|
|
|
|
|
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, 505
million and 533 million shares outstanding
|
|
9
|
|
9
|
|
Additional capital
paid-in
|
|
3,177
|
|
3,176
|
|
Retained income
|
|
31,704
|
|
31,969
|
|
Deferred ESOP expense
|
|
(43)
|
|
(44)
|
|
Treasury stock, at cost (395
million and 367 million shares)
|
|
(16,693)
|
|
(15,910)
|
|
Accumulated other comprehensive
income:
|
|
|
|
|
|
Unrealized net capital gains and
losses:
|
|
|
|
|
|
Unrealized net capital losses on
fixed income securities with OTTI
|
|
(155)
|
|
(190)
|
|
Other unrealized net capital
gains and losses
|
|
1,683
|
|
1,089
|
|
Unrealized adjustment to DAC,
DSI and insurance reserves
|
|
(496)
|
|
36
|
|
Total unrealized net capital
gains and losses
|
|
1,032
|
|
935
|
|
Unrealized foreign
currency translation adjustments
|
|
49
|
|
69
|
|
Unrecognized
pension and other postretirement benefit cost
|
|
(1,135)
|
|
(1,188)
|
|
Total accumulated other
comprehensive loss
|
|
(54)
|
|
(184)
|
|
Total shareholders'
equity
|
|
18,100
|
|
19,016
|
|
Noncontrolling
interest
|
|
29
|
|
28
|
|
Total equity
|
|
18,129
|
|
19,044
|
|
Total liabilities and
equity
|
$
|
126,959
|
$
|
130,874
|
|
|
|
|
|
|
|
|
THE ALLSTATE
CORPORATION AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
($ in millions)
|
|
Nine months
ended
September
30,
|
|
|
|
2011
|
|
2010
|
|
Cash flows from operating
activities
|
|
(unaudited)
|
|
Net income
|
$
|
64
|
$
|
632
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation, amortization
and other non-cash items
|
|
149
|
|
55
|
|
Realized capital gains and
losses
|
|
(417)
|
|
943
|
|
Loss (gain) on disposition
of operations
|
|
17
|
|
(12)
|
|
Interest credited to
contractholder funds
|
|
1,240
|
|
1,358
|
|
Changes in:
|
|
|
|
|
|
Policy benefits and other
insurance reserves
|
|
546
|
|
143
|
|
Unearned
premiums
|
|
220
|
|
172
|
|
Deferred policy
acquisition costs
|
|
138
|
|
(138)
|
|
Premium installment
receivables, net
|
|
(158)
|
|
(137)
|
|
Reinsurance recoverables,
net
|
|
(275)
|
|
(229)
|
|
Income taxes
|
|
(188)
|
|
178
|
|
Other operating assets and
liabilities
|
|
335
|
|
58
|
|
Net cash provided by
operating activities
|
|
1,671
|
|
3,023
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Proceeds from sales
|
|
|
|
|
|
Fixed income
securities
|
|
23,916
|
|
17,345
|
|
Equity
securities
|
|
1,116
|
|
4,262
|
|
Limited
partnership interests
|
|
762
|
|
387
|
|
Mortgage
loans
|
|
74
|
|
121
|
|
Other
investments
|
|
149
|
|
98
|
|
Investment
collections
|
|
|
|
|
|
Fixed income
securities
|
|
3,864
|
|
3,672
|
|
Mortgage loans
|
|
491
|
|
784
|
|
Other
investments
|
|
105
|
|
96
|
|
Investment purchases
|
|
|
|
|
|
Fixed income
securities
|
|
(21,900)
|
|
(20,712)
|
|
Equity
securities
|
|
(1,066)
|
|
(2,721)
|
|
Limited partnership
interests
|
|
(1,159)
|
|
(1,040)
|
|
Mortgage loans
|
|
(896)
|
|
(55)
|
|
Other
investments
|
|
(199)
|
|
(99)
|
|
Change in short-term
investments, net
|
|
64
|
|
104
|
|
Change in other investments,
net
|
|
(357)
|
|
(464)
|
|
Purchases of property and
equipment, net
|
|
(160)
|
|
(114)
|
|
Disposition of
operations
|
|
1
|
|
7
|
|
Net cash provided by
investing activities
|
|
4,805
|
|
1,671
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Repayment of long-term
debt
|
|
(1)
|
|
(1)
|
|
Contractholder fund
deposits
|
|
1,606
|
|
2,297
|
|
Contractholder fund
withdrawals
|
|
(6,439)
|
|
(6,779)
|
|
Dividends paid
|
|
(327)
|
|
(322)
|
|
Treasury stock
purchases
|
|
(858)
|
|
(5)
|
|
Shares reissued under equity
incentive plans, net
|
|
18
|
|
26
|
|
Excess tax benefits on
share-based payment arrangements
|
|
(4)
|
|
(7)
|
|
Other
|
|
(7)
|
|
(15)
|
|
Net cash used in financing
activities
|
|
(6,012)
|
|
(4,806)
|
|
Net increase (decrease) in
cash
|
|
464
|
|
(112)
|
|
Cash at beginning of
period
|
|
562
|
|
612
|
|
Cash at end of
period
|
$
|
1,026
|
$
|
500
|
|
|
|
|
|
|
|
|
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 (loss) 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 (loss),
- valuation changes on embedded derivatives that are not hedged,
after-tax,
- amortization of DAC and DSI, to the extent they resulted from
the recognition of certain realized capital gains and losses or
valuation changes on embedded derivatives that are not hedged,
- 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 (loss).
We use operating income (loss) 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 that are not hedged, 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 that are 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, operating income (loss) 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 (loss), 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 (loss) 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 (loss) is used by
management along with the other components of net income (loss) to
assess our performance. We use adjusted measures of operating
income (loss) and operating income (loss) per diluted share in
incentive compensation. Therefore, we believe it is useful
for investors to evaluate net income (loss), operating income
(loss) 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 (loss) as
the denominator. Operating income (loss) 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 (loss) and net
income (loss).
|
|
($ in millions, except per share
data)
|
|
For the
three months ended September 30,
|
|
|
|
Property-Liability
|
|
Allstate
Financial
|
|
Consolidated
|
|
Per diluted
share
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Operating income
|
$
|
21
|
$
|
394
|
$
|
134
|
$
|
108
|
$
|
84
|
$
|
452
|
$
|
0.16
|
$
|
0.83
|
|
Realized capital gains and
losses
|
|
24
|
|
(107)
|
|
219
|
|
(38)
|
|
264
|
|
(144)
|
|
|
|
|
|
Income tax (expense)
benefit
|
|
(9)
|
|
38
|
|
(77)
|
|
13
|
|
(94)
|
|
51
|
|
|
|
|
|
Realized capital gains and
losses,
after-tax
|
|
15
|
|
(69)
|
|
142
|
|
(25)
|
|
170
|
|
(93)
|
|
0.33
|
|
(0.17)
|
|
Valuation changes on
embedded
derivatives that
are not hedged,
after-tax
|
|
--
|
|
--
|
|
(4)
|
|
--
|
|
(4)
|
|
--
|
|
(0.01)
|
|
--
|
|
DAC and DSI
(amortization) accretion
relating to
realized capital gains and
losses and
valuation changes on
embedded
derivatives that are not
hedged,
after-tax
|
|
--
|
|
--
|
|
(78)
|
|
7
|
|
(78)
|
|
7
|
|
(0.15)
|
|
0.01
|
|
Reclassification of periodic
settlements
and accruals on
non-hedge derivative
instruments,
after-tax
|
|
4
|
|
2
|
|
(12)
|
|
(7)
|
|
(8)
|
|
(5)
|
|
(0.01)
|
|
--
|
|
Gain on disposition of
operations,
after-tax
|
|
--
|
|
4
|
|
1
|
|
2
|
|
1
|
|
6
|
|
--
|
|
0.01
|
|
Net income
|
$
|
40
|
$
|
331
|
$
|
183
|
$
|
85
|
$
|
165
|
$
|
367
|
$
|
0.32
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions, except per share
data)
|
|
For the nine
months ended September 30,
|
|
|
|
Property-Liability
|
|
Allstate
Financial
|
|
Consolidated
|
|
Per diluted
share
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Operating (loss)
income
|
$
|
(285)
|
$
|
1,048
|
$
|
391
|
$
|
372
|
$
|
(61)
|
$
|
1,268
|
$
|
(0.12)
|
$
|
2.34
|
|
Realized capital gains and
losses
|
|
73
|
|
(403)
|
|
320
|
|
(553)
|
|
417
|
|
(943)
|
|
|
|
|
|
Income tax (expense)
benefit
|
|
(26)
|
|
142
|
|
(113)
|
|
193
|
|
(148)
|
|
330
|
|
|
|
|
|
Realized capital gains and
losses,
after-tax
|
|
47
|
|
(261)
|
|
207
|
|
(360)
|
|
269
|
|
(613)
|
|
0.52
|
|
(1.13)
|
|
Valuation changes on
embedded
derivatives that
are not hedged,
after-tax
|
|
--
|
|
--
|
|
1
|
|
--
|
|
1
|
|
--
|
|
--
|
|
--
|
|
DAC and DSI
(amortization) accretion
relating to
realized capital gains and
losses and
valuation changes on
embedded
derivatives that are not
hedged,
after-tax
|
|
--
|
|
--
|
|
(109)
|
|
9
|
|
(109)
|
|
9
|
|
(0.21)
|
|
0.01
|
|
DAC and DSI
unlocking relating to
realized capital
gains and losses,
after-tax
|
|
--
|
|
--
|
|
1
|
|
(18)
|
|
1
|
|
(18)
|
|
--
|
|
(0.03)
|
|
Reclassification of periodic
settlements
and accruals on
non-hedge derivative
instruments,
after-tax
|
|
8
|
|
3
|
|
(35)
|
|
(25)
|
|
(27)
|
|
(22)
|
|
(0.05)
|
|
(0.04)
|
|
Gain (loss) on disposition of
operations,
after-tax
|
|
--
|
|
4
|
|
(10)
|
|
4
|
|
(10)
|
|
8
|
|
(0.02)
|
|
0.01
|
|
Net (loss) income
|
$
|
(230)
|
$
|
794
|
$
|
446
|
$
|
(18)
|
$
|
64
|
$
|
632
|
$
|
0.12
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 Property-Liability combined ratio
excluding the effect of catastrophes and prior year reserve
reestimates to the Property-Liability combined ratio is provided in
the following table.
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Combined ratio excluding the
effect of catastrophes and prior
year reserve
reestimates ("underlying combined ratio")
|
89.2
|
|
89.2
|
|
88.9
|
|
88.8
|
|
Effect of catastrophe
losses
|
16.7
|
|
5.9
|
|
19.4
|
|
8.6
|
|
Effect of prior year
non-catastrophe reserve reestimates
|
(1.1)
|
|
0.8
|
|
(0.6)
|
|
(0.2)
|
|
Combined ratio
|
104.8
|
|
95.9
|
|
107.7
|
|
97.2
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe
reserve reestimates
|
(0.7)
|
|
(0.6)
|
|
(0.5)
|
|
(0.7)
|
|
|
|
|
|
|
|
|
|
|
|
In this news release, we provide our outlook range on the
Property-Liability 2011 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.
A reconciliation of the Allstate brand standard auto combined
ratio excluding the effect of catastrophes and prior year reserve
reestimates to the Allstate brand standard auto combined ratio is
provided in the following table.
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Combined ratio excluding the
effect of catastrophes and prior
year reserve
reestimates ("underlying combined ratio")
|
94.5
|
|
93.1
|
|
94.3
|
|
93.6
|
|
Effect of catastrophe
losses
|
2.9
|
|
0.4
|
|
3.3
|
|
1.0
|
|
Effect of prior year
non-catastrophe reserve reestimates
|
(3.2)
|
|
(0.3)
|
|
(1.8)
|
|
(0.5)
|
|
Combined ratio
|
94.2
|
|
93.2
|
|
95.8
|
|
94.1
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe
reserve reestimates
|
(0.1)
|
|
(0.3)
|
|
(0.2)
|
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Allstate brand homeowners combined ratio
excluding the effect of catastrophes and prior year reserve
reestimates to the Allstate brand homeowners combined ratio is
provided in the following table.
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Combined ratio excluding the
effect of catastrophes and prior
year reserve
reestimates ("underlying combined ratio")
|
73.3
|
|
75.0
|
|
72.3
|
|
73.2
|
|
Effect of catastrophe
losses
|
55.8
|
|
23.1
|
|
65.7
|
|
31.6
|
|
Effect of prior year
non-catastrophe reserve reestimates
|
2.8
|
|
6.6
|
|
1.0
|
|
2.0
|
|
Combined ratio
|
131.9
|
|
104.7
|
|
139.0
|
|
106.8
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe
reserve reestimates
|
(2.8)
|
|
(1.4)
|
|
(1.8)
|
|
(1.8)
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2011
|
|
2010
|
|
Book value per
share
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Shareholders'
equity
|
$
|
18,100
|
$
|
19,274
|
|
Denominator:
|
|
|
|
|
|
Shares outstanding
and dilutive potential shares
outstanding
|
|
509.0
|
|
543.3
|
|
Book value per share
|
$
|
35.56
|
$
|
35.48
|
|
|
|
|
|
|
|
Book value per share, excluding
the impact of
unrealized net
capital gains and losses on fixed
income
securities
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Shareholders'
equity
|
$
|
18,100
|
$
|
19,274
|
|
Unrealized net
capital gains and losses on fixed income
securities
|
|
1,103
|
|
1,138
|
|
Adjusted shareholders'
equity
|
$
|
16,997
|
$
|
18,136
|
|
Denominator:
|
|
|
|
|
|
Shares
outstanding and dilutive potential shares
outstanding
|
|
509.0
|
|
543.3
|
|
Book value per share, excluding
the impact of unrealized
net capital gains
and losses on fixed income securities
|
$
|
33.39
|
$
|
33.38
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Property-Liability premiums
written
|
$
|
6,728
|
$
|
6,767
|
$
|
19,554
|
$
|
19,665
|
|
Increase in unearned
premiums
|
|
(276)
|
|
(319)
|
|
(207)
|
|
(184)
|
|
Other
|
|
(20)
|
|
51
|
|
(10)
|
|
34
|
|
Property-Liability premiums
earned
|
$
|
6,432
|
$
|
6,499
|
$
|
19,337
|
$
|
19,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2011. 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