NORTHBROOK, Ill., Nov. 2, 2016 /PRNewswire/ -- The
Allstate Corporation (NYSE: ALL) today reported financial results for the third quarter of 2016. The financial highlights
were:
|
The Allstate Corporation Consolidated Highlights
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
($ millions, except per share amounts and ratios)
|
2016
|
2015
|
% / pts
Change
|
|
2016
|
2015
|
% / pts
Change
|
|
Consolidated revenues
|
$
|
9,221
|
|
$
|
9,028
|
|
2.1
|
|
|
$
|
27,256
|
|
$
|
26,962
|
|
1.1
|
|
|
Net income applicable to common shareholders
|
491
|
|
621
|
|
(20.9)
|
|
|
950
|
|
1,595
|
|
(40.4)
|
|
|
per diluted common share
|
1.31
|
|
1.54
|
|
(14.9)
|
|
|
2.51
|
|
3.87
|
|
(35.1)
|
|
|
Operating income*
|
474
|
|
610
|
|
(22.3)
|
|
|
1,031
|
|
1,488
|
|
(30.7)
|
|
|
per diluted common share*
|
1.26
|
|
1.52
|
|
(17.1)
|
|
|
2.72
|
|
3.61
|
|
(24.7)
|
|
|
Return on common shareholders' equity
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders
|
|
|
|
|
7.4
|
%
|
12.2
|
%
|
(4.8) pts
|
|
Operating income*
|
|
|
|
|
9.4
|
%
|
12.1
|
%
|
(2.7) pts
|
|
Book value per common share
|
|
|
|
|
51.48
|
|
47.54
|
|
8.3
|
|
|
Property-Liability combined ratio
|
|
|
|
|
|
|
|
|
Recorded
|
95.5
|
|
93.6
|
|
1.9 pts
|
|
98.2
|
|
95.8
|
|
2.4 pts
|
|
Underlying combined ratio* (excludes
catastrophes, prior year reserve reestimates and
amortization of purchased intangibles)
|
88.0
|
|
89.3
|
|
(1.3) pts
|
|
88.0
|
|
89.1
|
|
(1.1) pts
|
|
Catastrophe losses
|
481
|
|
270
|
|
78.1
|
|
|
2,269
|
|
1,361
|
|
66.7
|
|
|
|
|
*
|
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 in the "Definitions of Non-GAAP Measures" section of this document.
|
"Allstate proactively balances near-term operating results with long-term strategy to meet the needs of our stakeholders,"
said Tom Wilson, chairman and chief executive officer of The Allstate Corporation. "Net income
applicable to common shareholders was $491 million in the third quarter, reflecting strong
profitability from homeowners insurance and an improvement in underlying auto insurance margins. Catastrophe losses increased by
$211 million (78%) in the third quarter and $908 million (67%) for
the first three quarters, which led to a $457 million decline in year-to-date operating income
versus 2015. The property-liability underlying combined ratio of 88.0 for the first three quarters was at the favorable end of
our annual outlook range of 88 - 90(1). Total return on the investment portfolio was 5.2% year-to-date, as higher bond
valuations and solid returns from performance-based investments were partially offset by lower market yields.
"Results on our five operating priorities for 2016 also reflect a balanced approach to adapting to the external environment,"
Wilson continued. "Overall policies in force declined reflecting auto price increases of 7.8% for the Allstate brand over the
last twelve months, which impacted both new business and customer retention.
___________
|
(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 dates.
|
Providing a broad set of unique products through different distribution channels, including strong policy growth in Allstate
Benefits, enabled us to offset a significant portion of the decline in Allstate brand auto policies. Despite auto insurance price
increases, Allstate agency owners are effectively managing customer satisfaction by serving as trusted advisors to our customers.
We made excellent progress on building capabilities to increase performance-based investments and expand Arity's connected car
platform. Our view that 'corporations can do more' is keeping our reputation with customers strong as we invest in our people and
communities," concluded Wilson.
Operating Results: Third Quarter 2016
- Total revenue of $9.2 billion in the third quarter of 2016 increased by 2.1% compared to the
prior year quarter.
- Property-liability insurance premiums increased 2.9%.
- Allstate Financial premiums and contract charges rose 6.1%.
- Net investment income was 7.3% lower.
- Realized capital gains of $33 million were flat.
- Net income applicable to common shareholders in the third quarter was $491 million, or
$1.31 per diluted share, compared to $621 million, or $1.54 per diluted share, in the third quarter of 2015. Operating income was $474
million in the third quarter of 2016, compared to $610 million in the third quarter of
2015.
-
Property-liability net income of $483 million was $46
million higher than the third quarter of 2015. Underwriting income* of $355 million was
$136 million below the prior year quarter, driven by an increase in catastrophe losses and
unfavorable prior year reserve reestimates in our Discontinued Lines and Coverages segment, partially offset by higher earned
premium.
- The underlying combined ratio of 88.0 for the third quarter of 2016 was 1.3 points better than the third quarter of
2015, reflecting improved Allstate brand auto results.
- The auto profit improvement plan, which began in the second quarter of 2015, impacted results.
- Auto insurance rate increases across all three underwriting brands are estimated at $1.2
billion of net written premium through the first three quarters of 2016 and $2.2
billion since March 31, 2015.
- As expected, auto new business for all three underwriting brands declined by 24% through the third quarter of
2016.
- The property-liability expense ratio declined by 0.8 points, to 25.0, through the first nine months of 2016
compared to the same time period in 2015.
|
Underwriting Results
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
($ millions, except ratios)
|
2016
|
2015
|
% / pts
Change
|
|
2016
|
2015
|
% / pts
Change
|
|
Property-Liability Results
|
|
|
|
|
|
|
|
|
Underwriting income (loss)
|
$
|
355
|
|
$
|
491
|
|
(27.7)
|
|
|
$
|
414
|
|
$
|
948
|
|
(56.3)
|
|
|
Auto
|
24
|
|
22
|
|
9.1
|
|
|
(44)
|
|
(13)
|
|
(238.5)
|
|
|
Homeowners
|
395
|
|
465
|
|
(15.1)
|
|
|
528
|
|
922
|
|
(42.7)
|
|
|
Discontinued Lines and Coverages
|
(100)
|
|
(49)
|
|
(104.1)
|
|
|
(104)
|
|
(53)
|
|
(96.2)
|
|
|
Recorded combined ratio
|
95.5
|
|
93.6
|
|
1.9 pts
|
|
98.2
|
|
95.8
|
|
2.4 pts
|
|
Auto
|
99.6
|
|
99.6
|
|
—
|
|
|
100.3
|
|
100.1
|
|
0.2 pts
|
|
Homeowners
|
78.2
|
|
74.1
|
|
4.1 pts
|
|
90.3
|
|
82.7
|
|
7.6 pts
|
|
Underlying combined ratio
|
88.0
|
|
89.3
|
|
(1.3) pts
|
|
88.0
|
|
89.1
|
|
(1.1) pts
|
|
Auto
|
96.5
|
|
98.6
|
|
(2.1) pts
|
|
97.1
|
|
98.3
|
|
(1.2) pts
|
|
Homeowners
|
63.0
|
|
62.6
|
|
0.4 pts
|
|
61.5
|
|
63.3
|
|
(1.8) pts
|
|
Auto and homeowners results reflect Allstate Protection.
|
- Allstate brand auto written premium growth of 4.1% in the third quarter of 2016 reflects a 7.7% increase in average
premium, which more than offset a 2.5% decline in policies in force. The recorded combined ratio of 99.0 in the third quarter
of 2016 was 0.2 points higher than the prior year quarter and was adversely impacted by 3.1 points of catastrophe losses. The
underlying combined ratio in the third quarter of 2016 was 2.2 points better than the third quarter of 2015, as higher average
premium more than offset increases in frequency and severity.
- Allstate brand homeowners net written premium declined slightly in the third quarter of 2016 compared to the third
quarter of 2015, as average premium increased by 2.0% while policies in force declined by 0.9%. The recorded combined ratio was
adversely impacted by higher catastrophe losses compared to the third quarter of 2015, while the underlying combined ratio of
61.1 in the third quarter of 2016 continues to reflect strong underlying profitability. Losses from Hurricane Matthew, an
October event, will be disclosed in our October catastrophe release, per our disclosure policy, if total catastrophes for the
month exceed $150 million.
- Esurance net written premium growth of 5.4% compared to the prior year quarter reflects a slight decline in policies
in force, which was more than offset by a 6.4% increase in auto average premium. The recorded combined ratio of 109.8 was 3.3
points higher in the third quarter of 2016, primarily driven by higher catastrophe losses. The underlying loss ratio* was 75.7
in the third quarter compared to 73.5 in the prior year quarter, as increased auto frequency and severity more than offset
higher average earned premium. The increase in the underlying loss ratio was mostly offset by a reduction in the expense
ratio.
- Encompass net written premium declined by 9.7% and policies in force were 12.6% lower in the third quarter of 2016
compared to the prior year quarter, reflecting the continued focus on improving returns in this business. Both the recorded
combined ratio of 98.3 and underlying combined ratio of 89.3 improved in the third quarter of 2016 compared to the same period
a year ago.
- Allstate Financial net income was $80 million and operating income was $94 million in the third quarter of 2016. Operating income was $44
million lower than the prior year quarter, primarily due to lower limited partnership income and reduced interest income
from the portfolio repositioning in our annuity business.
- Net investment income of $748 million declined by $59
million in the third quarter of 2016 from the prior year. This decline reflects lower interest income on market-based
investments, driven by the Allstate Financial annuity portfolio repositioning. Solid performance-based results were lower
compared to a strong prior year quarter.
- Net realized capital gains were $33 million in the third quarter of 2016, consistent
with the prior year quarter. Net realized gains on sales totaled $121 million, primarily related
to ongoing portfolio management. Impairment write-downs were $63 million, including $23 million related to energy investments.
- Investments carrying value of $81.1 billion was $3.3
billion above carrying value of $77.8 billion at year-end 2015 and included an increase in
unrealized net capital gains of $2.0 billion, primarily reflecting increased bond valuations. The
portfolio is managed to deliver attractive risk adjusted returns over an intermediate time horizon with performance measured on
a current and multiple-year basis.
|
Allstate Investment Highlights
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
($ millions, except ratios)
|
2016
|
2015
|
% / pts
Change
|
|
2016
|
2015
|
% / pts
Change
|
|
Investment Results
|
|
|
|
|
|
|
|
|
Net investment income
|
$
|
748
|
|
$
|
807
|
|
(7.3)
|
|
|
$
|
2,241
|
|
$
|
2,446
|
|
(8.4)
|
|
|
Realized capital gains and losses
|
33
|
|
33
|
|
—
|
|
|
(92)
|
|
280
|
|
NM
|
|
Change in unrealized net capital gains, pre-tax
|
318
|
|
(854)
|
|
NM
|
|
1,990
|
|
(1,719)
|
|
NM
|
|
Total return on investment portfolio
|
1.3
|
%
|
—
|
%
|
1.3 pts
|
|
5.2
|
%
|
1.2
|
%
|
4.0 pts
|
Proactive Capital Management
"Allstate returned $389 million to shareholders during the third quarter of 2016 through a
combination of $124 million in common stock dividends and repurchasing $265
million outstanding shares," said Steve Shebik, chief financial officer. "Share repurchases
in the third quarter included $212 million related to the new $250
million accelerated share repurchase (ASR) agreement. As of September 30, 2016, there was
$938 million remaining on the $1.5 billion authorization, which is
expected to be completed by November 2017. Book value per diluted common share of $51.48 was 8.3% higher than the third quarter of 2015 and 2.9% greater than the second quarter of 2016.
Operating income return on common shareholders' equity was 9.4% as of September 30, 2016."
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
4.
The Allstate Corporation (NYSE: ALL) is the
nation's largest publicly held personal lines insurer, protecting approximately 16 million households from life's uncertainties
through auto, home, life and other
insurance offered through its Allstate, Esurance, Encompass and Answer
Financial brand names. Now celebrating its 85th anniversary as an insurer, Allstate is widely known through the slogan
"You're In Good Hands With Allstate®."
Allstate agencies are in virtually every local community in America.
Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.
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 speak only 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
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(unaudited)
|
|
(unaudited)
|
|
Revenues
|
|
|
|
|
|
|
|
|
Property-liability insurance premiums
|
$
|
7,869
|
|
|
$
|
7,650
|
|
|
$
|
23,406
|
|
|
$
|
22,625
|
|
|
Life and annuity premiums and contract charges
|
571
|
|
|
538
|
|
|
1,701
|
|
|
1,611
|
|
|
Net investment income
|
748
|
|
|
807
|
|
|
2,241
|
|
|
2,446
|
|
|
Realized capital gains and losses:
|
|
|
|
|
|
|
|
|
Total other-than-temporary impairment ("OTTI") losses
|
(73)
|
|
|
(186)
|
|
|
(241)
|
|
|
(286)
|
|
|
OTTI losses reclassified to (from) other comprehensive income
|
—
|
|
|
12
|
|
|
8
|
|
|
20
|
|
|
Net OTTI losses recognized in earnings
|
(73)
|
|
|
(174)
|
|
|
(233)
|
|
|
(266)
|
|
|
Sales and other realized capital gains and losses
|
106
|
|
|
207
|
|
|
141
|
|
|
546
|
|
|
Total realized capital gains and losses
|
33
|
|
|
33
|
|
|
(92)
|
|
|
280
|
|
|
9,221
|
|
|
9,028
|
|
|
27,256
|
|
|
26,962
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
Property-liability insurance claims and claims expense
|
5,553
|
|
|
5,255
|
|
|
17,138
|
|
|
15,835
|
|
|
Life and annuity contract benefits
|
484
|
|
|
460
|
|
|
1,393
|
|
|
1,347
|
|
|
Interest credited to contractholder funds
|
183
|
|
|
194
|
|
|
558
|
|
|
578
|
|
|
Amortization of deferred policy acquisition costs
|
1,138
|
|
|
1,092
|
|
|
3,393
|
|
|
3,248
|
|
|
Operating costs and expenses
|
1,021
|
|
|
992
|
|
|
3,043
|
|
|
3,143
|
|
|
Restructuring and related charges
|
5
|
|
|
9
|
|
|
21
|
|
|
32
|
|
|
Interest expense
|
73
|
|
|
73
|
|
|
218
|
|
|
219
|
|
|
8,457
|
|
|
8,075
|
|
|
25,764
|
|
|
24,402
|
|
|
|
|
|
|
|
|
|
|
Gain on disposition of operations
|
1
|
|
|
2
|
|
|
4
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income tax expense
|
765
|
|
|
955
|
|
|
1,496
|
|
|
2,562
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
245
|
|
|
305
|
|
|
459
|
|
|
880
|
|
|
|
|
|
|
|
|
|
|
Net income
|
520
|
|
|
650
|
|
|
1,037
|
|
|
1,682
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
29
|
|
|
29
|
|
|
87
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders
|
$
|
491
|
|
|
$
|
621
|
|
|
$
|
950
|
|
|
$
|
1,595
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders per common
share – Basic
|
$
|
1.32
|
|
|
$
|
1.56
|
|
|
$
|
2.54
|
|
|
$
|
3.92
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – Basic
|
371.5
|
|
|
397.0
|
|
|
374.4
|
|
|
406.5
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders per common
share – Diluted
|
$
|
1.31
|
|
|
$
|
1.54
|
|
|
$
|
2.51
|
|
|
$
|
3.87
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – Diluted
|
375.9
|
|
|
402.1
|
|
|
378.9
|
|
|
412.4
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
$
|
0.33
|
|
|
$
|
0.30
|
|
|
$
|
0.99
|
|
|
$
|
0.90
|
|
|
THE ALLSTATE CORPORATION
|
|
BUSINESS RESULTS
|
|
($ in millions, except ratios)
|
Three months ended
|
|
Nine months ended
|
|
September 30,
|
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Property-Liability
|
|
|
|
|
|
|
|
|
Premiums written
|
$
|
8,311
|
|
|
$
|
8,137
|
|
|
$
|
23,877
|
|
|
$
|
23,320
|
|
|
Premiums earned
|
$
|
7,869
|
|
|
$
|
7,650
|
|
|
$
|
23,406
|
|
|
$
|
22,625
|
|
|
Claims and claims expense
|
(5,553)
|
|
|
(5,255)
|
|
|
(17,138)
|
|
|
(15,835)
|
|
|
Amortization of deferred policy acquisition costs
|
(1,068)
|
|
|
(1,029)
|
|
|
(3,181)
|
|
|
(3,050)
|
|
|
Operating costs and expenses
|
(888)
|
|
|
(867)
|
|
|
(2,653)
|
|
|
(2,763)
|
|
|
Restructuring and related charges
|
(5)
|
|
|
(8)
|
|
|
(20)
|
|
|
(29)
|
|
|
Underwriting income
|
355
|
|
|
491
|
|
|
414
|
|
|
948
|
|
|
Net investment income
|
310
|
|
|
307
|
|
|
928
|
|
|
957
|
|
|
Periodic settlements and accruals on non-hedge derivative
instruments
|
(1)
|
|
|
(1)
|
|
|
(2)
|
|
|
(2)
|
|
|
Amortization of purchased intangible assets
|
9
|
|
|
12
|
|
|
27
|
|
|
37
|
|
|
Income tax expense on operations
|
(221)
|
|
|
(259)
|
|
|
(438)
|
|
|
(637)
|
|
|
Operating income
|
452
|
|
|
550
|
|
|
929
|
|
|
1,303
|
|
|
Realized capital gains and losses, after-tax
|
36
|
|
|
(104)
|
|
|
(10)
|
|
|
(55)
|
|
|
Loss on disposition of operations, after-tax
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
Reclassification of periodic settlements and accruals on non-hedge
derivative
instruments, after-tax
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Amortization of purchased intangible assets, after-tax
|
(5)
|
|
|
(8)
|
|
|
(17)
|
|
|
(24)
|
|
|
Change in accounting for investments in qualified affordable housing
projects,
after-tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(28)
|
|
|
Net income applicable to common shareholders
|
$
|
483
|
|
|
$
|
437
|
|
|
$
|
903
|
|
|
$
|
1,197
|
|
|
Catastrophe losses
|
$
|
481
|
|
|
$
|
270
|
|
|
$
|
2,269
|
|
|
$
|
1,361
|
|
|
Operating ratios:
|
|
|
|
|
|
|
|
|
Claims and claims expense ratio
|
70.6
|
|
|
68.7
|
|
|
73.2
|
|
|
70.0
|
|
|
Expense ratio
|
24.9
|
|
|
24.9
|
|
|
25.0
|
|
|
25.8
|
|
|
Combined ratio
|
95.5
|
|
|
93.6
|
|
|
98.2
|
|
|
95.8
|
|
|
Effect of catastrophe losses on combined ratio
|
6.1
|
|
|
3.5
|
|
|
9.7
|
|
|
6.0
|
|
|
Effect of prior year reserve reestimates on combined ratio
|
1.3
|
|
|
0.6
|
|
|
0.5
|
|
|
0.5
|
|
|
Effect of catastrophe losses included in prior year reserve reestimates on
combined ratio
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Effect of amortization of purchased intangible assets on combined
ratio
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
Effect of Discontinued Lines and Coverages on combined ratio
|
1.3
|
|
|
0.7
|
|
|
0.4
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Allstate Financial
|
|
|
|
|
|
|
|
|
Premiums and contract charges
|
$
|
571
|
|
|
$
|
538
|
|
|
$
|
1,701
|
|
|
$
|
1,611
|
|
|
Net investment income
|
427
|
|
|
491
|
|
|
1,281
|
|
|
1,464
|
|
|
Contract benefits
|
(484)
|
|
|
(460)
|
|
|
(1,393)
|
|
|
(1,347)
|
|
|
Interest credited to contractholder funds
|
(183)
|
|
|
(191)
|
|
|
(546)
|
|
|
(574)
|
|
|
Amortization of deferred policy acquisition costs
|
(68)
|
|
|
(61)
|
|
|
(207)
|
|
|
(192)
|
|
|
Operating costs and expenses
|
(126)
|
|
|
(112)
|
|
|
(370)
|
|
|
(353)
|
|
|
Restructuring and related charges
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(3)
|
|
|
Income tax expense on operations
|
(43)
|
|
|
(66)
|
|
|
(147)
|
|
|
(195)
|
|
|
Operating income
|
94
|
|
|
138
|
|
|
318
|
|
|
411
|
|
|
Realized capital gains and losses, after-tax
|
(14)
|
|
|
125
|
|
|
(46)
|
|
|
235
|
|
|
Valuation changes on embedded derivatives that are not hedged,
after-tax
|
—
|
|
|
(2)
|
|
|
(8)
|
|
|
(3)
|
|
|
DAC and DSI amortization relating to realized capital gains and losses and
valuation changes on embedded derivatives that are not hedged, after-tax
|
(1)
|
|
|
(1)
|
|
|
(3)
|
|
|
(3)
|
|
|
Gain on disposition of operations, after-tax
|
1
|
|
|
2
|
|
|
3
|
|
|
1
|
|
|
Change in accounting for investments in qualified affordable housing
projects,
after-tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
Net income applicable to common shareholders
|
$
|
80
|
|
|
$
|
262
|
|
|
$
|
264
|
|
|
$
|
624
|
|
|
|
|
|
|
|
|
|
|
Corporate and Other
|
|
|
|
|
|
|
|
|
Net investment income
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
32
|
|
|
$
|
25
|
|
|
Operating costs and expenses
|
(80)
|
|
|
(86)
|
|
|
(238)
|
|
|
(246)
|
|
|
Income tax benefit on operations
|
26
|
|
|
28
|
|
|
77
|
|
|
82
|
|
|
Preferred stock dividends
|
(29)
|
|
|
(29)
|
|
|
(87)
|
|
|
(87)
|
|
|
Operating loss
|
(72)
|
|
|
(78)
|
|
|
(216)
|
|
|
(226)
|
|
|
Realized capital gains and losses, after-tax
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
Net loss applicable to common shareholders
|
$
|
(72)
|
|
|
$
|
(78)
|
|
|
$
|
(217)
|
|
|
$
|
(226)
|
|
|
Consolidated net income applicable to common
shareholders
|
$
|
491
|
|
|
$
|
621
|
|
|
$
|
950
|
|
|
$
|
1,595
|
|
|
THE ALLSTATE CORPORATION AND SUBSIDIARIES
|
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
|
($ in millions, except par value data)
|
September 30,
2016
|
|
December 31,
2015
|
|
Assets
|
(unaudited)
|
|
|
|
Investments:
|
|
|
|
|
Fixed income securities, at fair value (amortized cost $57,775 and
$57,201)
|
$
|
60,306
|
|
|
$
|
57,948
|
|
|
Equity securities, at fair value (cost $4,800 and $4,806)
|
5,288
|
|
|
5,082
|
|
|
Mortgage loans
|
4,396
|
|
|
4,338
|
|
|
Limited partnership interests
|
5,588
|
|
|
4,874
|
|
|
Short-term, at fair value (amortized cost $1,863 and $2,122)
|
1,863
|
|
|
2,122
|
|
|
Other
|
3,663
|
|
|
3,394
|
|
|
Total investments
|
81,104
|
|
|
77,758
|
|
|
Cash
|
389
|
|
|
495
|
|
|
Premium installment receivables, net
|
5,799
|
|
|
5,544
|
|
|
Deferred policy acquisition costs
|
3,886
|
|
|
3,861
|
|
|
Reinsurance recoverables, net
|
8,922
|
|
|
8,518
|
|
|
Accrued investment income
|
567
|
|
|
569
|
|
|
Property and equipment, net
|
1,013
|
|
|
1,024
|
|
|
Goodwill
|
1,219
|
|
|
1,219
|
|
|
Other assets
|
2,169
|
|
|
2,010
|
|
|
Separate Accounts
|
3,469
|
|
|
3,658
|
|
|
Total assets
|
$
|
108,537
|
|
|
$
|
104,656
|
|
|
Liabilities
|
|
|
|
|
Reserve for property-liability insurance claims and claims
expense
|
$
|
25,450
|
|
|
$
|
23,869
|
|
|
Reserve for life-contingent contract benefits
|
12,228
|
|
|
12,247
|
|
|
Contractholder funds
|
20,583
|
|
|
21,295
|
|
|
Unearned premiums
|
12,772
|
|
|
12,202
|
|
|
Claim payments outstanding
|
934
|
|
|
842
|
|
|
Deferred income taxes
|
935
|
|
|
90
|
|
|
Other liabilities and accrued expenses
|
6,122
|
|
|
5,304
|
|
|
Long-term debt
|
5,110
|
|
|
5,124
|
|
|
Separate Accounts
|
3,469
|
|
|
3,658
|
|
|
Total liabilities
|
87,603
|
|
|
84,631
|
|
|
Shareholders' equity
|
|
|
|
|
Preferred stock and additional capital paid-in, $1 par value, 72.2 thousand
shares issued
and outstanding, $1,805 aggregate liquidation preference
|
1,746
|
|
|
1,746
|
|
|
Common stock, $.01 par value, 900 million issued, 368 million and 381
million shares
outstanding
|
9
|
|
|
9
|
|
|
Additional capital paid-in
|
3,237
|
|
|
3,245
|
|
|
Retained income
|
39,990
|
|
|
39,413
|
|
|
Deferred ESOP expense
|
(13)
|
|
|
(13)
|
|
|
Treasury stock, at cost (532 million and 519 million shares)
|
(24,537)
|
|
|
(23,620)
|
|
|
Accumulated other comprehensive income:
|
|
|
|
|
Unrealized net capital gains and losses:
|
|
|
|
|
Unrealized net capital gains and losses on fixed income securities with
OTTI
|
56
|
|
|
56
|
|
|
Other unrealized net capital gains and losses
|
1,902
|
|
|
608
|
|
|
Unrealized adjustment to DAC, DSI and insurance reserves
|
(141)
|
|
|
(44)
|
|
|
Total unrealized net capital gains and losses
|
1,817
|
|
|
620
|
|
|
Unrealized foreign currency translation adjustments
|
(48)
|
|
|
(60)
|
|
|
Unrecognized pension and other postretirement benefit cost
|
(1,267)
|
|
|
(1,315)
|
|
|
Total accumulated other comprehensive income (loss)
|
502
|
|
|
(755)
|
|
|
Total shareholders' equity
|
20,934
|
|
|
20,025
|
|
|
Total liabilities and shareholders' equity
|
$
|
108,537
|
|
|
$
|
104,656
|
|
|
THE ALLSTATE CORPORATION AND SUBSIDIARIES
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
($ in millions)
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
Cash flows from operating activities
|
(unaudited)
|
|
Net income
|
$
|
1,037
|
|
|
$
|
1,682
|
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation, amortization and other non-cash items
|
285
|
|
|
275
|
|
|
Realized capital gains and losses
|
92
|
|
|
(280)
|
|
|
Gain on disposition of operations
|
(4)
|
|
|
(2)
|
|
|
Interest credited to contractholder funds
|
558
|
|
|
578
|
|
|
Changes in:
|
|
|
|
|
Policy benefits and other insurance reserves
|
978
|
|
|
500
|
|
|
Unearned premiums
|
540
|
|
|
762
|
|
|
Deferred policy acquisition costs
|
(159)
|
|
|
(219)
|
|
|
Premium installment receivables, net
|
(236)
|
|
|
(290)
|
|
|
Reinsurance recoverables, net
|
(420)
|
|
|
(133)
|
|
|
Income taxes
|
30
|
|
|
(60)
|
|
|
Other operating assets and liabilities
|
41
|
|
|
(127)
|
|
|
Net cash provided by operating activities
|
2,742
|
|
|
2,686
|
|
|
Cash flows from investing activities
|
|
|
|
|
Proceeds from sales
|
|
|
|
|
Fixed income securities
|
19,132
|
|
|
22,796
|
|
|
Equity securities
|
4,069
|
|
|
2,688
|
|
|
Limited partnership interests
|
634
|
|
|
795
|
|
|
Mortgage loans
|
—
|
|
|
6
|
|
|
Other investments
|
206
|
|
|
178
|
|
|
Investment collections
|
|
|
|
|
Fixed income securities
|
3,430
|
|
|
3,248
|
|
|
Mortgage loans
|
403
|
|
|
305
|
|
|
Other investments
|
281
|
|
|
254
|
|
|
Investment purchases
|
|
|
|
|
Fixed income securities
|
(22,282)
|
|
|
(22,928)
|
|
|
Equity securities
|
(4,113)
|
|
|
(3,238)
|
|
|
Limited partnership interests
|
(1,128)
|
|
|
(930)
|
|
|
Mortgage loans
|
(460)
|
|
|
(524)
|
|
|
Other investments
|
(674)
|
|
|
(743)
|
|
|
Change in short-term investments, net
|
94
|
|
|
(577)
|
|
|
Change in other investments, net
|
(60)
|
|
|
(16)
|
|
|
Purchases of property and equipment, net
|
(190)
|
|
|
(219)
|
|
|
Net cash (used in) provided by investing activities
|
(658)
|
|
|
1,095
|
|
|
Cash flows from financing activities
|
|
|
|
|
Repayments of long-term debt
|
(16)
|
|
|
(20)
|
|
|
Contractholder fund deposits
|
785
|
|
|
784
|
|
|
Contractholder fund withdrawals
|
(1,537)
|
|
|
(1,793)
|
|
|
Dividends paid on common stock
|
(364)
|
|
|
(365)
|
|
|
Dividends paid on preferred stock
|
(87)
|
|
|
(87)
|
|
|
Treasury stock purchases
|
(1,154)
|
|
|
(2,216)
|
|
|
Shares reissued under equity incentive plans, net
|
123
|
|
|
121
|
|
|
Excess tax benefits on share-based payment arrangements
|
25
|
|
|
44
|
|
|
Other
|
35
|
|
|
(1)
|
|
|
Net cash used in financing activities
|
(2,190)
|
|
|
(3,533)
|
|
|
Net (decrease) increase in cash
|
(106)
|
|
|
248
|
|
|
Cash at beginning of period
|
495
|
|
|
657
|
|
|
Cash at end of period
|
$
|
389
|
|
|
$
|
905
|
|
The following table presents the investment portfolio by strategy as of September 30, 2016.
|
($ in millions)
|
Total
|
|
Market-
Based Core
|
|
Market-
Based Active
|
|
Performance-
Based
Long-Term
|
|
Performance-
Based
Opportunistic
|
|
Fixed income securities
|
$
|
60,306
|
|
|
$
|
52,452
|
|
|
$
|
7,769
|
|
|
$
|
69
|
|
|
$
|
16
|
|
|
Equity securities
|
5,288
|
|
|
4,297
|
|
|
897
|
|
|
94
|
|
|
—
|
|
|
Mortgage loans
|
4,396
|
|
|
4,396
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Limited partnership interests
|
5,588
|
|
|
448
|
|
|
—
|
|
|
5,137
|
|
|
3
|
|
|
Short-term investments
|
1,863
|
|
|
1,575
|
|
|
288
|
|
|
—
|
|
|
—
|
|
|
Other
|
3,663
|
|
|
2,980
|
|
|
152
|
|
|
520
|
|
|
11
|
|
|
Total
|
$
|
81,104
|
|
|
$
|
66,148
|
|
|
$
|
9,106
|
|
|
$
|
5,820
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
Property-Liability
|
$
|
41,057
|
|
|
$
|
30,015
|
|
|
$
|
7,929
|
|
|
$
|
3,093
|
|
|
$
|
20
|
|
|
Allstate Financial
|
37,516
|
|
|
33,602
|
|
|
1,177
|
|
|
2,727
|
|
|
10
|
|
|
Corporate & Other
|
2,531
|
|
|
2,531
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
81,104
|
|
|
$
|
66,148
|
|
|
$
|
9,106
|
|
|
$
|
5,820
|
|
|
$
|
30
|
|
The following table presents investment income by investment strategy for the three months and nine months ended September 30.
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Market-Based Core
|
$
|
577
|
|
|
$
|
612
|
|
|
$
|
1,753
|
|
|
$
|
1,881
|
|
|
Market-Based Active
|
66
|
|
|
52
|
|
|
194
|
|
|
154
|
|
|
Performance-Based Long-Term
|
147
|
|
|
176
|
|
|
416
|
|
|
515
|
|
|
Performance-Based Opportunistic
|
—
|
|
|
2
|
|
|
5
|
|
|
7
|
|
|
Investment income, before expense
|
790
|
|
|
842
|
|
|
2,368
|
|
|
2,557
|
|
|
Investment expense
|
(42)
|
|
|
(35)
|
|
|
(127)
|
|
|
(111)
|
|
|
Net investment income
|
$
|
748
|
|
|
$
|
807
|
|
|
$
|
2,241
|
|
|
$
|
2,446
|
|
The following table presents investment income by investment type and strategy for the three months and nine months ended
September 30, 2016.
|
($ in millions)
|
Total
|
|
Market-
Based Core
|
|
Market-
Based Active
|
|
Performance-
Based
Long-Term
|
|
Performance-
Based
Opportunistic
|
|
Three months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
$
|
508
|
|
|
$
|
452
|
|
|
$
|
55
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
Equity securities
|
31
|
|
|
24
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
Mortgage loans
|
56
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Limited partnership interests
|
136
|
|
|
1
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
Short-term investments
|
4
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Other
|
55
|
|
|
41
|
|
|
3
|
|
|
11
|
|
|
—
|
|
|
Investment income, before expense
|
790
|
|
|
$
|
577
|
|
|
$
|
66
|
|
|
$
|
147
|
|
|
$
|
—
|
|
|
Investment expense
|
(42)
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
$
|
748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property-Liability
|
$
|
333
|
|
|
$
|
200
|
|
|
$
|
57
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
Allstate Financial
|
445
|
|
|
365
|
|
|
9
|
|
|
71
|
|
|
—
|
|
|
Corporate & Other
|
12
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Investment income, before expense
|
$
|
790
|
|
|
$
|
577
|
|
|
$
|
66
|
|
|
$
|
147
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
$
|
1,546
|
|
|
$
|
1,374
|
|
|
$
|
165
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
Equity securities
|
103
|
|
|
85
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
Mortgage loans
|
162
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Limited partnership interests
|
383
|
|
|
1
|
|
|
—
|
|
|
382
|
|
|
—
|
|
|
Short-term investments
|
11
|
|
|
8
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
Other
|
163
|
|
|
123
|
|
|
8
|
|
|
31
|
|
|
1
|
|
|
Investment income, before expense
|
2,368
|
|
|
$
|
1,753
|
|
|
$
|
194
|
|
|
$
|
416
|
|
|
$
|
5
|
|
|
Investment expense
|
(127)
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
$
|
2,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property-Liability
|
$
|
997
|
|
|
$
|
617
|
|
|
$
|
169
|
|
|
$
|
208
|
|
|
$
|
3
|
|
|
Allstate Financial
|
1,334
|
|
|
1,099
|
|
|
25
|
|
|
208
|
|
|
2
|
|
|
Corporate & Other
|
37
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Investment income, before expense
|
$
|
2,368
|
|
|
$
|
1,753
|
|
|
$
|
194
|
|
|
$
|
416
|
|
|
$
|
5
|
|
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.
Operating 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 operating income,
- valuation changes on embedded derivatives that are 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 that are not
hedged, after-tax,
- 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 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, valuation changes on embedded
derivatives that are not hedged, 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 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 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. 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, 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 applicable to
common shareholders to assess our performance. We use adjusted measures of operating income in incentive compensation. Therefore,
we believe it is useful for investors to evaluate net income applicable to common shareholders, 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 a substitute for net income applicable to common
shareholders and does not reflect the overall profitability of our business.
The following tables reconcile operating income and net income applicable to common shareholders. Taxes on adjustments to
reconcile operating income and net income applicable to common shareholders generally use a 35% effective tax rate and are
reported net with the reconciling adjustment. If the effective tax rate is other than 35%, this is specified in the
disclosure.
|
($ in millions, except per share data)
|
For the three months ended September 30,
|
|
Property-Liability
|
|
Allstate Financial
|
|
Consolidated
|
|
Per diluted
common share
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Operating income
|
$
|
452
|
|
|
$
|
550
|
|
|
$
|
94
|
|
|
$
|
138
|
|
|
$
|
474
|
|
|
$
|
610
|
|
|
$
|
1.26
|
|
|
$
|
1.52
|
|
|
Realized capital gains and losses, after-tax
|
36
|
|
|
(104)
|
|
|
(14)
|
|
|
125
|
|
|
22
|
|
|
21
|
|
|
0.06
|
|
|
0.05
|
|
|
Valuation changes on embedded derivatives that are
not hedged, after-tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(0.01)
|
|
|
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
Amortization of purchased intangible assets, after-tax
|
(5)
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(8)
|
|
|
(0.01)
|
|
|
(0.02)
|
|
|
(Loss) gain on disposition of operations, after-tax
|
—
|
|
|
(1)
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Net income applicable to common shareholders
|
$
|
483
|
|
|
$
|
437
|
|
|
$
|
80
|
|
|
$
|
262
|
|
|
$
|
491
|
|
|
$
|
621
|
|
|
$
|
1.31
|
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30,
|
|
Property-Liability
|
|
Allstate Financial
|
|
Consolidated
|
|
Per diluted
common share
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Operating income
|
$
|
929
|
|
|
$
|
1,303
|
|
|
$
|
318
|
|
|
$
|
411
|
|
|
$
|
1,031
|
|
|
$
|
1,488
|
|
|
$
|
2.72
|
|
|
$
|
3.61
|
|
|
Realized capital gains and losses, after-tax
|
(10)
|
|
|
(55)
|
|
|
(46)
|
|
|
235
|
|
|
(57)
|
|
|
180
|
|
|
(0.15)
|
|
|
0.44
|
|
|
Valuation changes on embedded derivatives that are
not hedged, after-tax
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(3)
|
|
|
(8)
|
|
|
(3)
|
|
|
(0.02)
|
|
|
(0.01)
|
|
|
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
|
(3)
|
|
|
(3)
|
|
|
(0.01)
|
|
|
(0.01)
|
|
|
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Amortization of purchased intangible assets, after-tax
|
(17)
|
|
|
(24)
|
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
(24)
|
|
|
(0.04)
|
|
|
(0.05)
|
|
|
Gain on disposition of operations, after-tax
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
0.01
|
|
|
—
|
|
|
Change in accounting for investments in qualified
affordable housing projects, after-tax (all tax)
|
—
|
|
|
(28)
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
|
(45)
|
|
|
—
|
|
|
(0.11)
|
|
|
Net income applicable to common shareholders
|
$
|
903
|
|
|
$
|
1,197
|
|
|
$
|
264
|
|
|
$
|
624
|
|
|
$
|
950
|
|
|
$
|
1,595
|
|
|
$
|
2.51
|
|
|
$
|
3.87
|
|
Operating income return on common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by
dividing the rolling 12-month operating 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 operating income as the numerator for the same reasons we use operating 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 operating 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 operating
income return on common shareholders' equity in incentive compensation. Therefore, we believe it is useful for investors to have
operating 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 operating
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. Operating 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 operating income return on common shareholders'
equity.
|
($ in millions)
|
For the twelve months ended
September 30,
|
|
2016
|
|
2015
|
|
Return on common shareholders' equity
|
|
|
|
|
Numerator:
|
|
|
|
|
Net income applicable to common shareholders
|
$
|
1,410
|
|
|
$
|
2,390
|
|
|
Denominator:
|
|
|
|
|
Beginning common shareholders' equity (1)
|
$
|
18,758
|
|
|
$
|
20,583
|
|
|
Ending common shareholders' equity (1)
|
19,188
|
|
|
18,758
|
|
|
Average common shareholders' equity
|
$
|
18,973
|
|
|
$
|
19,671
|
|
|
Return on common shareholders' equity
|
7.4
|
%
|
|
12.2
|
%
|
|
For the twelve months ended
September 30,
|
|
2016
|
|
2015
|
|
Operating income return on common shareholders' equity
|
|
|
|
|
Numerator:
|
|
|
|
|
Operating income
|
$
|
1,656
|
|
|
$
|
2,224
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Beginning common shareholders' equity
|
$
|
18,758
|
|
|
$
|
20,583
|
|
|
Unrealized net capital gains and losses
|
879
|
|
|
1,827
|
|
|
Adjusted beginning common shareholders' equity
|
17,879
|
|
|
18,756
|
|
|
|
|
|
|
Ending common shareholders' equity
|
19,188
|
|
|
18,758
|
|
|
Unrealized net capital gains and losses
|
1,817
|
|
|
879
|
|
|
Adjusted ending common shareholders' equity
|
17,371
|
|
|
17,879
|
|
|
Average adjusted common shareholders' equity
|
$
|
17,625
|
|
|
$
|
18,318
|
|
|
Operating income return on common shareholders' equity
|
9.4
|
%
|
|
12.1
|
%
|
_____________
|
(1)
|
Excludes equity related to preferred stock of $1,746 million.
|
Underwriting income 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 applicable to common shareholders is
the most directly comparable GAAP measure. Underwriting income should not be considered a substitute for net income applicable to
common shareholders and does not reflect the overall profitability of our business. A reconciliation of Property-Liability
underwriting income to net income applicable to common shareholders is provided in the "Business Results" page.
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 underlying combined ratio to the combined ratio.
|
Property-Liability
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Combined ratio excluding the effect of catastrophes, prior year
reserve reestimates and amortization of purchased intangible
assets ("underlying combined ratio")
|
88.0
|
|
|
89.3
|
|
|
88.0
|
|
|
89.1
|
|
|
Effect of catastrophe losses
|
6.1
|
|
|
3.5
|
|
|
9.7
|
|
|
6.0
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
1.3
|
|
|
0.6
|
|
|
0.4
|
|
|
0.5
|
|
|
Effect of amortization of purchased intangible assets
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
Combined ratio
|
95.5
|
|
|
93.6
|
|
|
98.2
|
|
|
95.8
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Underwriting margin is calculated as 100% minus the combined ratio.
|
Allstate Protection Auto Insurance
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
96.5
|
|
|
98.6
|
|
|
97.1
|
|
|
98.3
|
|
|
Effect of catastrophe losses
|
3.1
|
|
|
0.5
|
|
|
3.2
|
|
|
1.3
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
(0.1)
|
|
|
0.3
|
|
|
(0.2)
|
|
|
0.3
|
|
|
Effect of amortization of purchased intangible assets
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
|
Combined ratio
|
99.6
|
|
|
99.6
|
|
|
100.3
|
|
|
100.1
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
(0.1)
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
Allstate Protection Homeowners Insurance
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
63.0
|
|
|
62.6
|
|
|
61.5
|
|
|
63.3
|
|
|
Effect of catastrophe losses
|
15.7
|
|
|
12.4
|
|
|
29.0
|
|
|
19.7
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
(0.5)
|
|
|
(0.9)
|
|
|
(0.2)
|
|
|
(0.3)
|
|
|
Combined ratio
|
78.2
|
|
|
74.1
|
|
|
90.3
|
|
|
82.7
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
0.3
|
|
|
0.1
|
|
|
0.3
|
|
|
0.1
|
|
|
Allstate Brand - Total
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
86.9
|
|
|
88.3
|
|
|
86.9
|
|
|
87.8
|
|
|
Effect of catastrophe losses
|
6.2
|
|
|
3.6
|
|
|
10.0
|
|
|
6.1
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
0.3
|
|
|
Combined ratio
|
93.1
|
|
|
91.8
|
|
|
96.9
|
|
|
94.2
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
—
|
|
|
(0.1)
|
|
|
0.1
|
|
|
—
|
|
|
Allstate Brand - Auto Insurance
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
95.9
|
|
|
98.1
|
|
|
96.5
|
|
|
97.2
|
|
|
Effect of catastrophe losses
|
3.1
|
|
|
0.5
|
|
|
3.4
|
|
|
1.3
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
—
|
|
|
0.2
|
|
|
(0.2)
|
|
|
0.5
|
|
|
Combined ratio
|
99.0
|
|
|
98.8
|
|
|
99.7
|
|
|
99.0
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
(0.1)
|
|
|
(0.1)
|
|
|
—
|
|
|
(0.1)
|
|
|
Allstate Brand - Homeowners Insurance
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
61.1
|
|
|
60.9
|
|
|
59.7
|
|
|
62.0
|
|
|
Effect of catastrophe losses
|
15.4
|
|
|
12.4
|
|
|
29.3
|
|
|
19.5
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
(0.6)
|
|
|
(0.8)
|
|
|
(0.3)
|
|
|
(0.4)
|
|
|
Combined ratio
|
75.9
|
|
|
72.5
|
|
|
88.7
|
|
|
81.1
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
0.3
|
|
|
(0.1)
|
|
|
0.4
|
|
|
0.2
|
|
|
Allstate Brand - Other Personal Lines
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
82.0
|
|
|
82.1
|
|
|
79.1
|
|
|
81.1
|
|
|
Effect of catastrophe losses
|
6.0
|
|
|
4.5
|
|
|
12.5
|
|
|
8.0
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
(0.5)
|
|
|
1.8
|
|
|
(1.2)
|
|
|
0.8
|
|
|
Combined ratio
|
87.5
|
|
|
88.4
|
|
|
90.4
|
|
|
89.9
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
(0.3)
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
Encompass Brand - Total
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying combined ratio
|
89.3
|
|
|
90.9
|
|
|
90.1
|
|
|
92.7
|
|
|
Effect of catastrophe losses
|
9.0
|
|
|
5.3
|
|
|
11.2
|
|
|
10.0
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
—
|
|
|
5.1
|
|
|
1.8
|
|
|
1.5
|
|
|
Combined ratio
|
98.3
|
|
|
101.3
|
|
|
103.1
|
|
|
104.2
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year catastrophe reserve reestimates
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
(0.1)
|
|
Underlying loss ratio is a non-GAAP ratio, which is computed as the difference between three GAAP operating ratios: the
loss ratio, the effect of catastrophes on the combined ratio and the effect of prior year non-catastrophe reserve reestimates on
the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends that may
be obscured by catastrophe losses and prior year reserve reestimates. 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. The most directly comparable GAAP measure is the loss ratio. The underlying loss ratio should not be considered a
substitute for the loss ratio and does not reflect the overall loss ratio of our business.
The following table reconciles the Esurance brand underlying loss ratio and underlying combined ratio to the Esurance brand
combined ratio.
|
Esurance Brand - Total
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Underlying loss ratio
|
75.7
|
|
|
73.5
|
|
|
74.4
|
|
|
75.3
|
|
|
Expense ratio, excluding the effect of amortization of purchased
intangible assets
|
30.3
|
|
|
31.8
|
|
|
30.9
|
|
|
34.1
|
|
|
Underlying combined ratio
|
106.0
|
|
|
105.3
|
|
|
105.3
|
|
|
109.4
|
|
|
Effect of catastrophe losses
|
3.3
|
|
|
0.8
|
|
|
2.5
|
|
|
0.9
|
|
|
Effect of prior year non-catastrophe reserve reestimates
|
(1.0)
|
|
|
(1.6)
|
|
|
(1.0)
|
|
|
(1.1)
|
|
|
Effect of amortization of purchased intangible assets
|
1.5
|
|
|
2.0
|
|
|
1.5
|
|
|
2.2
|
|
|
Combined ratio
|
109.8
|
|
|
106.5
|
|
|
108.3
|
|
|
111.4
|
|
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SOURCE The Allstate Corporation