UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 2, 2015
THE ALLSTATE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-11840 | 36-3871531 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
2775 Sanders Road, Northbrook, Illinois | 60062 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (847) 402-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
On November 2, 2015, the Registrant issued a press release announcing its financial results for the third quarter of 2015, and the availability of the Registrant’s third quarter investor supplement on the Registrant’s web site. The press release and the investor supplement are furnished as Exhibits 99.1 and 99.2 to this report. The information contained in the press release and the investor supplement are furnished and not filed pursuant to instruction B.2 of Form 8-K.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Registrant’s press release dated November 2, 2015
99.2 Third quarter 2015 Investor Supplement of The Allstate Corporation
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE ALLSTATE CORPORATION | ||
(Registrant) | ||
By: | /s/ Samuel H. Pilch | |
Name: Samuel H. Pilch | ||
Title: Senior Group Vice President and Controller | ||
Date: November 2, 2015 | ||
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Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts:
Greg Burns Pat Macellaro
Media Relations Investor Relations
(847) 402-5600 (847) 402-2800
Allstate’s Profits Benefit From Strong Homeowners Results
Company Continues to Advance Auto Profit Improvement Plan
NORTHBROOK, Ill., November 2, 2015 – The Allstate Corporation (NYSE: ALL) today reported financial results for the third quarter of 2015. 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) | 2015 | 2014 | % / pts Change | 2015 | 2014 | % / pts Change | |||||||||||
Consolidated revenues | $ | 9,028 | $ | 8,936 | 1.0 | $ | 26,962 | $ | 26,480 | 1.8 | |||||||
Net income available to common shareholders | 621 | 750 | (17.2 | ) | 1,595 | 1,951 | (18.2 | ) | |||||||||
per diluted common share | 1.54 | 1.74 | (11.5 | ) | 3.87 | 4.42 | (12.4 | ) | |||||||||
Operating income* | 610 | 598 | 2.0 | 1,488 | 1,631 | (8.8 | ) | ||||||||||
per diluted common share* | 1.52 | 1.39 | 9.4 | 3.61 | 3.69 | (2.2 | ) | ||||||||||
Return on common shareholders’ equity | |||||||||||||||||
Net income available to common shareholders | 12.2 | % | 13.6 | % | (1.4) pts | ||||||||||||
Operating income* | 12.1 | % | 13.0 | % | (0.9) pts | ||||||||||||
Book value per common share | 47.54 | 48.28 | (1.5 | ) | |||||||||||||
Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities* | 45.49 | 44.67 | 1.8 | ||||||||||||||
Property-Liability combined ratio | |||||||||||||||||
Recorded | 93.6 | 93.5 | 0.1 pts | 95.8 | 95.2 | 0.6 pts | |||||||||||
Underlying combined ratio* (excludes catastrophes, prior year reserve reestimates and amortization of purchased intangibles) | 89.3 | 86.1 | 3.2 pts | 89.1 | 86.4 | 2.7 pts | |||||||||||
Catastrophe losses | 270 | 517 | (47.8 | ) | 1,361 | 1,898 | (28.3 | ) | |||||||||
* | 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 had net income of $621 million, or $1.54 per diluted common share in the third quarter of 2015, reflecting our focus on delivering good returns on capital, growing profitably and providing cash to shareholders,” said Thomas J. Wilson, chairman and chief executive officer of The Allstate Corporation. “The homeowners business continued to generate excellent results due to the repositioning of the business several years ago and low catastrophe losses in the third quarter of 2015. Price increases approved for auto insurance for the first nine months of the year were double the average for the same periods of 2013 and 2014 as we work to lower the auto combined ratio. A reduction in underwriting expenses and a 10% increase in Allstate Financial operating income also benefited earnings. The property-liability underlying combined ratio was 89.1 for the nine months ended September 30, 2015, and was slightly above our annual outlook range of 87 - 89. We now expect the full-year underlying combined ratio to be no higher than 89.5.
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“Policy in force growth for the property-liability business was 2.3%, driven by the Allstate brand, although auto insurance policy growth declined slightly from the second quarter of 2015, reflecting the impact of our profit improvement plan. Investment results reflected a continuation of the strategy to increase performance-based investing and lower interest rate exposure. The unrealized gain on the investment portfolio declined to $879 million as of September 30, 2015, as credit spreads widened and equity prices declined during the quarter. Book value per common share declined slightly to $47.54 including unrealized gains and losses. Operating income return on equity was 12.1% and common shareholders received $920 million in cash returns through a combination of common share dividends and share repurchases in the quarter.”
Third Quarter 2015 Operating Facts
Allstate Brand | ||||||||||||
Consolidated | Auto | Homeowners | Other Personal Lines | Esurance | Encompass | |||||||
Net Written Premium Growth | ||||||||||||
Q3 2015 | 4.2 | % | 5.7 | % | 2.6 | % | 0.7 | % | 3.7 | % | -3.5 | % |
YTD 2015 | 4.5 | % | 5.4 | % | 2.8 | % | 1.4 | % | 7.0 | % | -2.0 | % |
Policy in Force Growth | 2.3 | % | 3.1 | % | 1.3 | % | 3.0 | % | 3.7 | % | -5.7 | % |
Recorded Combined Ratios | ||||||||||||
Q3 2015 | 93.6 | 98.8 | 72.5 | 88.4 | 106.5 | 101.3 | ||||||
YTD 2015 | 95.8 | 99.0 | 81.1 | 89.9 | 111.4 | 104.2 | ||||||
Underlying Combined Ratios | ||||||||||||
Q3 2015 | 89.3 | 98.1 | 60.9 | 82.1 | 105.3 | 90.9 | ||||||
YTD 2015 | 89.1 | 97.2 | 62.0 | 81.1 | 109.4 | 92.7 | ||||||
Investment Portfolio Total Return | ||||||||||||
Q3 2015 | Nil | |||||||||||
YTD 2015 | 1.2 | % | ||||||||||
Third Quarter 2015 Financial Results
Total revenue of $9.0 billion in the third quarter of 2015 reflected a 4.7% increase in property-liability insurance premium and a 5.1% increase in Allstate Financial premium and contract charges, which were partially offset by lower investment income and capital gains. Net income available to common shareholders was $621 million, or $1.54 per diluted share, compared to $750 million, or $1.74 per diluted share in the third quarter of 2014. A decrease of $171 million in after-tax realized capital gains was the primary driver of the change in net income. For the quarter, operating income of $610 million was $12 million higher than the prior year quarter, and operating income per diluted share of $1.52 was 9.4% higher than the third quarter of 2014. Net income return on shareholders’ equity was 12.2%, and operating income return on shareholders’ equity was 12.1% for the trailing twelve months ended September 30, 2015.
Total property-liability net written premium of $8.1 billion grew by 4.2% in the third quarter of 2015 compared to the prior year quarter, driven by a 4.7% increase in Allstate brand premium. Allstate brand premiums increased in the third quarter of 2015 compared to the prior year quarter due to growth in policies in force and average premium for auto and homeowners insurance. Esurance net written premium rose 3.7% in the third quarter of 2015 over the prior year quarter, as decreased investment in marketing and auto profit improvement actions slowed policy growth. Encompass net written premium decreased by 3.5% in the third quarter of 2015 from the prior year as a continued decline in policies in force offset higher average premiums in auto and homeowners.
The recorded property-liability combined ratio of 93.6 resulted in $491 million of underwriting income* in the third quarter of 2015. Catastrophe losses of $270 million in the third quarter of 2015 were $247 million lower than the same quarter a year ago. The underlying property-liability combined ratio of 89.3 in the third quarter of 2015 was 3.2 points worse than the same quarter a year ago, driven by higher underlying auto losses. Property-liability underwriting income in the third quarter of 2015 included an unfavorable reserve reestimate of $47 million, primarily
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due to the annual review of asbestos and environmental exposures in the discontinued lines and coverages segment.
Allstate brand underwriting income of $571 million was $105 million lower than the third quarter of 2014, primarily due to higher non-catastrophe auto losses and lower favorable reserve reestimates, partially offset by higher earned premium and a decline in catastrophe losses. Auto underwriting income declined as continued high auto claims frequency and severity contributed to the third quarter 2015 combined ratio deterioration of 5.7 points to 98.8 from 93.1 in the same quarter a year ago. Property damage frequency and paid claim severities increased 8.9% and 5.4%, respectively, compared to the prior year quarter. Bodily injury frequency increased 6.4% while paid severities decreased 2.9% compared to the prior year quarter. The underlying combined ratio of 98.1 deteriorated 0.3 points from the second quarter of 2015, driven in part by approximately half a point of additional loss expense reserves due to an increased number of claims. Allstate brand homeowners underwriting income of $458 million improved by $154 million in the third quarter of 2015, reflecting strong underlying profitability and low catastrophe losses.
We continued to implement our multi-faceted auto profit improvement plan which includes increasing prices, tightening underwriting standards, managing loss cost through focus on claims process excellence and reducing expenses. Allstate brand auto rate increases of 3.4% were approved in the first nine months of 2015, compared to 1.1% through the first nine months of 2013 and 1.6% through the first nine months of 2014. Based on historical premiums written, approved auto rate changes totaled $277 million and $600 million in the three and nine months ended September 30, 2015, respectively. These amounts do not assume customer choices such as non-renewal or changes in policy terms which might reduce future premiums. Over the last nine months, we have increased auto rates in all three brands: Allstate 3.4%, Esurance 4.1%, and Encompass 7.4%. We also made underwriting guideline adjustments in all three underwriting brands in geographic areas and customer segments experiencing less than acceptable returns. Lower advertising, professional services costs, compensation incentives and technology expenses reduced the property-liability expense ratio by 1.4 points in the third quarter of 2015.
Allstate Financial operating income of $138 million in the third quarter of 2015 was $13 million higher than the prior year quarter, driven by strong performance-based investment income, partially offset by higher life insurance mortality and a lower yield on the interest-bearing portfolio. Allstate Benefits, which sells through the workplace, grew premium and contract charges 7.4% in the third quarter of 2015 compared to the prior year quarter. Longer maturity bonds that support the long-term immediate annuity liabilities were sold in the quarter so the proceeds can be invested in higher returning performance-based assets. This generated capital gains in the quarter and will reduce near-term operating income but is expected to improve long-term economic results.
Net Investment Income of $807 million for the third quarter of 2015 was 1.9% lower than the prior year quarter, and reflects lower average investment balances and a decline in interest-bearing portfolio yields, primarily in the Allstate Financial portfolio. Investment income from the performance-based long-term strategy increased over the prior year quarter largely due to strong distributions from private equity investments as financing and acquisition conditions facilitated the sales of underlying investments. We also experienced appreciation across the private equity portfolio, partially reduced by declines in valuation of energy and emerging markets investments. Income from real estate investments was lower compared to the prior year quarter as appreciation slowed. Total portfolio return was flat for the quarter as a 1.0% contribution from net investment income was offset by (1.0)% from lower valuations driven primarily by wider credit spreads. Total portfolio carrying value was $78.34 billion as of September 30, 2015 compared to $81.11 billion as of December 31, 2014. Unrealized pre-tax net capital gains totaled $1.45 billion as of September 30, 2015 compared to $3.17 billion as of December 31, 2014.
Continued Focus on Capital Management
”We continued our commitment to provide good returns to shareholders while maintaining a strong capital position to provide strategic flexibility,” said Steve Shebik, chief financial officer. “In the third quarter, we returned $920 million to common shareholders through a combination of common stock dividends and repurchasing $798 million of outstanding shares.”
As of September 30, 2015, $1.1 billion remained on the current $3 billion common share repurchase authorization. Year to date, we have repurchased 8.0% of the beginning-of-year outstanding shares. Book value per diluted common share of $47.54 was lower than in both the prior year quarter and second quarter of 2015.
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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 Tuesday, November 3.
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. Allstate is widely known through the slogan “You’re In Good Hands With Allstate®.” The Allstate brand’s network of small businesses offers auto, home, life and retirement products and services to customers in the United States and Canada.
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.
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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, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Revenues | |||||||||||||||
Property-liability insurance premiums | $ | 7,650 | $ | 7,307 | $ | 22,625 | $ | 21,575 | |||||||
Life and annuity premiums and contract charges | 538 | 512 | 1,611 | 1,637 | |||||||||||
Net investment income | 807 | 823 | 2,446 | 2,680 | |||||||||||
Realized capital gains and losses: | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (186 | ) | (53 | ) | (286 | ) | (177 | ) | |||||||
OTTI losses reclassified to (from) other comprehensive income | 12 | — | 20 | (2 | ) | ||||||||||
Net OTTI losses recognized in earnings | (174 | ) | (53 | ) | (266 | ) | (179 | ) | |||||||
Sales and other realized capital gains and losses | 207 | 347 | 546 | 767 | |||||||||||
Total realized capital gains and losses | 33 | 294 | 280 | 588 | |||||||||||
9,028 | 8,936 | 26,962 | 26,480 | ||||||||||||
Costs and expenses | |||||||||||||||
Property-liability insurance claims and claims expense | 5,255 | 4,909 | 15,835 | 14,810 | |||||||||||
Life and annuity contract benefits | 460 | 433 | 1,347 | 1,334 | |||||||||||
Interest credited to contractholder funds | 194 | 198 | 578 | 717 | |||||||||||
Amortization of deferred policy acquisition costs | 1,092 | 1,030 | 3,248 | 3,100 | |||||||||||
Operating costs and expenses | 992 | 1,068 | 3,143 | 3,185 | |||||||||||
Restructuring and related charges | 9 | 3 | 32 | 13 | |||||||||||
Loss on extinguishment of debt | — | — | — | 1 | |||||||||||
Interest expense | 73 | 78 | 219 | 249 | |||||||||||
8,075 | 7,719 | 24,402 | 23,409 | ||||||||||||
Gain (loss) on disposition of operations | 2 | (27 | ) | 2 | (77 | ) | |||||||||
Income from operations before income tax expense | 955 | 1,190 | 2,562 | 2,994 | |||||||||||
Income tax expense | 305 | 409 | 880 | 968 | |||||||||||
Net income | 650 | 781 | 1,682 | 2,026 | |||||||||||
Preferred stock dividends | 29 | 31 | 87 | 75 | |||||||||||
Net income available to common shareholders | $ | 621 | $ | 750 | $ | 1,595 | $ | 1,951 | |||||||
Earnings per common share: | |||||||||||||||
Net income available to common shareholders per common share – Basic | $ | 1.56 | $ | 1.77 | $ | 3.92 | $ | 4.49 | |||||||
Weighted average common shares – Basic | 397.0 | 424.5 | 406.5 | 435.0 | |||||||||||
Net income available to common shareholders per common share – Diluted | $ | 1.54 | $ | 1.74 | $ | 3.87 | $ | 4.42 | |||||||
Weighted average common shares – Diluted | 402.1 | 431.2 | 412.4 | 441.6 | |||||||||||
Cash dividends declared per common share | $ | 0.30 | $ | 0.28 | $ | 0.90 | $ | 0.84 | |||||||
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THE ALLSTATE CORPORATION | ||||||||||||||||
BUSINESS RESULTS | ||||||||||||||||
($ in millions, except ratios) | Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Property-Liability | ||||||||||||||||
Premiums written | $ | 8,137 | $ | 7,806 | $ | 23,320 | $ | 22,322 | ||||||||
Premiums earned | $ | 7,650 | $ | 7,307 | $ | 22,625 | $ | 21,575 | ||||||||
Claims and claims expense | (5,255 | ) | (4,909 | ) | (15,835 | ) | (14,810 | ) | ||||||||
Amortization of deferred policy acquisition costs | (1,029 | ) | (972 | ) | (3,050 | ) | (2,902 | ) | ||||||||
Operating costs and expenses | (867 | ) | (948 | ) | (2,763 | ) | (2,817 | ) | ||||||||
Restructuring and related charges | (8 | ) | (4 | ) | (29 | ) | (11 | ) | ||||||||
Underwriting income | 491 | 474 | 948 | 1,035 | ||||||||||||
Net investment income | 307 | 344 | 957 | 1,007 | ||||||||||||
Periodic settlements and accruals on non-hedge derivative instruments | (1 | ) | (1 | ) | (2 | ) | (7 | ) | ||||||||
Amortization of purchased intangible assets | 12 | 17 | 37 | 51 | ||||||||||||
Income tax expense on operations | (259 | ) | (281 | ) | (637 | ) | (701 | ) | ||||||||
Operating income | 550 | 553 | 1,303 | 1,385 | ||||||||||||
Realized capital gains and losses, after-tax | (104 | ) | 173 | (55 | ) | 368 | ||||||||||
(Loss) gain on disposition of operations, after-tax | (1 | ) | (1 | ) | — | 37 | ||||||||||
Reclassification of periodic settlements and accruals on non-hedge | ||||||||||||||||
derivative instruments, after-tax | — | — | 1 | 4 | ||||||||||||
Amortization of purchased intangible assets, after-tax | (8 | ) | (11 | ) | (24 | ) | (33 | ) | ||||||||
Change in accounting for investments in qualified affordable | ||||||||||||||||
housing projects, after-tax | — | — | (28 | ) | — | |||||||||||
Net income available to common shareholders | $ | 437 | $ | 714 | $ | 1,197 | $ | 1,761 | ||||||||
Catastrophe losses | $ | 270 | $ | 517 | $ | 1,361 | $ | 1,898 | ||||||||
Operating ratios: | ||||||||||||||||
Claims and claims expense ratio | 68.7 | 67.2 | 70.0 | 68.6 | ||||||||||||
Expense ratio | 24.9 | 26.3 | 25.8 | 26.6 | ||||||||||||
Combined ratio | 93.6 | 93.5 | 95.8 | 95.2 | ||||||||||||
Effect of catastrophe losses on combined ratio | 3.5 | 7.1 | 6.0 | 8.8 | ||||||||||||
Effect of prior year reserve reestimates on combined ratio | 0.6 | 0.1 | 0.5 | — | ||||||||||||
Effect of catastrophe losses included in prior year reserve reestimates | ||||||||||||||||
on combined ratio | — | — | — | 0.2 | ||||||||||||
Effect of amortization of purchased intangible assets on combined ratio | 0.2 | 0.2 | 0.2 | 0.2 | ||||||||||||
Effect of Discontinued Lines and Coverages on combined ratio | 0.7 | 1.4 | 0.2 | 0.5 | ||||||||||||
Allstate Financial | ||||||||||||||||
Premiums and contract charges | $ | 538 | $ | 512 | $ | 1,611 | $ | 1,637 | ||||||||
Net investment income | 491 | 473 | 1,464 | 1,651 | ||||||||||||
Periodic settlements and accruals on non-hedge derivative instruments | — | — | — | (1 | ) | |||||||||||
Contract benefits | (460 | ) | (433 | ) | (1,347 | ) | (1,334 | ) | ||||||||
Interest credited to contractholder funds | (191 | ) | (200 | ) | (574 | ) | (699 | ) | ||||||||
Amortization of deferred policy acquisition costs | (61 | ) | (56 | ) | (192 | ) | (195 | ) | ||||||||
Operating costs and expenses | (112 | ) | (115 | ) | (353 | ) | (345 | ) | ||||||||
Restructuring and related charges | (1 | ) | 1 | (3 | ) | (2 | ) | |||||||||
Income tax expense on operations | (66 | ) | (57 | ) | (195 | ) | (233 | ) | ||||||||
Operating income | 138 | 125 | 411 | 479 | ||||||||||||
Realized capital gains and losses, after-tax | 125 | 19 | 235 | 13 | ||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | (2 | ) | 2 | (3 | ) | (12 | ) | |||||||||
DAC and DSI amortization relating to realized capital gains and losses and | ||||||||||||||||
valuation changes on embedded derivatives that are not hedged, after-tax | (1 | ) | (3 | ) | (3 | ) | (3 | ) | ||||||||
Reclassification of periodic settlements and accruals on non-hedge | ||||||||||||||||
derivative instruments, after-tax | — | — | — | 1 | ||||||||||||
Gain (loss) on disposition of operations, after-tax | 2 | (27 | ) | 1 | (55 | ) | ||||||||||
Change in accounting for investments in qualified affordable housing | ||||||||||||||||
projects, after-tax | — | — | (17 | ) | — | |||||||||||
Net income available to common shareholders | $ | 262 | $ | 116 | $ | 624 | $ | 423 | ||||||||
Corporate and Other | ||||||||||||||||
Net investment income | $ | 9 | $ | 6 | $ | 25 | $ | 22 | ||||||||
Operating costs and expenses | (86 | ) | (83 | ) | (246 | ) | (272 | ) | ||||||||
Income tax benefit on operations | 28 | 28 | 82 | 92 | ||||||||||||
Preferred stock dividends | (29 | ) | (31 | ) | (87 | ) | (75 | ) | ||||||||
Operating loss | (78 | ) | (80 | ) | (226 | ) | (233 | ) | ||||||||
Realized capital gains and losses, after-tax | — | — | — | — | ||||||||||||
Net loss available to common shareholders | $ | (78 | ) | $ | (80 | ) | $ | (226 | ) | $ | (233 | ) | ||||
Consolidated net income available to common shareholders | $ | 621 | $ | 750 | $ | 1,595 | $ | 1,951 | ||||||||
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THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||
($ in millions, except par value data) | September 30, | December 31, | |||||
2015 | 2014 | ||||||
Assets | (unaudited) | ||||||
Investments: | |||||||
Fixed income securities, at fair value (amortized cost $56,918 and $59,672) | $ | 58,257 | $ | 62,440 | |||
Equity securities, at fair value (cost $4,123 and $3,692) | 4,236 | 4,104 | |||||
Mortgage loans | 4,402 | 4,188 | |||||
Limited partnership interests | 4,823 | 4,527 | |||||
Short-term, at fair value (amortized cost $3,036 and $2,540) | 3,036 | 2,540 | |||||
Other | 3,588 | 3,314 | |||||
Total investments | 78,342 | 81,113 | |||||
Cash | 905 | 657 | |||||
Premium installment receivables, net | 5,711 | 5,465 | |||||
Deferred policy acquisition costs | 3,811 | 3,525 | |||||
Reinsurance recoverables, net | 8,468 | 8,490 | |||||
Accrued investment income | 575 | 591 | |||||
Property and equipment, net | 1,050 | 1,031 | |||||
Goodwill | 1,219 | 1,219 | |||||
Other assets | 2,091 | 2,046 | |||||
Separate Accounts | 3,677 | 4,396 | |||||
Total assets | $ | 105,849 | $ | 108,533 | |||
Liabilities | |||||||
Reserve for property-liability insurance claims and claims expense | $ | 23,757 | $ | 22,923 | |||
Reserve for life-contingent contract benefits | 12,229 | 12,380 | |||||
Contractholder funds | 21,559 | 22,529 | |||||
Unearned premiums | 12,343 | 11,655 | |||||
Claim payments outstanding | 804 | 784 | |||||
Deferred income taxes | 243 | 715 | |||||
Other liabilities and accrued expenses | 5,558 | 5,653 | |||||
Long-term debt | 5,175 | 5,194 | |||||
Separate Accounts | 3,677 | 4,396 | |||||
Total liabilities | 85,345 | 86,229 | |||||
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, 2.0 billion authorized and 900 million issued, 390 million and 418 million shares outstanding | 9 | 9 | |||||
Additional capital paid-in | 3,224 | 3,199 | |||||
Retained income | 39,068 | 37,842 | |||||
Deferred ESOP expense | (23 | ) | (23 | ) | |||
Treasury stock, at cost (510 million and 482 million shares) | (23,058 | ) | (21,030 | ) | |||
Accumulated other comprehensive income: | |||||||
Unrealized net capital gains and losses: | |||||||
Unrealized net capital gains and losses on fixed income securities with OTTI | 57 | 72 | |||||
Other unrealized net capital gains and losses | 886 | 1,988 | |||||
Unrealized adjustment to DAC, DSI and insurance reserves | (64 | ) | (134 | ) | |||
Total unrealized net capital gains and losses | 879 | 1,926 | |||||
Unrealized foreign currency translation adjustments | (52 | ) | (2 | ) | |||
Unrecognized pension and other postretirement benefit cost | (1,289 | ) | (1,363 | ) | |||
Total accumulated other comprehensive (loss) income | (462 | ) | 561 | ||||
Total shareholders’ equity | 20,504 | 22,304 | |||||
Total liabilities and shareholders’ equity | $ | 105,849 | $ | 108,533 | |||
7
THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
($ in millions) | Nine months ended September 30, | ||||||
2015 | 2014 | ||||||
Cash flows from operating activities | (unaudited) | ||||||
Net income | $ | 1,682 | $ | 2,026 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and other non-cash items | 275 | 277 | |||||
Realized capital gains and losses | (280 | ) | (588 | ) | |||
Loss on extinguishment of debt | — | 1 | |||||
(Gain) loss on disposition of operations | (2 | ) | 77 | ||||
Interest credited to contractholder funds | 578 | 717 | |||||
Changes in: | |||||||
Policy benefits and other insurance reserves | 500 | 50 | |||||
Unearned premiums | 762 | 822 | |||||
Deferred policy acquisition costs | (219 | ) | (189 | ) | |||
Premium installment receivables, net | (290 | ) | (386 | ) | |||
Reinsurance recoverables, net | (133 | ) | (110 | ) | |||
Income taxes | (60 | ) | 175 | ||||
Other operating assets and liabilities | (127 | ) | (307 | ) | |||
Net cash provided by operating activities | 2,686 | 2,565 | |||||
Cash flows from investing activities | |||||||
Proceeds from sales | |||||||
Fixed income securities | 22,796 | 27,648 | |||||
Equity securities | 2,688 | 5,263 | |||||
Limited partnership interests | 795 | 1,084 | |||||
Mortgage loans | 6 | 10 | |||||
Other investments | 178 | 292 | |||||
Investment collections | |||||||
Fixed income securities | 3,248 | 2,787 | |||||
Mortgage loans | 305 | 868 | |||||
Other investments | 254 | 158 | |||||
Investment purchases | |||||||
Fixed income securities | (22,928 | ) | (30,650 | ) | |||
Equity securities | (3,238 | ) | (4,208 | ) | |||
Limited partnership interests | (930 | ) | (892 | ) | |||
Mortgage loans | (524 | ) | (218 | ) | |||
Other investments | (743 | ) | (652 | ) | |||
Change in short-term investments, net | (577 | ) | 265 | ||||
Change in other investments, net | (16 | ) | 58 | ||||
Purchases of property and equipment, net | (219 | ) | (207 | ) | |||
Disposition of operations | — | 378 | |||||
Net cash provided by investing activities | 1,095 | 1,984 | |||||
Cash flows from financing activities | |||||||
Repayment of long-term debt | (20 | ) | (1,006 | ) | |||
Proceeds from issuance of preferred stock | — | 965 | |||||
Contractholder fund deposits | 784 | 926 | |||||
Contractholder fund withdrawals | (1,793 | ) | (2,831 | ) | |||
Dividends paid on common stock | (365 | ) | (360 | ) | |||
Dividends paid on preferred stock | (87 | ) | (56 | ) | |||
Treasury stock purchases | (2,216 | ) | (2,189 | ) | |||
Shares reissued under equity incentive plans, net | 121 | 204 | |||||
Excess tax benefits on share-based payment arrangements | 44 | 22 | |||||
Other | (1 | ) | (14 | ) | |||
Net cash used in financing activities | (3,533 | ) | (4,339 | ) | |||
Net increase in cash | 248 | 210 | |||||
Cash at beginning of period | 657 | 675 | |||||
Cash at end of period | $ | 905 | $ | 885 | |||
8
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 available 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 available 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 available 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 available 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 available to common shareholders and does not reflect the overall profitability of our business.
The following tables reconcile operating income and net income available to common shareholders.
($ in millions, except per share data) | For the three months ended September 30, | ||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Operating income | $ | 550 | $ | 553 | $ | 138 | $ | 125 | $ | 610 | $ | 598 | $ | 1.52 | $ | 1.39 | |||||||||||||||
Realized capital gains and losses, after-tax | (104 | ) | 173 | 125 | 19 | 21 | 192 | 0.05 | 0.45 | ||||||||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | (2 | ) | 2 | (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 | ) | (3 | ) | (1 | ) | (3 | ) | — | (0.01 | ) | ||||||||||||||||||
Amortization of purchased intangible assets, after-tax | (8 | ) | (11 | ) | — | — | (8 | ) | (11 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||
(Loss) gain on disposition of operations, after-tax | (1 | ) | (1 | ) | 2 | (27 | ) | 1 | (28 | ) | — | (0.06 | ) | ||||||||||||||||||
Net income available to common shareholders | $ | 437 | $ | 714 | $ | 262 | $ | 116 | $ | 621 | $ | 750 | $ | 1.54 | $ | 1.74 | |||||||||||||||
9
($ in millions, except per share data) | For the nine months ended September 30, | ||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Operating income | $ | 1,303 | $ | 1,385 | $ | 411 | $ | 479 | $ | 1,488 | $ | 1,631 | $ | 3.61 | $ | 3.69 | |||||||||||||||
Realized capital gains and losses, after-tax | (55 | ) | 368 | 235 | 13 | 180 | 381 | 0.44 | 0.86 | ||||||||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | (3 | ) | (12 | ) | (3 | ) | (12 | ) | (0.01 | ) | (0.03 | ) | |||||||||||||||||
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 | ) | — | ||||||||||||||||||
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax | 1 | 4 | — | 1 | 1 | 5 | — | 0.01 | |||||||||||||||||||||||
Amortization of purchased intangible assets, after-tax | (24 | ) | (33 | ) | — | — | (24 | ) | (33 | ) | (0.05 | ) | (0.07 | ) | |||||||||||||||||
Gain (loss) on disposition of operations, after-tax | — | 37 | 1 | (55 | ) | 1 | (18 | ) | — | (0.04 | ) | ||||||||||||||||||||
Change in accounting for investments in qualified affordable housing projects, after-tax | (28 | ) | — | (17 | ) | — | (45 | ) | — | (0.11 | ) | — | |||||||||||||||||||
Net income available to common shareholders | $ | 1,197 | $ | 1,761 | $ | 624 | $ | 423 | $ | 1,595 | $ | 1,951 | $ | 3.87 | $ | 4.42 | |||||||||||||||
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 available 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.
10
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, | ||||||
2015 | 2014 | ||||||
Return on common shareholders’ equity | |||||||
Numerator: | |||||||
Net income available to common shareholders | $ | 2,390 | $ | 2,761 | |||
Denominator: | |||||||
Beginning common shareholders’ equity (1) | $ | 20,583 | $ | 20,130 | |||
Ending common shareholders’ equity (1) | 18,758 | 20,583 | |||||
Average common shareholders’ equity | $ | 19,671 | $ | 20,357 | |||
Return on common shareholders’ equity | 12.2 | % | 13.6 | % | |||
For the twelve months ended September 30, | |||||||
2015 | 2014 | ||||||
Operating income return on common shareholders’ equity | |||||||
Numerator: | |||||||
Operating income | $ | 2,224 | $ | 2,412 | |||
Denominator: | |||||||
Beginning common shareholders’ equity | $ | 20,583 | $ | 20,130 | |||
Unrealized net capital gains and losses | 1,827 | 1,714 | |||||
Adjusted beginning common shareholders’ equity | 18,756 | 18,416 | |||||
Ending common shareholders’ equity | 18,758 | 20,583 | |||||
Unrealized net capital gains and losses | 879 | 1,827 | |||||
Adjusted ending common shareholders’ equity | 17,879 | 18,756 | |||||
Average adjusted common shareholders’ equity | $ | 18,318 | $ | 18,586 | |||
Operating income return on common shareholders’ equity | 12.1 | % | 13.0 | % | |||
_____________
(1) Excludes equity related to preferred stock of $1,746 million as of September 30, 2015 and 2014.
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 available to common shareholders is the most directly comparable GAAP measure. Underwriting income should not be considered a substitute for net income available to common shareholders and does not reflect the overall profitability of our business. A reconciliation of Property-Liability underwriting income to net income available 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.
11
The following table reconciles the Property-Liability underlying combined ratio to the Property-Liability combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets (“underlying combined ratio”) | 89.3 | 86.1 | 89.1 | 86.4 | |||||||
Effect of catastrophe losses | 3.5 | 7.1 | 6.0 | 8.8 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 0.6 | 0.1 | 0.5 | (0.2 | ) | ||||||
Effect of amortization of purchased intangible assets | 0.2 | 0.2 | 0.2 | 0.2 | |||||||
Combined ratio | 93.6 | 93.5 | 95.8 | 95.2 | |||||||
Effect of prior year catastrophe reserve reestimates | — | — | — | 0.2 | |||||||
Underwriting margin is calculated as 100% minus the combined ratio.
In this news release, we provide our outlook range on the Property-Liability 2015 underlying combined ratio. 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.
The following table reconciles the Allstate brand underlying combined ratio to the Allstate brand combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying combined ratio | 88.3 | 84.2 | 87.8 | 84.5 | |||||||
Effect of catastrophe losses | 3.6 | 6.9 | 6.1 | 8.8 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (0.1 | ) | (1.3 | ) | 0.3 | (0.7 | ) | ||||
Effect of amortization of purchased intangible assets | — | — | — | — | |||||||
Combined ratio | 91.8 | 89.8 | 94.2 | 92.6 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) | — | — | 0.2 | ||||||
The following table reconciles the Allstate brand auto underlying combined ratio to the Allstate brand auto combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying combined ratio | 98.1 | 92.9 | 97.2 | 92.8 | |||||||
Effect of catastrophe losses | 0.5 | 1.8 | 1.3 | 2.1 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 0.2 | (1.6 | ) | 0.5 | (0.9 | ) | |||||
Combined ratio | 98.8 | 93.1 | 99.0 | 94.0 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) | (0.2 | ) | (0.1 | ) | (0.2 | ) | |||
The following table reconciles the Allstate brand homeowners underlying combined ratio to the Allstate brand homeowners combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying combined ratio | 60.9 | 60.0 | 62.0 | 62.0 | |||||||
Effect of catastrophe losses | 12.4 | 22.0 | 19.5 | 27.3 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (0.8 | ) | (0.8 | ) | (0.4 | ) | (0.3 | ) | |||
Combined ratio | 72.5 | 81.2 | 81.1 | 89.0 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) | 0.7 | 0.2 | 1.2 | ||||||
12
The following table reconciles the Allstate brand other personal lines underlying combined ratio to the Allstate brand other personal lines combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying combined ratio | 82.1 | 77.6 | 81.1 | 79.1 | |||||||
Effect of catastrophe losses | 4.5 | 4.9 | 8.0 | 10.0 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 1.8 | 2.8 | 0.8 | 1.3 | |||||||
Combined ratio | 88.4 | 85.3 | 89.9 | 90.4 | |||||||
Effect of prior year catastrophe reserve reestimates | — | (0.2 | ) | — | (0.3 | ) | |||||
The following table reconciles the Encompass brand underlying combined ratio to the Encompass brand combined ratio.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying combined ratio | 90.9 | 95.6 | 92.7 | 94.1 | |||||||
Effect of catastrophe losses | 5.3 | 16.4 | 10.0 | 17.1 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 5.1 | (2.3 | ) | 1.5 | (0.7 | ) | |||||
Combined ratio | 101.3 | 109.7 | 104.2 | 110.5 | |||||||
Effect of prior year catastrophe reserve reestimates | 0.3 | 0.4 | (0.1 | ) | 0.2 | ||||||
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.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Underlying loss ratio | 73.5 | 75.3 | 75.3 | 75.2 | |||||||
Expense ratio, excluding the effect of amortization of purchased intangible assets | 31.8 | 37.0 | 34.1 | 39.3 | |||||||
Underlying combined ratio | 105.3 | 112.3 | 109.4 | 114.5 | |||||||
Effect of catastrophe losses | 0.8 | 1.9 | 0.9 | 1.7 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (1.6 | ) | (0.8 | ) | (1.1 | ) | (1.0 | ) | |||
Effect of amortization of purchased intangible assets | 2.0 | 3.2 | 2.2 | 3.3 | |||||||
Combined ratio | 106.5 | 116.6 | 111.4 | 118.5 | |||||||
13
Book value per common 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 common 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 common shares outstanding plus dilutive potential common shares outstanding. We use the trend in book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, in conjunction with book value per common 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 common 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 common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, should not be considered a substitute for book value per common 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, | ||||||
2015 | 2014 | ||||||
Book value per common share | |||||||
Numerator: | |||||||
Common shareholders’ equity | $ | 18,758 | $ | 20,583 | |||
Denominator: | |||||||
Common shares outstanding and dilutive potential common shares outstanding | 394.6 | 426.3 | |||||
Book value per common share | $ | 47.54 | $ | 48.28 | |||
Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities | |||||||
Numerator: | |||||||
Common shareholders’ equity | $ | 18,758 | $ | 20,583 | |||
Unrealized net capital gains and losses on fixed income securities | 807 | 1,541 | |||||
Adjusted common shareholders’ equity | $ | 17,951 | $ | 19,042 | |||
Denominator: | |||||||
Common shares outstanding and dilutive potential common shares outstanding | 394.6 | 426.3 | |||||
Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities | $ | 45.49 | $ | 44.67 | |||
# # # # #
14
Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*) the first time they appear. These measures are defined on the page "Definitions of Non-GAAP Measures" and are reconciled to the most directly comparable generally accepted accounting principles ("GAAP") measure herein. THE ALLSTATE CORPORATION Investor Supplement Third Quarter 2015 The consolidated financial statements and financial exhibits included herein are unaudited. These consolidated financial statements and exhibits should be read in conjunction with the consolidated financial statements and notes thereto included in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The results of operations for interim periods should not be considered indicative of results to be expected for the full year.
PAGE Consolidated Statements of Operations 1 Contribution to Income 2 Revenues 3 Statements of Financial Position 4 Book Value Per Common Share 5 Return on Common Shareholders' Equity 6 Debt to Capital 7 Statements of Cash Flows 8 Analysis of Deferred Policy Acquisition Costs 9,10 Property-Liability Operations Property-Liability Results 11 Underwriting Results by Area of Business 12 Premiums Written by Brand 13 Impact of Net Rate Changes Approved on Premiums Written 14 Policies in Force and Other Statistics 15 Allstate Brand Profitability Measures 16 Allstate Brand Statistics 17 Allstate Brand Auto Frequency Analysis 18,19 Esurance Brand Profitability Measures and Statistics 20 Encompass Brand Profitability Measures and Statistics 21 Auto Profitability Measures 22 Homeowners Profitability Measures 23 Other Personal Lines Profitability Measures 24 Commercial Lines Profitability Measures 25 Other Business Lines Profitability Measures 26 Auto, Homeowners and Other Personal Lines Underlying Combined Ratios 27 Allstate Brand Auto and Homeowners Underlying Loss and Expense 28 Homeowners Supplemental Information 29 Catastrophe Losses by Brand 30 Effect of Catastrophe Losses on the Combined Ratio 31 Catastrophe by Size of Event 32 Prior Year Reserve Reestimates 33 Asbestos and Environmental Reserves 34 Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures 35 Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures 36 Allstate Financial Operations Allstate Financial Results 37 Impact of LBL on Comparison of Allstate Financial Results 38 Return on Attributed Equity 39 Allstate Financial Premiums and Contract Charges 40 Allstate Financial Change in Contractholder Funds 41 Allstate Financial Analysis of Net Income 42 Allstate Financial Weighted Average Investment Spreads 43 Allstate Financial Supplemental Product Information 44 Allstate Financial Insurance Policies and Annuities in Force 45 Allstate Life and Annuities and Allstate Benefits Results and Product Information 46 Corporate and Other Results 47 Investments Investments 48 Limited Partnership Investments 49 Unrealized Net Capital Gains and Losses on Security Portfolio by Type 50 Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 51 Property-Liability Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 52 Allstate Financial Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 53 Investment Results 54 Investment Position by Strategy 55 Performance-Based Long-Term Investments 56 Definitions of Non-GAAP Measures 57 THE ALLSTATE CORPORATION Investor Supplement - Third Quarter 2015 Table of Contents
1 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Revenues Property-liability insurance premiums $ 7,650 $ 7,549 $ 7,426 $ 7,354 $ 7,307 $ 7,204 $ 7,064 $ 22,625 $ 21,575 Life and annuity premiums and contract charges 538 536 537 520 512 518 607 1,611 1,637 Net investment income 807 789 850 779 823 898 959 2,446 2,680 Realized capital gains and losses: Total other-than-temporary impairment ("OTTI") losses (186) (47) (53) (65) (53) (44) (80) (286) (177) OTTI losses reclassified to (from) other comprehensive income 12 4 4 (1) - (1) (1) 20 (2) Net OTTI losses recognized in earnings (174) (43) (49) (66) (53) (45) (81) (266) (179) Sales and other realized capital gains and losses 207 151 188 172 347 285 135 546 767 Total realized capital gains and losses 33 108 139 106 294 240 54 280 588 Total revenues 9,028 8,982 8,952 8,759 8,936 8,860 8,684 26,962 26,480 Costs and expenses Property-liability insurance claims and claims expense 5,255 5,587 4,993 4,618 4,909 5,142 4,759 15,835 14,810 Life and annuity contract benefits 460 446 441 431 433 413 488 1,347 1,334 Interest credited to contractholder funds 194 185 199 202 198 212 307 578 717 Amortization of deferred policy acquisition costs 1,092 1,086 1,070 1,035 1,030 1,035 1,035 3,248 3,100 Operating costs and expenses 992 1,061 1,090 1,156 1,068 1,023 1,094 3,143 3,185 Restructuring and related charges 9 19 4 5 3 4 6 32 13 Loss on extinguishment of debt - - - - - 1 - - 1 Interest expense 73 73 73 73 78 84 87 219 249 Total costs and expenses 8,075 8,457 7,870 7,520 7,719 7,914 7,776 24,402 23,409 Gain (loss) on disposition of operations 2 1 (1) 3 (27) 9 (59) 2 (77) Income from operations before income tax expense 955 526 1,081 1,242 1,190 955 849 2,562 2,994 Income tax expense 305 171 404 418 409 310 249 880 968 Net income $ 650 $ 355 $ 677 $ 824 $ 781 $ 645 $ 600 $ 1,682 $ 2,026 Preferred stock dividends 29 29 29 29 31 31 13 87 75 Net income available to common shareholders $ 621 $ 326 $ 648 $ 795 $ 750 $ 614 $ 587 $ 1,595 $ 1,951 Earnings per common share: (1) Net income available to common shareholders per common share - Basic $ 1.56 $ 0.80 $ 1.56 $ 1.89 $ 1.77 $ 1.41 $ 1.31 $ 3.92 $ 4.49 Weighted average common shares - Basic 397.0 407.0 415.8 420.2 424.5 434.3 446.4 406.5 435.0 Net income available to common shareholders per common share - Diluted $ 1.54 $ 0.79 $ 1.53 $ 1.86 $ 1.74 $ 1.39 $ 1.30 $ 3.87 $ 4.42 Weighted average common shares - Diluted 402.1 412.6 422.6 427.7 431.2 440.7 452.8 412.4 441.6 Cash dividends declared per common share $ 0.30 $ 0.30 $ 0.30 $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 0.90 $ 0.84 (1) In accordance with GAAP, the quarter and year-to-date per share amounts are calculated discretely. Therefore, the sum of each quarter may not equal the year-to-date amount. THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS ($ in millions, except per share data) Nine months endedThree months ended
2 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Contribution to income Operating income before the impact of restructuring and related charges $ 616 $ 274 $ 619 $ 740 $ 599 $ 448 $ 592 $ 1,509 $ 1,639 Restructuring and related charges, after-tax (6) (12) (3) (4) (1) (3) (4) (21) (8) Operating income * 610 262 616 736 598 445 588 1,488 1,631 Realized capital gains and losses, after-tax 21 69 90 70 192 154 35 180 381 Valuation changes on embedded derivatives that are not hedged, after-tax (2) 4 (5) (3) 2 (3) (11) (3) (12) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (1) (2) - - (3) - - (3) (3) Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - 1 2 - 3 2 1 5 Amortization of purchased intangible assets, after-tax (8) (8) (8) (12) (11) (11) (11) (24) (33) Gain (loss) on disposition of operations, after-tax 1 1 (1) 2 (28) 26 (16) 1 (18) Change in accounting for investments in qualified affordable housing projects, after-tax - - (45) - - - - (45) - Net income available to common shareholders $ 621 $ 326 $ 648 $ 795 $ 750 $ 614 $ 587 $ 1,595 $ 1,951 Income per common share - Diluted Operating income before the impact of restructuring and related charges $ 1.53 $ 0.66 $ 1.46 $ 1.73 $ 1.39 $ 1.02 $ 1.31 $ 3.66 $ 3.71 Restructuring and related charges, after-tax (0.01) (0.03) - (0.01) - (0.01) (0.01) (0.05) (0.02) Operating income 1.52 0.63 1.46 1.72 1.39 1.01 1.30 3.61 3.69 Realized capital gains and losses, after-tax 0.05 0.17 0.21 0.16 0.45 0.35 0.08 0.44 0.86 Valuation changes on embedded derivatives that are not hedged, after-tax (0.01) 0.01 (0.01) (0.01) - (0.01) (0.02) (0.01) (0.03) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax - - - - (0.01) - - (0.01) - Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - - 0.01 - 0.01 - - 0.01 Amortization of purchased intangible assets, after-tax (0.02) (0.02) (0.02) (0.03) (0.03) (0.03) (0.02) (0.05) (0.07) Gain (loss) on disposition of operations, after-tax - - - 0.01 (0.06) 0.06 (0.04) - (0.04) Change in accounting for investments in qualified affordable housing projects, after-tax - - (0.11) - - - - (0.11) - Net income available to common shareholders $ 1.54 $ 0.79 $ 1.53 $ 1.86 $ 1.74 $ 1.39 $ 1.30 $ 3.87 $ 4.42 Weighted average common shares - Diluted 402.1 412.6 422.6 427.7 431.2 440.7 452.8 412.4 441.6 THE ALLSTATE CORPORATION CONTRIBUTION TO INCOME ($ in millions, except per share data) Nine months endedThree months ended
3 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Property-Liability Property-Liability insurance premiums $ 7,650 $ 7,549 $ 7,426 $ 7,354 $ 7,307 $ 7,204 $ 7,064 $ 22,625 $ 21,575 Net investment income 307 292 358 294 344 351 312 957 1,007 Realized capital gains and losses (161) 49 28 (20) 266 250 53 (84) 569 Total Property-Liability revenues 7,796 7,890 7,812 7,628 7,917 7,805 7,429 23,498 23,151 Allstate Financial Life and annuity premiums and contract charges 538 536 537 520 512 518 607 1,611 1,637 Net investment income 491 489 484 480 473 538 640 1,464 1,651 Realized capital gains and losses 194 59 111 125 28 (10) 1 364 19 Total Allstate Financial revenues 1,223 1,084 1,132 1,125 1,013 1,046 1,248 3,439 3,307 Corporate and Other Service fees (1) - 1 1 1 1 1 2 2 4 Net investment income 9 8 8 5 6 9 7 25 22 Realized capital gains and losses - - - 1 - - - - - Total Corporate and Other revenues before reclassification of services fees 9 9 9 7 7 10 9 27 26 Reclassification of service fees (1) - (1) (1) (1) (1) (1) (2) (2) (4) Total Corporate and Other revenues 9 8 8 6 6 9 7 25 22 Consolidated revenues $ 9,028 $ 8,982 $ 8,952 $ 8,759 $ 8,936 $ 8,860 $ 8,684 $ 26,962 $ 26,480 (1) For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to Operating costs and expenses. THE ALLSTATE CORPORATION REVENUES ($ in millions) Nine months endedThree months ended
4 Sept 30, June 30, March 31, Dec. 31, Sept. 30, Sept 30, June 30, March 31, Dec. 31, Sept. 30, 2015 2015 2015 2014 2014 2015 2015 2015 2014 2014 Assets Liabilities Investments Reserve for property-liability insurance claims and claims expense $ 23,757 $ 23,702 $ 23,103 $ 22,923 $ 22,350 Fixed income securities, at fair value Reserve for life-contingent contract benefits 12,229 12,227 12,318 12,380 12,482 (amortized cost $56,918, $57,971, Contractholder funds 21,559 21,968 22,267 22,529 22,848 $58,235, $59,672 and $59,616) $ 58,257 $ 59,930 $ 61,403 $ 62,440 $ 62,313 Unearned premiums 12,343 11,858 11,489 11,655 11,728 Equity securities, at fair value Claim payments outstanding 804 820 796 784 814 (cost $4,123, $3,649, $3,752, Deferred income taxes 243 475 779 715 1,076 $3,692 and $3,877) 4,236 4,000 4,166 4,104 4,335 Other liabilities and accrued expenses 5,558 5,462 5,635 5,653 4,967 Mortgage loans 4,402 4,343 4,276 4,188 4,143 Long-term debt 5,175 5,186 5,194 5,194 5,195 Limited partnership interests 4,823 4,536 4,699 4,527 4,348 Separate Accounts 3,677 4,121 4,304 4,396 4,521 Short-term, at fair value Total liabilities 85,345 85,819 85,885 86,229 85,981 (amortized cost $3,036, $2,821, $2,497, $2,540 and $2,463) 3,036 2,821 2,497 2,540 2,463 Other 3,588 3,511 3,396 3,314 3,119 Total investments 78,342 79,141 80,437 81,113 80,721 Equity Preferred stock and additional capital paid-in, 72.2 thousand shares outstanding 1,746 1,746 1,746 1,746 1,746 Common stock, 390 million, 402 million, 409 million, 418 million and 419 million shares outstanding 9 9 9 9 9 Additional capital paid-in 3,224 3,205 3,109 3,199 3,059 Retained income 39,068 38,567 38,363 37,842 37,164 Deferred ESOP expense (23) (23) (23) (23) (31) Treasury stock, at cost (510 million, 498 million, 491 million, 482 million and 481 million shares) (23,058) (22,273) (21,799) (21,030) (20,856) Accumulated other comprehensive income: Unrealized net capital gains and losses: Unrealized net capital gains and losses on fixed income securities with other-than-temporary impairments 57 62 71 72 70 Cash 905 805 916 657 885 Other unrealized net capital gains and losses 886 1,435 2,255 1,988 1,970 Premium installment receivables, net 5,711 5,599 5,502 5,465 5,604 Unrealized adjustment to DAC, DSI and insurance Deferred policy acquisition costs 3,811 3,708 3,527 3,525 3,516 reserves (64) (78) (189) (134) (213) Reinsurance recoverables, net (1) 8,468 8,520 8,408 8,490 7,555 Total unrealized net capital gains and losses 879 1,419 2,137 1,926 1,827 Accrued investment income 575 610 597 591 595 Unrealized foreign currency translation Property and equipment, net 1,050 1,038 1,026 1,031 1,012 adjustments (52) (38) (29) (2) 18 Goodwill 1,219 1,219 1,219 1,219 1,219 Unrecognized pension and other Other assets 2,091 2,356 2,128 2,046 2,682 postretirement benefit cost (1,289) (1,314) (1,334) (1,363) (607) Separate Accounts 3,677 4,121 4,304 4,396 4,521 Total accumulated other comprehensive (loss) income (462) 67 774 561 1,238 Total shareholders' equity 20,504 21,298 22,179 22,304 22,329 Total assets $ 105,849 $ 107,117 $ 108,064 $ 108,533 $ 108,310 Total liabilities and shareholders' equity $ 105,849 $ 107,117 $ 108,064 $ 108,533 $ 108,310 (1) THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in millions) Reinsurance recoverables of unpaid losses related to Property-Liability were $5,853 million, $5,853 million, $5,719 million, $5,694 million and $4,764 million as of September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.
5 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Book value per common share Numerator: Common shareholders' equity (1) $ 18,758 $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Denominator: Common shares outstanding and dilutive potential common shares outstanding 394.6 407.7 415.4 426.2 426.3 440.4 441.1 Book value per common share $ 47.54 $ 47.96 $ 49.19 $ 48.24 $ 48.28 $ 47.97 $ 46.70 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities * Numerator: Common shareholders' equity $ 18,758 $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Unrealized net capital gains and losses on fixed income securities 807 1,196 1,871 1,666 1,541 1,690 1,640 Adjusted common shareholders' equity $ 17,951 $ 18,356 $ 18,562 $ 18,892 $ 19,042 $ 19,436 $ 18,960 Denominator: Common shares outstanding and dilutive potential common shares outstanding 394.6 407.7 415.4 426.2 426.3 440.4 441.1 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities $ 45.49 $ 45.02 $ 44.68 $ 44.33 $ 44.67 $ 44.13 $ 42.98 (1) Excludes equity related to preferred stock of $1,746 million, $1,746 million, $1,746 million, $1,746 million, $1,746 million, $1,746 million and $1,505 million as of September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. THE ALLSTATE CORPORATION BOOK VALUE PER COMMON SHARE ($ in millions, except per share data)
6 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Return on Common Shareholders' Equity Numerator: Net income available to common shareholders (1) $ 2,390 $ 2,519 $ 2,807 $ 2,746 $ 2,761 $ 2,321 $ 2,141 Denominator: Beginning common shareholders' equity $ 20,583 $ 21,126 $ 20,600 $ 20,700 $ 20,130 $ 19,591 $ 20,619 Ending common shareholders' equity 18,758 19,552 20,433 20,558 20,583 21,126 20,600 Average common shareholders' equity (2) $ 19,671 $ 20,339 $ 20,517 $ 20,629 $ 20,357 $ 20,359 $ 20,610 Return on common shareholders' equity 12.2 % 12.4 % 13.7 % 13.3 % 13.6 % 11.4 % 10.4 % Operating Income Return on Common Shareholders' Equity * Numerator: Operating income (1) $ 2,224 $ 2,212 $ 2,395 $ 2,367 $ 2,412 $ 2,527 $ 2,611 Denominator: Beginning common shareholders' equity $ 20,583 $ 21,126 $ 20,600 $ 20,700 $ 20,130 $ 19,591 $ 20,619 Unrealized net capital gains and losses 1,827 2,150 2,091 1,646 1,714 1,651 2,905 Adjusted beginning common shareholders' equity 18,756 18,976 18,509 19,054 18,416 17,940 17,714 Ending common shareholders' equity 18,758 19,552 20,433 20,558 20,583 21,126 20,600 Unrealized net capital gains and losses 879 1,419 2,137 1,926 1,827 2,150 2,091 Adjusted ending common shareholders' equity 17,879 18,133 18,296 18,632 18,756 18,976 18,509 Average adjusted common shareholders' equity (2) $ 18,318 $ 18,555 $ 18,403 $ 18,843 $ 18,586 $ 18,458 $ 18,112 Operating income return on common shareholders' equity 12.1 % 11.9 % 13.0 % 12.6 % 13.0 % 13.7 % 14.4 % (1) Net income available to common shareholders and operating income reflect a trailing twelve-month period. (2) THE ALLSTATE CORPORATION RETURN ON COMMON SHAREHOLDERS' EQUITY ($ in millions) Average common shareholders' equity and average adjusted common shareholders' equity are determined using a two-point average, with the beginning and ending common shareholders' equity and adjusted common shareholders' equity, respectively, for the twelve-month period as data points. Twelve months ended
7 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Debt Short-term debt $ - $ - $ - $ - $ - $ - $ - Long-term debt 5,175 5,186 5,194 5,194 5,195 5,846 6,200 Total debt $ 5,175 $ 5,186 $ 5,194 $ 5,194 $ 5,195 $ 5,846 $ 6,200 Capital resources Debt $ 5,175 $ 5,186 $ 5,194 $ 5,194 $ 5,195 $ 5,846 $ 6,200 Shareholders' equity Preferred stock and additional capital paid-in 1,746 1,746 1,746 1,746 1,746 1,746 1,505 Common stock 9 9 9 9 9 9 9 Additional capital paid-in 3,224 3,205 3,109 3,199 3,059 3,035 3,017 Retained income 39,068 38,567 38,363 37,842 37,164 36,532 36,041 Deferred ESOP expense (23) (23) (23) (23) (31) (31) (31) Treasury stock (23,058) (22,273) (21,799) (21,030) (20,856) (19,985) (19,922) Unrealized net capital gains and losses 879 1,419 2,137 1,926 1,827 2,150 2,091 Unrealized foreign currency translation adjustments (52) (38) (29) (2) 18 35 22 Unrecognized pension and other postretirement benefit cost (1,289) (1,314) (1,334) (1,363) (607) (619) (627) Total shareholders' equity 20,504 21,298 22,179 22,304 22,329 22,872 22,105 Total capital resources $ 25,679 $ 26,484 $ 27,373 $ 27,498 $ 27,524 $ 28,718 $ 28,305 Ratio of debt to shareholders' equity 25.2 % 24.3 % 23.4 % 23.3 % 23.3 % 25.6 % 28.0 % Ratio of debt to capital resources 20.2 % 19.6 % 19.0 % 18.9 % 18.9 % 20.4 % 21.9 % THE ALLSTATE CORPORATION DEBT TO CAPITAL ($ in millions)
8 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 650 $ 355 $ 677 $ 824 $ 781 $ 645 $ 600 $ 1,682 $ 2,026 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 96 92 87 89 88 91 98 275 277 Realized capital gains and losses (33) (108) (139) (106) (294) (240) (54) (280) (588) Loss on extinguishment of debt - - - - - 1 - - 1 (Gain) loss on disposition of operations (2) (1) 1 (3) 27 (9) 59 (2) 77 Interest credited to contractholder funds 194 185 199 202 198 212 307 578 717 Changes in: Policy benefits and other insurance reserves (26) 411 115 491 (53) 121 (18) 500 50 Unearned premiums 518 361 (117) (56) 535 379 (92) 762 822 Deferred policy acquisition costs (87) (97) (35) (31) (112) (80) 3 (219) (189) Premium installment receivables, net (132) (92) (66) 129 (234) (106) (46) (290) (386) Reinsurance recoverables, net 11 (120) (24) (958) (71) 6 (45) (133) (110) Income taxes 223 (342) 59 30 370 (127) (68) (60) 175 Other operating assets and liabilities (29) 93 (191) 60 129 (166) (270) (127) (307) Net cash provided by operating activities 1,383 737 566 671 1,364 727 474 2,686 2,565 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales Fixed income securities 6,784 6,559 9,453 6,961 13,443 7,722 6,483 22,796 27,648 Equity securities 614 922 1,152 1,492 2,519 1,416 1,328 2,688 5,263 Limited partnership interests 204 295 296 389 282 564 238 795 1,084 Mortgage loans 6 - - - - - 10 6 10 Other investments 46 85 47 114 211 51 30 178 292 Investment collections Fixed income securities 1,005 1,030 1,213 949 1,057 881 849 3,248 2,787 Mortgage loans (52) 243 114 238 142 402 324 305 868 Other investments 77 117 60 33 51 57 50 254 158 Investment purchases Fixed income securities (6,446) (7,272) (9,210) (8,109) (14,848) (9,550) (6,252) (22,928) (30,650) Equity securities (1,318) (748) (1,172) (1,235) (1,540) (1,338) (1,330) (3,238) (4,208) Limited partnership interests (367) (198) (365) (506) (239) (376) (277) (930) (892) Mortgage loans (15) (307) (202) (283) (109) (107) (2) (524) (218) Other investments (225) (325) (193) (320) (257) (152) (243) (743) (652) Change in short-term investments, net (186) (328) (63) 7 325 (249) 189 (577) 265 Change in other investments, net - (18) 2 (12) 9 13 36 (16) 58 Purchases of property and equipment, net (86) (74) (59) (81) (83) (69) (55) (219) (207) Disposition and acquisition of operations - - - - - 380 (2) - 378 Net cash provided by (used in) investing activities 41 (19) 1,073 (363) 963 (355) 1,376 1,095 1,984 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (11) (9) - - (651) (354) (1) (20) (1,006) Proceeds from issuance of preferred stock - - - - - 240 725 - 965 Contractholder fund deposits 257 266 261 258 260 263 403 784 926 Contractholder fund withdrawals (641) (580) (572) (615) (909) (838) (1,084) (1,793) (2,831) Dividends paid on common stock (122) (125) (118) (117) (122) (125) (113) (365) (360) Dividends paid on preferred stock (29) (29) (29) (31) (31) (13) (12) (87) (56) Treasury stock purchases (792) (414) (1,010) (112) (932) (142) (1,115) (2,216) (2,189) Shares reissued under equity incentive plans, net 12 45 64 62 55 72 77 121 204 Excess tax benefits on share-based payment arrangements 1 17 26 19 4 5 13 44 22 Other 1 - (2) - (5) (3) (6) (1) (14) Net cash used in financing activities (1,324) (829) (1,380) (536) (2,331) (895) (1,113) (3,533) (4,339) Cash classified as held for sale - - - - - 242 (242) - - NET INCREASE (DECREASE) IN CASH 100 (111) 259 (228) (4) (281) 495 248 210 CASH AT BEGINNING OF PERIOD 805 916 657 885 889 1,170 675 657 675 CASH AT END OF PERIOD $ 905 $ 805 $ 916 $ 657 $ 885 $ 889 $ 1,170 $ 905 $ 885 THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions) Nine months endedThree months ended
9 Amortization relating to realized capital gains and Amortization losses and (acceleration) Effect of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending balance costs before embedded derivatives for changes in capital gains balance June 30, 2015 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Sept. 30, 2015 Property-Liability $ 1,942 $ 1,114 $ (1,029) $ - $ - $ - $ 2,027 Allstate Financial: Traditional life and accident and health 768 40 (31) - - - 777 Interest-sensitive life 948 22 (28) (2) (1) 19 958 Fixed annuity 50 - (1) - - - 49 Subtotal 1,766 62 (60) (2) (1) 19 1,784 Consolidated $ 3,708 $ 1,176 $ (1,089) $ (2) $ (1) $ 19 $ 3,811 Amortization relating to realized capital gains and Amortization losses and (acceleration) Effect of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending balance costs before embedded derivatives for changes in capital gains balance June 30, 2014 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Sept. 30, 2014 Property-Liability $ 1,704 $ 1,072 $ (972) $ - $ - $ - $ 1,804 Allstate Financial: Traditional life and accident and health 727 40 (29) - - - 738 Interest-sensitive life 899 28 (33) (1) 10 24 927 Fixed annuity 47 - (2) (1) (2) 5 47 Subtotal 1,673 68 (64) (2) 8 29 1,712 Consolidated $ 3,377 $ 1,140 $ (1,036) $ (2) $ 8 $ 29 $ 3,516 (1) (2) Included as a component of amortization of DAC on the Consolidated Statements of Operations. Change in Deferred Policy Acquisition Costs For the three months ended September 30, 2014 Amortization before adjustments reflects total DAC amortization before amortization/accretion related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged and amortization acceleration/deceleration for changes in assumptions. THE ALLSTATE CORPORATION ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS ($ in millions) Change in Deferred Policy Acquisition Costs For the three months ended September 30, 2015
10 Amortization relating to realized capital gains and Amortization DAC before DAC after losses and (acceleration) Effect of impact of Impact of impact of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending unrealized unrealized unrealized balance costs before embedded derivatives for changes in capital gains balance capital gains capital gains capital gains Dec. 31, 2014 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Sept. 30, 2015 and losses and losses and losses Property-Liability $ 1,820 $ 3,257 $ (3,050) $ - $ - $ - $ 2,027 $ 2,027 $ - $ 2,027 Allstate Financial: Traditional life and accident and health 753 128 (104) - - - 777 777 - 777 Interest-sensitive life 905 77 (83) (7) (1) 67 958 1,056 (98) 958 Fixed annuity 47 - (4) 1 - 5 49 49 - 49 Subtotal 1,705 205 (191) (6) (1) 72 1,784 1,882 (98) 1,784 Consolidated $ 3,525 $ 3,462 $ (3,241) $ (6) $ (1) $ 72 $ 3,811 $ 3,909 $ (98) $ 3,811 Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy For the nine months ended September 30, 2014 Acquisition Costs as of September 30, 2014 Amortization relating to realized capital gains and Amortization DAC before DAC after DAC classified losses and (acceleration) Effect of impact of Impact of impact of Beginning as held for sale Total DAC including Acquisition Amortization valuation changes on deceleration unrealized DAC sold in Ending unrealized unrealized unrealized balance beginning those classified costs before embedded derivatives for changes in capital gains LBL balance capital gains capital gains capital gains Dec. 31, 2013 balance as held for sale deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses disposition Sept. 30, 2014 and losses and losses and losses Property-Liability $ 1,625 $ - $ 1,625 $ 3,081 $ (2,902) $ - $ - $ - $ - $ 1,804 $ 1,804 $ - $ 1,804 Allstate Financial: Traditional life and accident and health 711 13 724 121 (94) - - - (13) 738 738 - 738 Interest-sensitive life 991 700 1,691 84 (102) (5) 10 (77) (674) 927 1,071 (144) 927 Fixed annuity 45 30 75 - (7) 2 (2) (1) (20) 47 53 (6) 47 Subtotal 1,747 743 2,490 205 (203) (3) 8 (78) (707) 1,712 1,862 (150) 1,712 Consolidated $ 3,372 $ 743 $ 4,115 $ 3,286 $ (3,105) $ (3) $ 8 $ (78) $ (707) $ 3,516 $ 3,666 $ (150) $ 3,516 (1) (2) Included as a component of amortization of DAC on the Consolidated Statements of Operations. THE ALLSTATE CORPORATION ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS ($ in millions) Amortization before adjustments reflects total DAC amortization before amortization/accretion related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged and amortization acceleration/deceleration for changes in assumptions. Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy For the nine months ended September 30, 2015 Acquisition Costs as of September 30, 2015
11 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Premiums written $ 8,137 $ 7,877 $ 7,306 $ 7,292 $ 7,806 $ 7,547 $ 6,969 $ 23,320 $ 22,322 (Increase) decrease in unearned premiums (485) (370) 166 74 (512) (397) 112 (689) (797) Other (2) 42 (46) (12) 13 54 (17) (6) 50 Premiums earned 7,650 7,549 7,426 7,354 7,307 7,204 7,064 22,625 21,575 Claims and claims expense (5,255) (5,587) (4,993) (4,618) (4,909) (5,142) (4,759) (15,835) (14,810) Amortization of deferred policy acquisition costs (1,029) (1,021) (1,000) (973) (972) (969) (961) (3,050) (2,902) Operating costs and expenses (867) (934) (962) (1,021) (948) (901) (968) (2,763) (2,817) Restructuring and related charges (8) (17) (4) (5) (4) (3) (4) (29) (11) Underwriting income (loss) * 491 (10) 467 737 474 189 372 948 1,035 Net investment income 307 292 358 294 344 351 312 957 1,007 Periodic settlements and accruals on non-hedge derivative instruments (1) - (1) (2) (1) (3) (3) (2) (7) Amortization of purchased intangible assets 12 13 12 17 17 17 17 37 51 Income tax expense on operations (259) (97) (281) (359) (281) (190) (230) (637) (701) Operating income 550 198 555 687 553 364 468 1,303 1,385 Realized capital gains and losses, after-tax (104) 31 18 (11) 173 161 34 (55) 368 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - 1 2 - 2 2 1 4 Amortization of purchased intangible assets, after-tax (8) (8) (8) (12) (11) (11) (11) (24) (33) (Loss) gain on disposition of operations, after-tax (1) 1 - - (1) 38 - - 37 Change in accounting for investments in qualified affordable housing projects, after-tax - - (28) - - - - (28) - Net income available to common shareholders $ 437 $ 222 $ 538 $ 666 $ 714 $ 554 $ 493 $ 1,197 $ 1,761 Catastrophe losses $ 270 $ 797 $ 294 $ 95 $ 517 $ 936 $ 445 $ 1,361 $ 1,898 Operating ratios Claims and claims expense ("loss") ratio 68.7 74.0 67.2 62.8 67.2 71.4 67.4 70.0 68.6 Expense ratio 24.9 26.1 26.5 27.2 26.3 26.0 27.3 25.8 26.6 Combined ratio 93.6 100.1 93.7 90.0 93.5 97.4 94.7 95.8 95.2 Combined ratio excluding the effect of catastrophes * 90.1 89.5 89.7 88.7 86.4 84.4 88.4 89.8 86.4 Effect of catastrophe losses on combined ratio 3.5 10.6 4.0 1.3 7.1 13.0 6.3 6.0 8.8 Combined ratio 93.6 100.1 93.7 90.0 93.5 97.4 94.7 95.8 95.2 Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets ("underlying combined ratio") * 89.3 89.1 89.0 89.5 86.1 84.7 88.4 89.1 86.4 Effect of catastrophe losses on combined ratio 3.5 10.6 4.0 1.3 7.1 13.0 6.3 6.0 8.8 Effect of prior year reserve reestimates on combined ratio 0.6 0.3 0.5 (1.0) 0.1 (0.1) (0.2) 0.5 - Effect of catastrophe losses included in prior year reserve reestimates on combined ratio - (0.1) 0.1 - - (0.5) - - (0.2) Effect of amortization of purchased intangible assets on combined ratio 0.2 0.2 0.1 0.2 0.2 0.3 0.2 0.2 0.2 Combined ratio 93.6 100.1 93.7 90.0 93.5 97.4 94.7 95.8 95.2 Effect of restructuring and related charges on combined ratio 0.1 0.2 0.1 0.1 0.1 - 0.1 0.1 0.1 Effect of Discontinued Lines and Coverages on combined ratio 0.7 - - 0.1 1.4 0.1 - 0.2 0.5 THE ALLSTATE CORPORATION PROPERTY-LIABILITY RESULTS ($ in millions) Nine months endedThree months ended
12 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Property-Liability Underwriting Summary Allstate Protection $ 540 $ (8) $ 469 $ 741 $ 579 $ 192 $ 375 $ 1,001 $ 1,146 Discontinued Lines and Coverages (49) (2) (2) (4) (105) (3) (3) (53) (111) Underwriting income (loss) $ 491 $ (10) $ 467 $ 737 $ 474 $ 189 $ 372 $ 948 $ 1,035 Allstate Protection Underwriting Summary Premiums written $ 8,137 $ 7,877 $ 7,306 $ 7,292 $ 7,805 $ 7,547 $ 6,969 $ 23,320 $ 22,321 Premiums earned $ 7,650 $ 7,549 $ 7,426 $ 7,354 $ 7,306 $ 7,204 $ 7,064 $ 22,625 $ 21,574 Claims and claims expense (5,207) (5,585) (4,992) (4,615) (4,804) (5,140) (4,756) (15,784) (14,700) Amortization of deferred policy acquisition costs (1,029) (1,021) (1,000) (973) (972) (969) (961) (3,050) (2,902) Operating costs and expenses (866) (934) (961) (1,020) (947) (900) (968) (2,761) (2,815) Restructuring and related charges (8) (17) (4) (5) (4) (3) (4) (29) (11) Underwriting income (loss) $ 540 $ (8) $ 469 $ 741 $ 579 $ 192 $ 375 $ 1,001 $ 1,146 Catastrophe losses $ 270 $ 797 $ 294 $ 95 $ 517 $ 936 $ 445 $ 1,361 $ 1,898 Operating ratios Loss ratio 68.0 74.0 67.2 62.7 65.8 71.3 67.3 69.8 68.1 Expense ratio 24.9 26.1 26.5 27.2 26.3 26.0 27.4 25.8 26.6 Combined ratio 92.9 100.1 93.7 89.9 92.1 97.3 94.7 95.6 94.7 Effect of catastrophe losses on combined ratio 3.5 10.6 4.0 1.3 7.1 13.0 6.3 6.0 8.8 Effect of restructuring and related charges on combined ratio 0.1 0.2 0.1 0.1 0.1 - 0.1 0.1 0.1 Effect of amortization of purchased intangible assets on combined ratio 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.2 0.2 Discontinued Lines and Coverages Underwriting Summary Premiums written $ - $ - $ - $ - $ 1 $ - $ - $ - $ 1 Premiums earned $ - $ - $ - $ - $ 1 $ - $ - $ - $ 1 Claims and claims expense (48) (2) (1) (3) (105) (2) (3) (51) (110) Operating costs and expenses (1) - (1) (1) (1) (1) - (2) (2) Underwriting loss $ (49) $ (2) $ (2) $ (4) $ (105) $ (3) $ (3) $ (53) $ (111) Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio 0.7 - - 0.1 1.4 0.1 - 0.2 0.5 Underwriting Income (Loss) by Brand Allstate brand $ 571 $ 86 $ 526 $ 782 $ 676 $ 299 $ 478 $ 1,183 $ 1,453 Esurance brand (26) (41) (69) (59) (62) (45) (93) (136) (200) Encompass brand (4) (50) 14 22 (31) (59) (8) (40) (98) Answer Financial (1) (3) (2) (4) (4) (3) (2) (6) (9) Underwriting income (loss) $ 540 $ (8) $ 469 $ 741 $ 579 $ 192 $ 375 $ 1,001 $ 1,146 THE ALLSTATE CORPORATION PROPERTY-LIABILITY UNDERWRITING RESULTS BY AREA OF BUSINESS ($ in millions) Nine months endedThree months ended
13 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Allstate brand (1) Auto $ 4,746 $ 4,588 $ 4,535 $ 4,347 $ 4,490 $ 4,375 $ 4,292 $ 13,869 $ 13,157 Homeowners 1,879 1,819 1,379 1,598 1,831 1,765 1,342 5,077 4,938 Other personal lines 429 424 357 376 426 416 351 1,210 1,193 Commercial lines 124 138 128 126 122 130 116 390 368 Other business lines 205 199 184 176 185 180 176 588 541 7,383 7,168 6,583 6,623 7,054 6,866 6,277 21,134 20,197 Esurance brand Auto 411 363 434 354 403 338 404 1,208 1,145 Homeowners 9 7 5 4 3 1 1 21 5 Other personal lines 3 1 2 1 2 1 1 6 4 423 371 441 359 408 340 406 1,235 1,154 Encompass brand Auto 169 173 147 160 178 176 151 489 505 Homeowners 134 136 111 123 137 136 110 381 383 Other personal lines 28 29 24 27 28 29 25 81 82 331 338 282 310 343 341 286 951 970 Allstate Protection 8,137 7,877 7,306 7,292 7,805 7,547 6,969 23,320 22,321 Discontinued Lines and Coverages - - - - 1 - - - 1 Property-Liability $ 8,137 $ 7,877 $ 7,306 $ 7,292 $ 7,806 $ 7,547 $ 6,969 $ 23,320 $ 22,322 Allstate Protection Auto $ 5,326 $ 5,124 $ 5,116 $ 4,861 $ 5,071 $ 4,889 $ 4,847 $ 15,566 $ 14,807 Homeowners 2,022 1,962 1,495 1,725 1,971 1,902 1,453 5,479 5,326 Other personal lines 460 454 383 404 456 446 377 1,297 1,279 Commercial lines 124 138 128 126 122 130 116 390 368 Other business lines 205 199 184 176 185 180 176 588 541 $ 8,137 $ 7,877 $ 7,306 $ 7,292 $ 7,805 $ 7,547 $ 6,969 $ 23,320 $ 22,321 (1) Canada premiums included in Allstate brand Auto $ 215 $ 235 $ 173 $ 200 $ 233 $ 250 $ 180 $ 623 $ 663 Homeowners 60 63 41 53 66 63 40 164 169 Other personal lines 15 15 11 13 16 15 11 41 42 $ 290 $ 313 $ 225 $ 266 $ 315 $ 328 $ 231 $ 828 $ 874 THE ALLSTATE CORPORATION PROPERTY-LIABILITY PREMIUMS WRITTEN BY BRAND ($ in millions) Nine months endedThree months ended
14 Number of Location Number of Location Number of Location locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) Allstate brand Auto (2) 23 (6) 1.6 5.1 34 (6) 1.5 3.6 18 (6) 0.4 3.9 Homeowners (3) 6 0.4 6.4 9 (7) 0.7 3.5 10 (7) 0.2 3.0 Esurance brand Auto 13 1.3 5.1 13 1.5 5.9 13 1.3 4.4 Encompass brand Auto 8 1.3 7.6 16 4.8 8.5 6 1.3 6.9 Homeowners 8 1.2 5.9 15 3.2 8.8 4 0.4 8.1 Number of Location Number of Location Number of Location locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) Allstate brand Auto (2) 14 (6) 0.7 3.4 20 (6) 0.9 3.7 25 (6) - (8) (0.2) Homeowners (3) 16 (7) 0.9 4.6 6 0.2 6.0 11 (7) 0.4 5.7 Esurance brand Auto 7 1.4 5.3 15 0.6 3.1 15 1.7 4.4 Encompass brand Auto 13 2.8 6.0 9 0.9 4.1 12 2.4 7.6 Homeowners 9 2.5 7.8 7 0.6 6.5 12 1.5 7.8 (1) (2) (3) (4) (5) (6) Includes five, four, two, one, one and three Canadian provinces for auto for the three months ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively. (7) (8) Excluding Canada, Allstate Brand Auto rate change was 0.5% for the three months ended June 30, 2014. Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written. Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations. Includes one, two, one, two and one Canadian provinces for homeowners for the three months ended June 30, 2015, March 31, 2015, December 31, 2014 and June 30, 2014, respectively. September 30, 2014 June 30, 2014 Rate changes include changes approved based on our net cost of reinsurance. These rate changes do not reflect initial rates filed for insurance subsidiaries initially writing business. Based on historical premiums written in those states and Canadian provinces, rate changes approved for the three month period ending September 30, 2015 are estimated to total $335 million. Rate changes do not include rating plan enhancements, including the introduction of discounts and surcharges, that result in no change in the overall rate level in the state. Impacts of Allstate brand auto effective rate changes as a percentage of total brand prior year-end premiums written were 1.5%, 1.1%, 0.8%, 0.4%, 0.2% and 1.1% for the three months ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively. Rate changes are included in the effective calculations in the period the rate change is effective for renewal contracts. Impacts of Allstate brand homeowners effective rate changes as a percentage of total brand prior year-end premiums written were 0.5%, 0.4%, 0.9%, 0.3%, 0.1% and 0.5% for the three months ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively. March 31, 2015 December 31, 2014 Three months ended Three months ended Three months ended June 30, 2015September 30, 2015 (1) Three months ended Three months ended THE ALLSTATE CORPORATION PROPERTY-LIABILITY IMPACT OF NET RATE CHANGES APPROVED ON PREMIUMS WRITTEN Three months ended
15 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Policies in Force (in thousands) (1) Allstate Brand Auto (2) 20,367 20,258 20,036 19,916 19,751 19,605 19,413 Homeowners (3) 6,163 6,141 6,114 6,106 6,082 6,069 6,063 Landlord 736 737 738 738 737 738 740 Renter 1,550 1,518 1,494 1,466 1,447 1,421 1,402 Condominium 665 662 658 655 652 648 646 Other 1,257 1,253 1,245 1,248 1,248 1,245 1,244 Other personal lines 4,208 4,170 4,135 4,107 4,084 4,052 4,032 Commercial lines 328 330 326 325 320 313 305 Other business lines 920 937 941 948 958 972 991 Excess and surplus 26 26 27 27 26 25 23 Total 32,012 31,862 31,579 31,429 31,221 31,036 30,827 Esurance Brand Auto 1,433 1,458 1,470 1,424 1,410 1,399 1,375 Homeowners 26 20 15 10 6 2 1 Other personal lines 44 44 42 36 33 30 26 Total 1,503 1,522 1,527 1,470 1,449 1,431 1,402 Encompass Brand Auto 746 767 778 790 792 788 778 Homeowners 347 355 361 365 365 364 359 Other personal lines 114 118 120 122 123 124 124 Total 1,207 1,240 1,259 1,277 1,280 1,276 1,261 Total Policies in Force 34,722 34,624 34,365 34,176 33,950 33,743 33,490 Other Customer Relationships Good Hands Roadside Members (in thousands) (4) 2,151 2,139 2,118 2,055 1,996 1,871 1,734 Non-Proprietary Premiums ($ in millions) Ivantage (5) $ 1,481 $ 1,461 $ 1,446 $ 1,422 $ 1,407 $ 1,391 $ 1,376 Answer Financial (6) 149 145 149 129 134 125 139 Agency Data Total Allstate agencies (7)(8) 12,100 12,000 11,900 Licensed sales professionals (8)(9) 24,000 23,500 23,200 Allstate independent agencies (8)(10) 2,200 2,000 2,000 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Rounded to the nearest hundred. Employees of Allstate agencies who are licensed to sell Allstate products. Includes 950 and 720 engaged Allstate independent agencies (“AIAs”) as of September 30, 2015 and December 31, 2014, respectively. Engaged AIAs, as currently determined, include those that increase the number of policies in force from the prior year. Membership provides pay on demand access to roadside services. Fees for three months ended September 30, 2015 were $111 thousand. Represents non-proprietary premiums under management as of the end of the period related to personal and commercial line products offered by Ivantage when an Allstate product is not available. Represents non-proprietary premiums written for the period. Commissions earned for the three months ended September 30, 2015 were $19.2 million. THE ALLSTATE CORPORATION POLICIES IN FORCE AND OTHER STATISTICS Policies in Force: Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Allstate Dealer Services (service contracts and other products sold in conjunction with auto lending and vehicle sales transactions) and Partnership Marketing Group (roadside assistance products) statistics are not included in total policies in force since these are not meaningful. Additionally, non-proprietary products offered by Ivantage (insurance agency) and Answer Financial (independent insurance agency) are not included. Total Allstate agencies represents exclusive Allstate agencies and financial representatives in the United States and Canada. Allstate brand auto PIF increased in 44 states, including our largest 10 states, as of September 30, 2015 compared to September 30, 2014. Allstate brand homeowners PIF increased in 33 states, including 8 out of our largest 10 states, as of September 30, 2015 compared to September 30, 2014.
16 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written $ 7,383 $ 7,168 $ 6,583 $ 6,623 $ 7,054 $ 6,866 $ 6,277 $ 21,134 $ 20,197 Net premiums earned Auto $ 4,597 $ 4,524 $ 4,432 $ 4,376 $ 4,352 $ 4,297 $ 4,209 $ 13,553 $ 12,858 Homeowners 1,663 1,645 1,631 1,625 1,616 1,594 1,580 4,939 4,790 Other personal lines 396 395 391 390 389 387 385 1,182 1,161 Commercial lines 128 128 125 125 120 121 110 381 351 Other business lines 148 137 141 140 138 131 133 426 402 Total 6,932 6,829 6,720 6,656 6,615 6,530 6,417 20,481 19,562 Incurred losses Auto $ 3,455 $ 3,431 $ 3,175 $ 3,103 $ 2,964 $ 3,011 $ 2,858 $ 10,061 $ 8,833 Homeowners 820 1,147 894 634 930 1,212 994 2,861 3,136 Other personal lines 241 259 244 223 229 226 279 744 734 Commercial lines 97 105 98 88 72 78 81 300 231 Other business lines 71 66 69 65 70 64 63 206 197 Total 4,684 5,008 4,480 4,113 4,265 4,591 4,275 14,172 13,131 Expenses Auto $ 1,086 $ 1,155 $ 1,113 $ 1,140 $ 1,088 $ 1,089 $ 1,075 $ 3,354 $ 3,252 Homeowners 385 372 389 399 382 359 385 1,146 1,126 Other personal lines 109 105 105 118 103 105 108 319 316 Commercial lines 36 40 38 41 38 35 34 114 107 Other business lines 61 63 69 63 63 52 62 193 177 Total 1,677 1,735 1,714 1,761 1,674 1,640 1,664 5,126 4,978 Underwriting income (loss) Auto $ 56 $ (62) $ 144 $ 133 $ 300 $ 197 $ 276 $ 138 $ 773 Homeowners 458 126 348 592 304 23 201 932 528 Other personal lines 46 31 42 49 57 56 (2) 119 111 Commercial lines (5) (17) (11) (4) 10 8 (5) (33) 13 Other business lines 16 8 3 12 5 15 8 27 28 Total 571 86 526 782 676 299 478 1,183 1,453 Loss ratio 67.6 73.3 66.7 61.8 64.5 70.3 66.6 69.2 67.1 Expense ratio (1) 24.2 25.4 25.5 26.5 25.3 25.1 26.0 25.0 25.5 Combined ratio 91.8 98.7 92.2 88.3 89.8 95.4 92.6 94.2 92.6 Underlying loss ratio * 64.1 62.3 61.9 61.4 58.9 57.9 60.4 62.8 59.0 Expense ratio, excluding the effect of amortization of purchased intangible assets 24.2 25.4 25.5 26.5 25.3 25.1 26.0 25.0 25.5 Underlying combined ratio 88.3 87.7 87.4 87.9 84.2 83.0 86.4 87.8 84.5 Effect of catastrophe losses on combined ratio 3.6 10.7 4.1 1.3 6.9 13.1 6.4 6.1 8.8 Effect of prior year reserve reestimates on combined ratio (0.2) 0.4 0.7 (1.0) (1.3) (0.1) (0.2) 0.3 (0.5) Effect of advertising expenses on combined ratio 2.0 2.4 2.3 2.4 2.6 2.7 2.4 2.2 2.6 Underlying combined ratio 88.3 87.7 87.4 87.9 84.2 83.0 86.4 87.8 84.5 Effect of catastrophe losses 3.6 10.7 4.1 1.3 6.9 13.1 6.4 6.1 8.8 Effect of prior year non-catastrophe reserve reestimates (0.1) 0.3 0.7 (0.9) (1.3) (0.7) (0.2) 0.3 (0.7) Effect of amortization of purchased intangible assets - - - - - - - - - Combined ratio 91.8 98.7 92.2 88.3 89.8 95.4 92.6 94.2 92.6 (1) Current year targeted expense spending reductions representing approximately 0.4 points of the annualized Allstate brand expense ratio, disclosed in the current year second quarter 2015, are on schedule. THE ALLSTATE CORPORATION ALLSTATE BRAND PROFITABILITY MEASURES ($ in millions) Nine months endedThree months ended
17 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 New Issued Applications (in thousands) (2) Auto (6) 790 818 792 740 809 770 714 2,400 2,293 Homeowners 218 212 177 178 201 192 154 607 547 Average Premium - Gross Written ($) (3) Auto 494 488 484 486 481 478 473 489 477 Homeowners 1,158 1,150 1,148 1,144 1,144 1,135 1,137 1,152 1,139 Average Premium - Net Earned ($) (4) Auto 452 450 444 444 443 441 435 449 439 Homeowners 1,074 1,066 1,060 1,060 1,054 1,045 1,034 1,067 1,045 Renewal Ratio (%) (5) Auto 88.6 88.9 88.8 88.6 88.9 89.1 89.0 88.8 89.0 Homeowners 88.7 88.4 88.4 88.6 88.6 88.3 88.2 88.5 88.4 Bodily Injury Claim Frequency (% change year-over-year) Auto 6.4 6.8 6.8 4.0 (1.3) (2.8) (0.3) 6.6 (1.5) Property Damage Claim Frequency (% change year-over-year) Auto 8.9 6.9 2.1 0.5 (1.0) (2.4) 5.1 5.9 0.5 Auto Paid Severity (% change year-over-year) Bodily injury (2.9) 0.6 3.9 6.0 2.2 1.3 0.7 0.5 1.4 Property damage 5.4 3.7 4.8 3.9 5.5 4.4 2.7 4.5 4.2 Homeowners Excluding Catastrophe Losses (% change year-over-year) Claim frequency (1.9) 0.4 (7.9) (4.1) (5.5) 2.3 6.1 (3.1) 0.7 Claim severity 4.5 3.6 6.6 8.1 9.2 5.5 8.3 4.8 7.6 (1) (2) (3) (4) (5) (6) Auto new issued applications decreased 2.3% to 790 thousand in third quarter 2015 from 809 thousand in third quarter 2014 and increased 4.7% to 2,400 thousand in the first nine months of 2015 from 2,293 thousand in the first nine months of 2014. As a result of a change that allows a greater number of autos on a single policy, new issued applications are approximately 4.9 points and 2.9 points lower in the third quarter and first nine months of 2015, respectively, compared to the same periods of 2014. THE ALLSTATE CORPORATION ALLSTATE BRAND STATISTICS (1) Nine months ended Renewal ratio: Renewal policies issued during the period, based on contract effective dates, divided by the total policies issued 6 months prior for auto or 12 months prior for homeowners. Statistics presented for Allstate brand exclude excess and surplus lines. Average Premium - Gross Written: Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line, which is 6 months for auto and 12 months for homeowners. Average Premium - Net Earned: Earned premium divided by average policies in force for the period. Earned premium includes the impacts from mid-term premium adjustments and ceded reinsurance, but does not include impacts of premium refund accruals. Average premiums represent the appropriate policy term for each line, which is 6 months for auto and 12 months for homeowners. Three months ended New Issued Applications: Item counts of automobiles or homeowners insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the amount allowed on a policy which is currently four or ten depending on the state.
18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Rates of change in auto frequency (1) (% change in frequency rate year over year) Allstate gross frequency (2) 5.1% 3.4% 6.9% 6.9% 2.1% -3.2% -4.4% -4.1% -2.9% 1.2% -1.8% -3.1% -2.4% -1.1% 0.8% -1.7% -0.3% -2.8% -1.3% 4.0% 6.8% 6.8% 6.4% Allstate paid frequency (3) 6.1% 7.7% 8.3% 7.9% 4.5% 1.5% -0.9% -2.4% -0.2% 1.1% -1.0% 0.7% -2.3% -2.7% -2.1% -4.7% -4.7% -3.8% 0.2% 4.7% 2.3% 6.0% 3.5% (1) (2) (3) The % change in frequency rate year over year is calculated as the change in the specified frequency rate between the current period and the same period of the prior year divided by the prior year frequency rate. Gross frequency rate is calculated as the number of claim notices received in the period divided by the average earned policies in force with the respective insurance coverage in force (“average coverage in force”). Paid frequency rate is calculated as the number of claim notices closed with a payment amount in the period divided by the average coverage in force. BODILY INJURY GROSS AND PAID % CHANGE IN FREQUENCY RATE THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO FREQUENCY STATISTICS 2010 2011 2012 2013 2014 2015 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 % c ha ng e ye ar -o ve r- ye ar Rates of change in auto bodily injury frequency Allstate gross frequency Allstate paid frequency
19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Rates of change in auto frequency (1) (% change in frequency rate year over year) Allstate gross frequency (2) -0.5% 1.5% 3.1% 1.7% 0.6% -4.4% -3.3% -3.1% -4.8% 0.7% -1.8% -4.3% -0.7% -0.3% 0.6% 1.4% 5.1% -2.4% -1.0% 0.5% 2.1% 6.9% 8.9% Allstate paid frequency (3) -3.4% 0.6% 4.2% 1.7% 0.4% -2.9% -4.3% -2.4% -4.3% -0.3% -3.4% -4.1% -4.5% 0.5% 3.7% 0.8% 2.9% -0.4% 0.4% 2.5% 2.5% 4.2% 4.7% (1) (2) (3) Paid frequency rate is calculated as the number of claim notices closed with a payment amount in the period divided by the average coverage in force. THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO FREQUENCY STATISTICS PROPERTY DAMAGE GROSS AND PAID % CHANGE IN FREQUENCY RATE The % change in frequency rate year over year is calculated as the change in the specified frequency rate between the current period and the same period of the prior year divided by the prior year frequency rate. Gross frequency rate is calculated as the number of claim notices received in the period divided by the average earned policies in force with the respective insurance coverage in force (“average coverage in force”). 2010 2011 2012 2013 2014 2015 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 % c ha ng e ye ar -o ve r- ye ar Rates of change in auto property damage frequency Allstate gross frequency Allstate paid frequency
20 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written $ 423 $ 371 $ 441 $ 359 $ 408 $ 340 $ 406 $ 1,235 $ 1,154 Net premiums earned Auto $ 392 $ 397 $ 382 $ 378 $ 370 $ 365 $ 342 $ 1,171 $ 1,077 Homeowners 5 4 3 2 1 - - 12 1 Other personal lines 2 1 2 1 2 1 1 5 4 399 402 387 381 373 366 343 1,188 1,082 Incurred losses Auto $ 285 $ 300 $ 297 $ 300 $ 283 $ 275 $ 260 $ 882 $ 818 Homeowners 4 3 1 1 1 - - 8 1 Other personal lines 1 1 1 1 1 1 - 3 2 290 304 299 302 285 276 260 893 821 Expenses Auto $ 125 $ 132 $ 155 $ 136 $ 148 $ 135 $ 174 $ 412 $ 457 Homeowners 10 7 - - - - - 17 - Other personal lines - - 2 2 2 - 2 2 4 135 139 157 138 150 135 176 431 461 Underwriting income (loss) Auto $ (18) $ (35) $ (70) $ (58) $ (61) $ (45) $ (92) $ (123) $ (198) Homeowners (9) (6) 2 1 - - - (13) - Other personal lines 1 - (1) (2) (1) - (1) - (2) (26) (41) (69) (59) (62) (45) (93) (136) (200) Loss ratio 72.7 75.6 77.2 79.3 76.4 75.4 75.8 75.1 75.9 Expense ratio 33.8 34.6 40.6 36.2 40.2 36.9 51.3 36.3 42.6 Combined ratio 106.5 110.2 117.8 115.5 116.6 112.3 127.1 111.4 118.5 Underlying loss ratio 73.5 74.3 78.2 80.3 75.3 74.1 76.4 75.3 75.2 Expense ratio, excluding the effect of amortization of purchased intangible assets 31.8 32.4 38.3 33.1 37.0 33.6 47.8 34.1 39.3 Underlying combined ratio 105.3 106.7 116.5 113.4 112.3 107.7 124.2 109.4 114.5 Effect of catastrophe losses on combined ratio 0.8 2.0 - 0.3 1.9 2.7 0.3 0.9 1.7 Effect of prior year reserve reestimates on combined ratio (1.3) (0.7) (1.0) (1.3) (0.8) (1.4) (0.9) (1.0) (1.0) Effect of amortization of purchased intangible assets on combined ratio 2.0 2.2 2.3 3.1 3.2 3.3 3.5 2.2 3.3 Effect of advertising expenses on combined ratio 11.0 12.4 17.3 11.8 15.8 14.5 28.3 13.6 19.3 Underlying combined ratio 105.3 106.7 116.5 113.4 112.3 107.7 124.2 109.4 114.5 Effect of catastrophe losses 0.8 2.0 - 0.3 1.9 2.7 0.3 0.9 1.7 Effect of prior year non-catastrophe reserve reestimates (1.6) (0.7) (1.0) (1.3) (0.8) (1.4) (0.9) (1.1) (1.0) Effect of amortization of purchased intangible assets 2.0 2.2 2.3 3.1 3.2 3.3 3.5 2.2 3.3 Combined ratio 106.5 110.2 117.8 115.5 116.6 112.3 127.1 111.4 118.5 Policies in Force (in thousands) Auto 1,433 1,458 1,470 1,424 1,410 1,399 1,375 1,433 1,410 Homeowners 26 20 15 10 6 2 1 26 6 Other personal lines 44 44 42 36 33 30 26 44 33 1,503 1,522 1,527 1,470 1,449 1,431 1,402 1,503 1,449 New Issued Applications (in thousands) Auto 145 148 195 168 181 177 221 488 579 Homeowners 8 7 6 4 5 1 1 21 7 Other personal lines 9 10 12 10 9 10 10 31 29 162 165 213 182 195 188 232 540 615 Average Premium - Gross Written ($) Auto 513 506 520 500 499 497 504 514 498 Homeowners 838 814 849 781 829 822 691 836 821 Renewal Ratio (%) Auto 78.7 80.4 79.9 79.4 78.4 80.1 80.4 79.6 79.6 THE ALLSTATE CORPORATION ESURANCE PROFITABILITY MEASURES AND STATISTICS Nine months ended ($ in millions) Three months ended
21 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written $ 331 $ 338 $ 282 $ 310 $ 343 $ 341 $ 286 $ 951 $ 970 Net premiums earned Auto $ 165 $ 165 $ 165 $ 164 $ 168 $ 162 $ 161 $ 495 $ 491 Homeowners 127 126 127 126 123 120 117 380 360 Other personal lines 27 27 27 27 27 26 26 81 79 Total 319 318 319 317 318 308 304 956 930 Incurred losses Auto $ 135 $ 129 $ 116 $ 126 $ 131 $ 134 $ 114 $ 380 $ 379 Homeowners 75 117 74 56 103 118 86 266 307 Other personal lines 23 27 23 18 20 21 21 73 62 Total 233 273 213 200 254 273 221 719 748 Expenses Auto $ 46 $ 50 $ 47 $ 48 $ 50 $ 50 $ 48 $ 143 $ 148 Homeowners 36 38 37 38 37 37 35 111 109 Other personal lines 8 7 8 9 8 7 8 23 23 Total 90 95 92 95 95 94 91 277 280 Underwriting income (loss) Auto $ (16) $ (14) $ 2 $ (10) $ (13) $ (22) $ (1) $ (28) $ (36) Homeowners 16 (29) 16 32 (17) (35) (4) 3 (56) Other personal lines (4) (7) (4) - (1) (2) (3) (15) (6) Total (4) (50) 14 22 (31) (59) (8) (40) (98) Loss ratio 73.1 85.8 66.8 63.1 79.8 88.7 72.7 75.2 80.4 Expense ratio 28.2 29.9 28.8 30.0 29.9 30.5 29.9 29.0 30.1 Combined ratio 101.3 115.7 95.6 93.1 109.7 119.2 102.6 104.2 110.5 Underlying loss ratio 62.7 66.6 61.8 62.7 65.8 64.3 61.9 63.7 64.0 Expense ratio, excluding the effect of amortization of purchased intangible assets 28.2 29.9 28.8 30.0 29.9 30.5 29.9 29.0 30.1 Underlying combined ratio 90.9 96.5 90.6 92.7 95.6 94.8 91.8 92.7 94.1 Effect of catastrophe losses on combined ratio 5.3 18.6 6.3 1.9 16.4 23.7 11.2 10.0 17.1 Effect of prior year reserve reestimates on combined ratio 5.4 0.9 (2.2) (1.2) (1.9) 1.0 (0.7) 1.4 (0.5) Effect of advertising expenses on combined ratio 0.3 0.6 0.6 0.3 - 0.6 0.7 0.5 0.4 Underlying combined ratio 90.9 96.5 90.6 92.7 95.6 94.8 91.8 92.7 94.1 Effect of catastrophe losses 5.3 18.6 6.3 1.9 16.4 23.7 11.2 10.0 17.1 Effect of prior year non-catastrophe reserve reestimates 5.1 0.6 (1.3) (1.5) (2.3) 0.7 (0.4) 1.5 (0.7) Combined ratio 101.3 115.7 95.6 93.1 109.7 119.2 102.6 104.2 110.5 Policies in Force (in thousands) Auto 746 767 778 790 792 788 778 746 792 Homeowners 347 355 361 365 365 364 359 347 365 Other personal lines 114 118 120 122 123 124 124 114 123 1,207 1,240 1,259 1,277 1,280 1,276 1,261 1,207 1,280 New Issued Applications (in thousands) Auto 20 23 23 28 34 40 33 66 107 Homeowners 12 14 12 15 18 20 17 38 55 Average Premium - Gross Written ($) Auto 963 925 913 901 898 888 893 934 893 Homeowners 1,583 1,532 1,519 1,482 1,471 1,437 1,440 1,546 1,450 Renewal Ratio (%) Auto 76.7 78.0 78.5 80.0 79.4 80.3 79.2 77.7 79.7 Homeowners 82.5 83.2 83.2 84.9 84.8 86.2 86.6 82.9 85.8 THE ALLSTATE CORPORATION ENCOMPASS BRAND PROFITABILITY MEASURES AND STATISTICS ($ in millions) Nine months endedThree months ended
22 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, ($ in millions) 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written Allstate brand $ 4,746 $ 4,588 $ 4,535 $ 4,347 $ 4,490 $ 4,375 $ 4,292 $ 13,869 $ 13,157 Esurance brand 411 363 434 354 403 338 404 1,208 1,145 Encompass brand 169 173 147 160 178 176 151 489 505 5,326 5,124 5,116 4,861 5,071 4,889 4,847 15,566 14,807 Net premiums earned Allstate brand $ 4,597 $ 4,524 $ 4,432 $ 4,376 $ 4,352 $ 4,297 $ 4,209 $ 13,553 $ 12,858 Esurance brand 392 397 382 378 370 365 342 1,171 1,077 Encompass brand 165 165 165 164 168 162 161 495 491 5,154 5,086 4,979 4,918 4,890 4,824 4,712 15,219 14,426 Incurred losses Allstate brand $ 3,455 $ 3,431 $ 3,175 $ 3,103 $ 2,964 $ 3,011 $ 2,858 $ 10,061 $ 8,833 Esurance brand 285 300 297 300 283 275 260 882 818 Encompass brand 135 129 116 126 131 134 114 380 379 3,875 3,860 3,588 3,529 3,378 3,420 3,232 11,323 10,030 Expenses Allstate brand $ 1,086 $ 1,155 $ 1,113 $ 1,140 $ 1,088 $ 1,089 $ 1,075 $ 3,354 $ 3,252 Esurance brand 125 132 155 136 148 135 174 412 457 Encompass brand 46 50 47 48 50 50 48 143 148 1,257 1,337 1,315 1,324 1,286 1,274 1,297 3,909 3,857 Underwriting income (loss) Allstate brand $ 56 $ (62) $ 144 $ 133 $ 300 $ 197 $ 276 $ 138 $ 773 Esurance brand (18) (35) (70) (58) (61) (45) (92) (123) (198) Encompass brand (16) (14) 2 (10) (13) (22) (1) (28) (36) 22 (111) 76 65 226 130 183 (13) 539 Loss ratio Allstate brand 75.2 75.9 71.7 70.9 68.1 70.1 67.9 74.2 68.7 Esurance brand 72.7 75.6 77.7 79.3 76.5 75.3 76.0 75.3 76.0 Encompass brand 81.8 78.2 70.3 76.8 78.0 82.7 70.8 76.8 77.2 Allstate Protection 75.2 75.9 72.1 71.8 69.1 70.9 68.6 74.4 69.5 Expense ratio Allstate brand 23.6 25.5 25.1 26.1 25.0 25.3 25.5 24.8 25.3 Esurance brand 31.9 33.2 40.6 36.0 40.0 37.0 50.9 35.2 42.4 Encompass brand 27.9 30.3 28.5 29.3 29.7 30.9 29.8 28.9 30.1 Allstate Protection 24.4 26.3 26.4 26.9 26.3 26.4 27.5 25.7 26.8 Combined ratio Allstate brand 98.8 101.4 96.8 97.0 93.1 95.4 93.4 99.0 94.0 Esurance brand 104.6 108.8 118.3 115.3 116.5 112.3 126.9 110.5 118.4 Encompass brand 109.7 108.5 98.8 106.1 107.7 113.6 100.6 105.7 107.3 Allstate Protection 99.6 102.2 98.5 98.7 95.4 97.3 96.1 100.1 96.3 Effect of catastrophe losses on combined ratio Allstate brand 0.5 3.2 0.3 0.2 1.8 4.1 0.4 1.3 2.1 Esurance brand 0.5 1.8 - 0.3 1.9 2.7 0.3 0.8 1.7 Encompass brand 0.6 3.0 - - 3.0 9.3 0.6 1.2 4.3 Allstate Protection 0.5 3.1 0.3 0.2 1.9 4.2 0.4 1.3 2.2 Effect of prior year reserve reestimates on combined ratio Allstate brand 0.1 0.4 0.8 (1.5) (1.8) (0.6) (0.9) 0.4 (1.1) Esurance brand (1.3) (0.8) (1.0) (1.3) (0.8) (1.4) (0.9) (1.0) (1.0) Encompass brand 7.9 (1.2) (4.8) (0.6) 0.5 (3.7) (4.3) 0.6 (2.5) Allstate Protection 0.3 0.2 0.5 (1.5) (1.6) (0.7) (1.0) 0.3 (1.1) Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand (0.1) - (0.1) (0.1) (0.2) (0.1) (0.1) (0.1) (0.2) Esurance brand 0.2 - - - - - - 0.1 - Encompass brand - - (0.6) - - (0.6) - (0.3) (0.2) Allstate Protection - (0.1) - (0.1) (0.1) - (0.1) - (0.1) Effect of amortization of purchased intangible assets on combined ratio Esurance brand 2.0 2.3 2.3 3.1 3.2 3.3 3.5 2.2 3.3 Allstate Protection 0.2 0.1 0.2 0.2 0.3 0.3 0.2 0.2 0.2 Three months ended THE ALLSTATE CORPORATION AUTO PROFITABILITY MEASURES Nine months ended
23 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, ($ in millions) 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written Allstate brand $ 1,879 $ 1,819 $ 1,379 $ 1,598 $ 1,831 $ 1,765 $ 1,342 $ 5,077 $ 4,938 Esurance brand 9 7 5 4 3 1 1 21 5 Encompass brand 134 136 111 123 137 136 110 381 383 2,022 1,962 1,495 1,725 1,971 1,902 1,453 5,479 5,326 Net premiums earned Allstate brand $ 1,663 $ 1,645 $ 1,631 $ 1,625 $ 1,616 $ 1,594 $ 1,580 $ 4,939 $ 4,790 Esurance brand 5 4 3 2 1 - - 12 1 Encompass brand 127 126 127 126 123 120 117 380 360 1,795 1,775 1,761 1,753 1,740 1,714 1,697 5,331 5,151 Incurred losses Allstate brand $ 820 $ 1,147 $ 894 $ 634 $ 930 $ 1,212 $ 994 $ 2,861 $ 3,136 Esurance brand 4 3 1 1 1 - - 8 1 Encompass brand 75 117 74 56 103 118 86 266 307 899 1,267 969 691 1,034 1,330 1,080 3,135 3,444 Expenses Allstate brand $ 385 $ 372 $ 389 $ 399 $ 382 $ 359 $ 385 $ 1,146 $ 1,126 Esurance brand 10 7 - - - - - 17 - Encompass brand 36 38 37 38 37 37 35 111 109 431 417 426 437 419 396 420 1,274 1,235 Underwriting income (loss) Allstate brand $ 458 $ 126 $ 348 $ 592 $ 304 $ 23 $ 201 $ 932 $ 528 Esurance brand (9) (6) 2 1 - - - (13) - Encompass brand 16 (29) 16 32 (17) (35) (4) 3 (56) 465 91 366 625 287 (12) 197 922 472 Loss ratio Allstate brand 49.3 69.7 54.8 39.0 57.6 76.1 62.9 57.9 65.5 Esurance brand 80.0 75.0 33.3 50.0 100.0 - - 66.7 100.0 Encompass brand 59.1 92.8 58.3 44.4 83.7 98.3 73.5 70.0 85.3 Allstate Protection 50.1 71.4 55.0 39.4 59.4 77.6 63.6 58.8 66.8 Expense ratio Allstate brand 23.2 22.6 23.9 24.6 23.6 22.5 24.4 23.2 23.5 Esurance brand 200.0 175.0 - - - - - 141.6 - Encompass brand 28.3 30.2 29.1 30.2 30.1 30.9 29.9 29.2 30.3 Allstate Protection 24.0 23.5 24.2 24.9 24.1 23.1 24.8 23.9 24.0 Combined ratio Allstate brand 72.5 92.3 78.7 63.6 81.2 98.6 87.3 81.1 89.0 Esurance brand 280.0 250.0 33.3 50.0 100.0 - - 208.3 100.0 Encompass brand 87.4 123.0 87.4 74.6 113.8 129.2 103.4 99.2 115.6 Allstate Protection 74.1 94.9 79.2 64.3 83.5 100.7 88.4 82.7 90.8 Effect of catastrophe losses on combined ratio Allstate brand 12.4 32.1 13.9 3.8 22.0 38.7 21.3 19.5 27.3 Esurance brand 20.0 25.0 - - - - - 16.6 - Encompass brand 11.8 41.3 14.2 4.8 36.6 46.7 25.6 22.4 36.4 Allstate Protection 12.4 32.7 13.9 3.9 23.0 39.3 21.6 19.7 27.9 Effect of prior year reserve reestimates on combined ratio Allstate brand (0.9) - 0.2 (1.1) (0.1) 2.1 0.8 (0.2) 0.9 Esurance brand - - - - - - - - - Encompass brand - 2.3 (1.6) (2.4) (6.5) 6.7 4.3 0.2 1.4 Allstate Protection (0.8) 0.2 0.1 (1.2) (0.5) 2.4 1.1 (0.2) 1.0 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand (0.1) 0.5 (0.1) 0.1 0.7 2.4 0.6 0.2 1.2 Esurance brand - - - - - - - - - Encompass brand 1.6 - (1.6) 0.8 0.9 1.7 (0.8) - 0.5 Allstate Protection 0.1 0.4 (0.1) 0.2 0.7 2.4 0.6 0.1 1.2 Three months ended THE ALLSTATE CORPORATION HOMEOWNERS PROFITABILITY MEASURES Nine months ended
24 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, ($ in millions) 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written Allstate brand $ 429 $ 424 $ 357 $ 376 $ 426 $ 416 $ 351 $ 1,210 $ 1,193 Esurance brand 3 1 2 1 2 1 1 6 4 Encompass brand 28 29 24 27 28 29 25 81 82 460 454 383 404 456 446 377 1,297 1,279 Net premiums earned Allstate brand $ 396 $ 395 $ 391 $ 390 $ 389 $ 387 $ 385 $ 1,182 $ 1,161 Esurance brand 2 1 2 1 2 1 1 5 4 Encompass brand 27 27 27 27 27 26 26 81 79 425 423 420 418 418 414 412 1,268 1,244 Incurred losses Allstate brand $ 241 $ 259 $ 244 $ 223 $ 229 $ 226 $ 279 $ 744 $ 734 Esurance brand 1 1 1 1 1 1 - 3 2 Encompass brand 23 27 23 18 20 21 21 73 62 265 287 268 242 250 248 300 820 798 Expenses Allstate brand $ 109 $ 105 $ 105 $ 118 $ 103 $ 105 $ 108 $ 319 $ 316 Esurance brand - - 2 2 2 - 2 2 4 Encompass brand 8 7 8 9 8 7 8 23 23 117 112 115 129 113 112 118 344 343 Underwriting income (loss) Allstate brand $ 46 $ 31 $ 42 $ 49 $ 57 $ 56 $ (2) $ 119 $ 111 Esurance brand 1 - (1) (2) (1) - (1) - (2) Encompass brand (4) (7) (4) - (1) (2) (3) (15) (6) 43 24 37 47 55 54 (6) 104 103 Loss ratio Allstate brand 60.9 65.6 62.4 57.2 58.9 58.4 72.5 62.9 63.2 Esurance brand 50.0 100.0 50.0 100.0 50.0 100.0 - 60.0 50.0 Encompass brand 85.2 100.0 85.2 66.7 74.1 80.8 80.8 90.1 78.5 Allstate Protection 62.4 67.8 63.8 57.9 59.8 59.9 72.8 64.7 64.1 Expense ratio Allstate brand 27.5 26.6 26.9 30.2 26.4 27.1 28.0 27.0 27.2 Esurance brand - - 100.0 200.0 100.0 - 200.0 40.0 100.0 Encompass brand 29.6 25.9 29.6 33.3 29.6 26.9 30.7 28.4 29.1 Allstate Protection 27.5 26.5 27.4 30.9 27.0 27.1 28.7 27.1 27.6 Combined ratio Allstate brand 88.4 92.2 89.3 87.4 85.3 85.5 100.5 89.9 90.4 Esurance brand 50.0 100.0 150.0 300.0 150.0 100.0 200.0 100.0 150.0 Encompass brand 114.8 125.9 114.8 100.0 103.7 107.7 111.5 118.5 107.6 Allstate Protection 89.9 94.3 91.2 88.8 86.8 87.0 101.5 91.8 91.7 Effect of catastrophe losses on combined ratio Allstate brand 4.5 11.9 7.4 2.8 4.9 12.4 12.7 8.0 10.0 Esurance brand - - - - - - - - - Encompass brand 3.7 7.4 7.4 - 7.4 7.7 11.5 6.2 8.9 Allstate Protection 4.5 11.6 7.4 2.7 5.0 12.1 12.6 7.8 9.9 Effect of prior year reserve reestimates on combined ratio Allstate brand 1.8 1.1 (0.5) 5.1 2.6 (3.4) 3.9 0.8 1.0 Esurance brand - - - - - - - - - Encompass brand 14.8 7.4 11.1 - 3.7 3.8 - 11.1 2.5 Allstate Protection 2.6 1.4 0.2 4.8 2.6 (2.9) 3.6 1.4 1.1 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand - - (0.3) - (0.2) (0.3) (0.5) - (0.3) Esurance brand - - - - - - - - - Encompass brand (3.7) 3.7 - - - - - - - Allstate Protection (0.2) 0.3 (0.3) - (0.3) (0.3) (0.6) (0.1) (0.3) (1) Other personal lines include renter, condominium, landlord and other personal lines. THE ALLSTATE CORPORATION OTHER PERSONAL LINES PROFITABILITY MEASURES (1) Nine months endedThree months ended
25 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, ($ in millions) 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written $ 124 $ 138 $ 128 $ 126 $ 122 $ 130 $ 116 $ 390 $ 368 Net premiums earned $ 128 $ 128 $ 125 $ 125 $ 120 $ 121 $ 110 $ 381 $ 351 Incurred losses $ 97 $ 105 $ 98 $ 88 $ 72 $ 78 $ 81 $ 300 $ 231 Expenses $ 36 $ 40 $ 38 $ 41 $ 38 $ 35 $ 34 $ 114 $ 107 Underwriting (loss) income $ (5) $ (17) $ (11) $ (4) $ 10 $ 8 $ (5) $ (33) $ 13 Loss ratio 75.8 82.0 78.4 70.4 60.0 64.5 73.6 78.8 65.8 Expense ratio 28.1 31.3 30.4 32.8 31.7 28.9 30.9 29.9 30.5 Combined ratio 103.9 113.3 108.8 103.2 91.7 93.4 104.5 108.7 96.3 Effect of catastrophe losses on combined ratio 2.3 9.4 4.0 4.8 3.3 8.3 8.2 5.3 6.6 Effect of prior year reserve reestimates on combined ratio (9.3) 3.1 8.0 (0.8) (14.2) (0.8) (0.9) 0.5 (5.4) Effect of catastrophe losses included in prior year reserve reestimates on combined ratio - 2.3 0.8 - 0.7 0.1 1.0 1.0 0.6 (1) Commercial lines all represent Allstate Brand products. Three months ended THE ALLSTATE CORPORATION COMMERCIAL LINES PROFITABILITY MEASURES (1) Nine months ended
26 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, ($ in millions) 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written $ 205 $ 199 $ 184 $ 176 $ 185 $ 180 $ 176 $ 588 $ 541 Net premiums earned $ 148 $ 137 $ 141 $ 140 $ 138 $ 131 $ 133 $ 426 $ 402 Incurred losses $ 71 $ 66 $ 69 $ 65 $ 70 $ 64 $ 63 $ 206 $ 197 Expenses $ 61 $ 63 $ 69 $ 63 $ 63 $ 52 $ 62 $ 193 $ 177 Underwriting income $ 16 $ 8 $ 3 $ 12 $ 5 $ 15 $ 8 $ 27 $ 28 Loss ratio 48.0 48.2 49.0 46.4 50.7 48.8 47.4 48.4 49.0 Expense ratio 41.2 46.0 48.9 45.0 45.7 39.7 46.6 45.3 44.0 Combined ratio 89.2 94.2 97.9 91.4 96.4 88.5 94.0 93.7 93.0 Effect of catastrophe losses on combined ratio - - - - - - - - - Effect of prior year reserve reestimates on combined ratio 0.7 0.7 - (0.7) - - - 0.5 - Effect of catastrophe losses included in prior year reserve reestimates on combined ratio - - - - - - - - - Effect of amortization of purchased intangible assets 0.7 0.8 0.7 0.7 0.7 0.7 0.8 0.7 0.7 (1) Other business lines include Allstate Roadside Services, Allstate Dealer Services and other business lines, which all represent Allstate Brand products. THE ALLSTATE CORPORATION OTHER BUSINESS LINES PROFITABILITY MEASURES (1) Nine months endedThree months ended
27 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Auto Allstate brand underlying combined ratio 98.1 97.8 95.6 98.2 92.9 91.8 93.8 97.2 92.8 Effect of catastrophe losses on combined ratio 0.5 3.2 0.3 0.2 1.8 4.1 0.4 1.3 2.1 Effect of prior year non-catastrophe reserve reestimates on combined ratio 0.2 0.4 0.9 (1.4) (1.6) (0.5) (0.8) 0.5 (0.9) Allstate brand combined ratio 98.8 101.4 96.8 97.0 93.1 95.4 93.4 99.0 94.0 Esurance brand underlying combined ratio 103.6 105.5 117.0 113.2 112.2 107.7 124.0 108.6 114.4 Effect of catastrophe losses on combined ratio 0.5 1.8 - 0.3 1.9 2.7 0.3 0.8 1.7 Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.5) (0.8) (1.0) (1.3) (0.8) (1.4) (0.9) (1.1) (1.0) Effect of amortization of purchased intangible assets on combined ratio 2.0 2.3 2.3 3.1 3.2 3.3 3.5 2.2 3.3 Esurance brand combined ratio 104.6 108.8 118.3 115.3 116.5 112.3 126.9 110.5 118.4 Encompass brand underlying combined ratio 101.2 106.7 103.0 106.7 104.2 107.4 104.3 103.6 105.3 Effect of catastrophe losses on combined ratio 0.6 3.0 - - 3.0 9.3 0.6 1.2 4.3 Effect of prior year non-catastrophe reserve reestimates on combined ratio 7.9 (1.2) (4.2) (0.6) 0.5 (3.1) (4.3) 0.9 (2.3) Encompass brand combined ratio 109.7 108.5 98.8 106.1 107.7 113.6 100.6 105.7 107.3 Homeowners Allstate brand underlying combined ratio 60.9 60.7 64.5 61.0 60.0 60.2 65.8 62.0 62.0 Effect of catastrophe losses on combined ratio 12.4 32.1 13.9 3.8 22.0 38.7 21.3 19.5 27.3 Effect of prior year non-catastrophe reserve reestimates on combined ratio (0.8) (0.5) 0.3 (1.2) (0.8) (0.3) 0.2 (0.4) (0.3) Allstate brand combined ratio 72.5 92.3 78.7 63.6 81.2 98.6 87.3 81.1 89.0 Encompass brand underlying combined ratio 77.2 79.4 73.2 73.0 84.6 77.5 72.7 76.6 78.3 Effect of catastrophe losses on combined ratio 11.8 41.3 14.2 4.8 36.6 46.7 25.6 22.4 36.4 Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.6) 2.3 - (3.2) (7.4) 5.0 5.1 0.2 0.9 Encompass brand combined ratio 87.4 123.0 87.4 74.6 113.8 129.2 103.4 99.2 115.6 Other Personal Lines Allstate brand underlying combined ratio 82.1 79.2 82.1 79.5 77.6 76.2 83.4 81.1 79.1 Effect of catastrophe losses on combined ratio 4.5 11.9 7.4 2.8 4.9 12.4 12.7 8.0 10.0 Effect of prior year non-catastrophe reserve reestimates on combined ratio 1.8 1.1 (0.2) 5.1 2.8 (3.1) 4.4 0.8 1.3 Allstate brand combined ratio 88.4 92.2 89.3 87.4 85.3 85.5 100.5 89.9 90.4 Encompass brand underlying combined ratio 92.6 114.8 96.3 100.0 92.6 96.2 100.0 101.2 96.2 Effect of catastrophe losses on combined ratio 3.7 7.4 7.4 - 7.4 7.7 11.5 6.2 8.9 Effect of prior year non-catastrophe reserve reestimates on combined ratio 18.5 3.7 11.1 - 3.7 3.8 - 11.1 2.5 Encompass brand combined ratio 114.8 125.9 114.8 100.0 103.7 107.7 111.5 118.5 107.6 Three months ended THE ALLSTATE CORPORATION AUTO, HOMEOWNERS AND OTHER PERSONAL LINES UNDERLYING COMBINED RATIOS Nine months ended
28 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Auto Annualized average premium (1) $ 903 $ 893 $ 885 $ 879 $ 881 $ 877 $ 867 Underlying combined ratios 98.1 97.8 95.6 98.2 92.9 91.8 93.8 Average underlying loss (incurred pure premium) and expense * $ 886 $ 874 $ 846 $ 863 $ 818 $ 805 $ 813 Homeowners Annualized average premium (1) $ 1,079 $ 1,071 $ 1,067 $ 1,065 $ 1,063 $ 1,051 $ 1,042 Underlying combined ratios 60.9 60.7 64.5 61.0 60.0 60.2 65.8 Average underlying loss (incurred pure premium) and expense $ 657 $ 650 $ 688 $ 650 $ 638 $ 633 $ 686 (1) THE ALLSTATE CORPORATION Calculated by annualizing net earned premium reported in the quarter divided by policies in force at quarter end. ALLSTATE BRAND AUTO AND HOMEOWNERS UNDERLYING LOSS AND EXPENSE Three months ended
29 Annual impact of Effect of rate changes Earned Incurred Catastrophe catastrophes Number of Number of on state specific Primary Exposure Groupings (1) premiums losses Loss ratios losses on loss ratio catastrophes locations premiums written Florida $ 84 $ 54 64.3% $ - 0.0% Other hurricane exposure states 2,830 1,663 58.8% 624 22.0% Total hurricane exposure states (2) 2,914 1,717 58.9% 624 21.4% 16 4.1% Other catastrophe exposure states (4) 2,417 1,418 58.7% 425 17.6% 18 5.7% Total $ 5,331 $ 3,135 58.8% $ 1,049 19.7% 66 34 4.7% (1) Basis of Presentation (2) (3) (4) Includes Canada. THE ALLSTATE CORPORATION HOMEOWNERS SUPPLEMENTAL INFORMATION ($ in millions) Represents the impact in the locations where rate changes were approved during the year as a percentage of total prior year-end premiums written in those locations. This homeowners supplemental information schedule displays financial results for the homeowners business (defined to include standard homeowners, scheduled personal property and other than primary residence lines). Each state in which the Company writes business has been categorized into one of two exposure groupings (Hurricane or Other). Hurricane exposure states are comprised of those states in which hurricanes are the primary catastrophe exposure. However, the catastrophe losses for these states include losses due to other kinds of catastrophes. A catastrophe is defined by Allstate as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per- event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Premium rate changes (3) Hurricane exposure states include the following coastal locations: Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington, D.C. Nine months ended September 30, 2015
30 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Allstate brand Auto $ 22 $ 143 $ 13 $ 9 $ 80 $ 178 $ 16 $ 178 $ 274 Homeowners 207 528 227 62 355 617 336 962 1,308 Other personal lines 18 47 29 11 19 48 49 94 116 Commercial lines 3 12 5 6 4 10 9 20 23 Other business lines - - - - - - - - - Total 250 730 274 88 458 853 410 1,254 1,721 Esurance brand Auto 2 7 - 1 7 10 1 9 18 Homeowners 1 1 - - - - - 2 - Other personal lines - - - - - - - - - Total 3 8 - 1 7 10 1 11 18 Encompass brand Auto 1 5 - - 5 15 1 6 21 Homeowners 15 52 18 6 45 56 30 85 131 Other personal lines 1 2 2 - 2 2 3 5 7 Total 17 59 20 6 52 73 34 96 159 Allstate Protection $ 270 $ 797 $ 294 $ 95 $ 517 $ 936 $ 445 $ 1,361 $ 1,898 Allstate Protection Auto $ 25 $ 155 $ 13 $ 10 $ 92 $ 203 $ 18 $ 193 $ 313 Homeowners 223 581 245 68 400 673 366 1,049 1,439 Other personal lines 19 49 31 11 21 50 52 99 123 Commercial lines 3 12 5 6 4 10 9 20 23 Other business lines - - - - - - - - - $ 270 $ 797 $ 294 $ 95 $ 517 $ 936 $ 445 $ 1,361 $ 1,898 THE ALLSTATE CORPORATION CATASTROPHE LOSSES BY BRAND ($ in millions) Nine months endedThree months ended
31 Premiums Total Total Effect on the earned catastrophe catastrophe Property-Liability Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year year-to-date losses by year losses by year combined ratio 2006 1.6 3.7 2.5 4.1 3.0 $ 27,369 $ 810 $ 1,044 3.8 2007 2.4 6.3 5.0 7.0 5.2 27,233 1,409 1,336 4.9 2008 8.4 10.3 26.8 3.9 12.4 26,967 3,342 1,876 7.0 2009 7.8 12.5 6.2 5.0 7.9 26,194 2,069 2,159 8.2 2010 10.0 9.8 5.9 8.3 8.5 25,957 2,207 2,272 8.8 2011 5.2 36.2 16.7 1.0 14.7 25,942 3,815 3,298 12.7 2012 3.9 12.3 3.1 15.7 8.8 26,737 2,345 1,324 5.0 2013 5.3 9.4 1.8 1.7 4.5 27,618 1,251 1,352 4.9 2014 6.3 13.0 7.1 1.3 6.9 28,929 1,993 2,000 6.9 2015 4.0 10.6 3.5 22,625 1,361 1,380 6.1 Average 5.4 12.3 7.8 5.3 7.8 6.8 Effect of all catastrophe losses on the Property-Liability combined ratio catastrophe losses relating to Excludes the effect of THE ALLSTATE CORPORATION PROPERTY-LIABILITY EFFECT OF CATASTROPHE LOSSES ON THE COMBINED RATIO ($ in millions) earthquakes and hurricanes
32 Average Number Claims and Combined catastrophe Size of catastrophe of events claims expense ratio impact loss per event Greater than $250 million - - % $ - - % - % - $101 million to $250 million - - - - - - $50 million to $100 million 2 9.1 115 42.6 1.5 58 Less than $50 million 20 90.9 137 50.7 1.8 7 Total 22 100.0 % 252 93.3 3.3 11 Prior year reserve reestimates (2) (0.7) - Prior quarter reserve reestimates 20 7.4 0.2 Total catastrophe losses $ 270 100.0 % 3.5 % Average Number Claims and Combined catastrophe Size of catastrophe of events claims expense ratio impact loss per event Greater than $250 million - - % $ - - % - % - $101 million to $250 million 2 3.0 254 18.6 1.1 127 $50 million to $100 million 9 13.7 525 38.6 2.3 58 Less than $50 million 55 83.3 581 42.7 2.6 11 Total 66 100.0 % 1,360 99.9 6.0 21 Prior year reserve reestimates 1 0.1 - Total catastrophe losses $ 1,361 100.0 % 6.0 % Nine months ended September 30, 2015 THE ALLSTATE CORPORATION CATASTROPHE BY SIZE OF EVENT ($ in millions) Three months ended September 30, 2015
33 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Prior Year Reserve Reestimates (1) Auto $ 14 $ 11 $ 24 $ (75) $ (79) $ (36) $ (48) $ 49 $ (163) Homeowners (15) 4 1 (21) (9) 41 18 (10) 50 Other personal lines 11 6 1 20 11 (12) 15 18 14 Commercial lines (12) 4 10 (1) (17) (1) (1) 2 (19) Other business lines 1 1 - (1) - - - 2 - Allstate Protection (1) 26 36 (78) (94) (8) (16) 61 (118) Discontinued Lines and Coverages 48 2 1 2 105 2 3 51 110 Property-Liability $ 47 $ 28 $ 37 $ (76) $ 11 $ (6) $ (13) $ 112 $ (8) Allstate brand (2) $ (13) $ 26 $ 47 $ (69) $ (85) $ (6) $ (11) $ 60 $ (102) Esurance brand (5) (3) (4) (5) (3) (5) (3) (12) (11) Encompass brand (2) 17 3 (7) (4) (6) 3 (2) 13 (5) Allstate Protection (2) $ (1) $ 26 $ 36 $ (78) $ (94) $ (8) $ (16) $ 61 $ (118) Effect of Prior Year Reserve Reestimates on Combined Ratio (1)(3) Auto 0.2 0.2 0.3 (1.0) (1.1) (0.5) (0.7) 0.2 (0.7) Homeowners (0.2) - - (0.3) (0.1) 0.6 0.3 - 0.2 Other personal lines 0.1 0.1 - 0.3 0.2 (0.2) 0.2 0.1 0.1 Commercial lines (0.1) - 0.2 - (0.3) - - - (0.1) Other business lines - - - - - - - - - Allstate Protection - 0.3 0.5 (1.0) (1.3) (0.1) (0.2) 0.3 (0.5) Discontinued Lines and Coverages 0.6 - - - 1.4 - - 0.2 0.5 Property-Liability 0.6 0.3 0.5 (1.0) 0.1 (0.1) (0.2) 0.5 - Allstate brand (2) (0.2) 0.3 0.6 (0.9) (1.2) (0.1) (0.2) 0.3 (0.5) Esurance brand - - - - - (0.1) - (0.1) - Encompass brand (2) 0.2 - (0.1) (0.1) (0.1) 0.1 - 0.1 - Allstate Protection (2) - 0.3 0.5 (1.0) (1.3) (0.1) (0.2) 0.3 (0.5) (1) (2) (3) Calculated using Property-Liability premiums earned for the respective period. THE ALLSTATE CORPORATION PROPERTY-LIABILITY PRIOR YEAR RESERVE REESTIMATES ($ in millions) Nine months ended Favorable reserve reestimates are shown in parentheses. (Favorable) unfavorable reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $(4) million, $1 million, $1 million, $(2) million and $5 million, $0 million, $1 million and $6 million, respectively, in the three months ended September 30, 2015 and 2014, respectively. Unfavorable (favorable) reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $1 million, $1 million, $(1) million, $1 million and $43 million, $0 million, $1 million and $44 million, respectively, in the nine months ended September 30, 2015 and 2014, respectively. Three months ended
34 Sept. 30, June 30, March 31, 2015 2015 2015 2014 2013 2012 2011 2010 (net of reinsurance) Asbestos claims Beginning reserves $ 977 $ 993 $ 1,014 $ 1,017 $ 1,026 $ 1,078 $ 1,100 $ 1,180 Incurred claims and claims expense 39 - - 87 74 26 26 5 Claims and claims expense paid (21) (16) (21) (90) (83) (78) (48) (85) Ending reserves $ 995 $ 977 $ 993 $ 1,014 $ 1,017 $ 1,026 $ 1,078 $ 1,100 Claims and claims expense paid as a percent of ending reserves 2.1% 1.6% 2.1% 8.9% 8.2% 7.6% 4.5% 7.7% Environmental claims Beginning reserves $ 190 $ 199 $ 203 $ 208 $ 193 $ 185 $ 201 $ 198 Incurred claims and claims expense 1 - - 15 30 22 - 18 Claims and claims expense paid (3) (9) (4) (20) (15) (14) (16) (15) Ending reserves $ 188 $ 190 $ 199 $ 203 $ 208 $ 193 $ 185 $ 201 Claims and claims expense paid as a percent of ending reserves 1.6% 4.7% 2.0% 9.9% 7.2% 7.3% 8.6% 7.5% Twelve months ended December 31, THE ALLSTATE CORPORATION ASBESTOS AND ENVIRONMENTAL RESERVES ($ in millions) Three months ended
35 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written Auto $ 4,746 $ 4,588 $ 4,535 $ 4,347 $ 4,490 $ 4,375 $ 4,292 $ 13,869 $ 13,157 Homeowners 1,879 1,819 1,379 1,598 1,831 1,765 1,342 5,077 4,938 Landlord 143 138 128 140 147 137 126 409 410 Renter 84 73 67 64 79 72 59 224 210 Condominium 64 63 51 57 62 61 48 178 171 Other 138 150 111 115 138 146 118 399 402 Other personal lines 429 424 357 376 426 416 351 1,210 1,193 Commercial lines 124 138 128 126 122 130 116 390 368 Total 7,178 6,969 6,399 6,447 6,869 6,686 6,101 20,546 19,656 Net premiums earned Auto $ 4,597 $ 4,524 $ 4,432 $ 4,376 $ 4,352 $ 4,297 $ 4,209 $ 13,553 $ 12,858 Homeowners 1,663 1,645 1,631 1,625 1,616 1,594 1,580 4,939 4,790 Other personal lines 396 395 391 390 389 387 385 1,182 1,161 Commercial lines 128 128 125 125 120 121 110 381 351 Total 6,784 6,692 6,579 6,516 6,477 6,399 6,284 20,055 19,160 Incurred losses Auto $ 3,455 $ 3,431 $ 3,175 $ 3,103 $ 2,964 $ 3,011 $ 2,858 $ 10,061 $ 8,833 Homeowners 820 1,147 894 634 930 1,212 994 2,861 3,136 Other personal lines 241 259 244 223 229 226 279 744 734 Commercial lines 97 105 98 88 72 78 81 300 231 Total 4,613 4,942 4,411 4,048 4,195 4,527 4,212 13,966 12,934 Expenses Auto $ 1,086 $ 1,155 $ 1,113 $ 1,140 $ 1,088 $ 1,089 $ 1,075 $ 3,354 $ 3,252 Homeowners 385 372 389 399 382 359 385 1,146 1,126 Other personal lines 109 105 105 118 103 105 108 319 316 Commercial lines 36 40 38 41 38 35 34 114 107 Total 1,616 1,672 1,645 1,698 1,611 1,588 1,602 4,933 4,801 Underwriting income (loss) Auto $ 56 $ (62) $ 144 $ 133 $ 300 $ 197 $ 276 $ 138 $ 773 Homeowners 458 126 348 592 304 23 201 932 528 Other personal lines 46 31 42 49 57 56 (2) 119 111 Commercial lines (5) (17) (11) (4) 10 8 (5) (33) 13 Total 555 78 523 770 671 284 470 1,156 1,425 Loss ratio 68.0 73.8 67.1 62.1 64.7 70.8 67.0 69.6 67.5 Expense ratio 23.8 25.0 25.0 26.1 24.9 24.8 25.5 24.6 25.1 Combined ratio 91.8 98.8 92.1 88.2 89.6 95.6 92.5 94.2 92.6 Effect of catastrophe losses on combined ratio 3.7 10.9 4.2 1.4 7.0 13.3 6.5 6.3 9.0 Effect of prior year reserve reestimates on combined ratio (0.2) 0.3 0.7 (1.0) (1.3) (0.1) (0.2) 0.2 (0.5) Underlying combined ratio 88.3 87.7 87.1 87.8 84.0 82.9 86.2 87.7 84.3 Effect of catastrophe losses 3.7 10.9 4.2 1.4 7.0 13.3 6.5 6.3 9.0 Effect of prior year non-catastrophe reserve reestimates (0.2) 0.2 0.8 (1.0) (1.4) (0.6) (0.2) 0.2 (0.7) Combined ratio 91.8 98.8 92.1 88.2 89.6 95.6 92.5 94.2 92.6 Policies in Force (in thousands) Auto 20,367 20,258 20,036 19,916 19,751 19,605 19,413 20,367 19,751 Homeowners 6,163 6,141 6,114 6,106 6,082 6,069 6,063 6,163 6,082 Other personal lines 4,208 4,170 4,135 4,107 4,084 4,052 4,032 4,208 4,084 Commercial lines 328 330 326 325 320 313 305 328 320 Excess and surplus 26 26 27 27 26 25 23 26 26 Total 31,092 30,925 30,638 30,481 30,263 30,064 29,836 31,092 30,263 (1) Allstate Personal Lines comprise Allstate brand auto, homeowners, other personal lines and commercial lines. Allstate Protection segment comprises Allstate Personal Lines and Emerging Businesses. Effective third quarter 2015, commercial lines was moved into Allstate Personal Lines from Emerging Businesses. Prior periods have been adjusted accordingly. THE ALLSTATE CORPORATION ALLSTATE PERSONAL LINES - AUTO, HOMEOWNERS, OTHER PERSONAL LINES AND COMMERCIAL LINES PROFITABILITY MEASURES (1) ($ in millions) Nine months endedThree months ended
36 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net premiums written Esurance $ 423 $ 371 $ 441 $ 359 $ 408 $ 340 $ 406 $ 1,235 $ 1,154 Encompass 331 338 282 310 343 341 286 951 970 Allstate Roadside Services 87 88 91 86 96 94 97 266 287 Allstate Dealer Services 118 111 93 90 89 86 79 322 254 Other business lines 205 199 184 176 185 180 176 588 541 Total 959 908 907 845 936 861 868 2,774 2,665 Net premiums earned Esurance $ 399 $ 402 $ 387 $ 381 $ 373 $ 366 $ 343 $ 1,188 $ 1,082 Encompass 319 318 319 317 318 308 304 956 930 Other business lines 148 137 141 140 138 131 133 426 402 Total 866 857 847 838 829 805 780 2,570 2,414 Incurred losses Esurance $ 290 $ 304 $ 299 $ 302 $ 285 $ 276 $ 260 $ 893 $ 821 Encompass 233 273 213 200 254 273 221 719 748 Other business lines 71 66 69 65 70 64 63 206 197 Total 594 643 581 - 567 609 613 544 1,818 1,766 Expenses Esurance $ 135 $ 139 $ 157 $ 138 $ 150 $ 135 $ 176 $ 431 $ 461 Encompass 90 95 92 95 95 94 91 277 280 Other business lines 61 63 69 63 63 52 62 193 177 Answer Financial 1 3 2 4 4 3 2 6 9 Total 287 300 320 300 312 284 331 907 927 Underwriting income (loss) Esurance $ (26) $ (41) $ (69) $ (59) $ (62) $ (45) $ (93) $ (136) $ (200) Encompass (4) (50) 14 22 (31) (59) (8) (40) (98) Other business lines 16 8 3 12 5 15 8 27 28 Answer Financial (1) (3) (2) (4) (4) (3) (2) (6) (9) Total (15) (86) (54) (29) (92) (92) (95) (155) (279) Loss ratio 68.6 75.0 68.6 67.7 73.5 76.1 69.8 70.7 73.2 Expense ratio 33.1 35.0 37.8 35.8 37.6 35.3 42.4 35.3 38.4 Combined ratio 101.7 110.0 106.4 103.5 111.1 111.4 112.2 106.0 111.6 Effect of catastrophe losses on combined ratio 2.3 7.8 2.4 0.8 7.1 10.3 4.5 4.2 7.3 Effect of prior year reserve reestimates on combined ratio 1.5 0.1 (1.3) (1.2) (1.1) (0.2) (0.6) 0.1 (0.7) Effect of amortization of purchased intangible assets 1.4 1.5 1.4 2.1 2.1 2.1 2.2 1.4 2.2 Underlying combined ratio 96.8 100.7 103.5 101.9 103.1 99.4 106.0 100.3 102.8 Effect of catastrophe losses 2.3 7.8 2.4 0.8 7.1 10.3 4.5 4.2 7.3 Effect of prior year non-catastrophe reserve reestimates 1.2 - (0.9) (1.3) (1.2) (0.4) (0.5) 0.1 (0.7) Effect of amortization of purchased intangible assets 1.4 1.5 1.4 2.1 2.1 2.1 2.2 1.4 2.2 Combined ratio 101.7 110.0 106.4 103.5 111.1 111.4 112.2 106.0 111.6 Policies in Force (in thousands) Esurance 1,503 1,522 1,527 1,470 1,449 1,431 1,402 1,503 1,449 Encompass 1,207 1,240 1,259 1,277 1,280 1,276 1,261 1,207 1,280 Other business lines 920 937 941 948 958 972 991 920 958 Total 3,630 3,699 3,727 3,695 3,687 3,679 3,654 3,630 3,687 (1) Emerging businesses include Esurance, Encompass, Allstate Roadside Services, Allstate Dealer Services, Ivantage and Answer Financial. Effective third quarter 2015, commercial lines was moved into Allstate Personal Lines from Emerging Businesses. Prior periods have been adjusted accordingly. THE ALLSTATE CORPORATION EMERGING BUSINESSES - ESURANCE, ENCOMPASS, OTHER BUSINESS LINES AND ANSWER FINANCIAL PROFITABILITY MEASURES (1) ($ in millions) Nine months endedThree months ended
37 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Premiums $ 329 $ 326 $ 328 $ 312 $ 308 $ 312 $ 327 $ 983 $ 947 Contract charges 209 210 209 208 204 206 280 628 690 Net investment income 491 489 484 480 473 538 640 1,464 1,651 Periodic settlements and accruals on non-hedge derivative instruments - - - - - (1) - - (1) Contract benefits (460) (446) (441) (431) (433) (413) (488) (1,347) (1,334) Interest credited to contractholder funds (191) (191) (192) (199) (200) (208) (291) (574) (699) Amortization of deferred policy acquisition costs (61) (62) (69) (60) (56) (65) (74) (192) (195) Operating costs and expenses (112) (118) (123) (121) (115) (112) (118) (353) (345) Restructuring and related charges (1) (2) - - 1 (1) (2) (3) (2) Income tax expense on operations (66) (67) (62) (61) (57) (91) (85) (195) (233) Operating income 138 139 134 128 125 165 189 411 479 Realized capital gains and losses, after-tax 125 38 72 81 19 (6) - 235 13 Valuation changes on embedded derivatives that are not hedged, after-tax (2) 4 (5) (3) 2 (3) (11) (3) (12) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (1) (2) - - (3) - - (3) (3) Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - - - - 1 - - 1 Gain (loss) on disposition of operations, after-tax 2 - (1) 2 (27) (12) (16) 1 (55) Change in accounting for investments in qualified affordable housing projects, after-tax - - (17) - - - - (17) - Net income available to common shareholders $ 262 $ 179 $ 183 $ 208 $ 116 $ 145 $ 162 $ 624 $ 423 (1) Refer to page 38 for further details related to the impact of LBL on comparison of Allstate Financial results. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL RESULTS (1) ($ in millions) Nine months endedThree months ended
38 Sept. 30, Sept. 30, Q1 2014 Change 2015 2014 Change LBL results excl.LBL Premiums and contract charges $ 1,611 $ 1,637 $ (26) $ 85 $ 59 Net investment income 1,464 1,651 (187) 126 (61) Periodic settlements and accruals on non-hedge derivative instruments - (1) 1 - 1 Contract benefits (1,347) (1,334) (13) (65) (78) Interest credited to contractholder funds (574) (699) 125 (80) 45 Amortization of deferred policy acquisition costs (192) (195) 3 (6) (3) Operating costs and expenses (353) (345) (8) (8) (16) Restructuring and related charges (3) (2) (1) - (1) Income tax expense on operations (195) (233) 38 (18) 20 Operating income 411 479 (68) 34 (34) Realized capital gains and losses, after-tax 235 13 222 - 222 Valuation changes on embedded derivatives that are not hedged, after-tax (3) (12) 9 (6) 3 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) - - - Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - 1 (1) - (1) Gain (loss) on disposition of operations, after-tax 1 (55) 56 - 56 Change in accounting for investments in qualified affordable housing projects, after-tax (17) - (17) - (17) Net income available to common shareholders $ 624 $ 423 $ 201 $ 28 $ 229 (1) Nine months ended THE ALLSTATE CORPORATION IMPACT OF LBL ON COMPARISON OF ALLSTATE FINANCIAL RESULTS (1) ($ in millions) As a result of our LBL disposition on April 1, 2014, Allstate Financial results no longer include LBL beginning in the second quarter of 2014. To assist with comparison of Allstate Financial results between periods, results of LBL's business for the first quarter of 2014 were excluded in this presentation.
39 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Return on Attributed Equity Numerator: Net income available to common shareholders (1) $ 832 $ 686 $ 652 $ 631 $ 542 $ 66 $ 111 Denominator: Beginning attributed equity (2) $ 7,356 $ 7,262 $ 7,812 $ 7,273 $ 7,819 $ 8,224 $ 8,617 Ending attributed equity 7,475 7,621 7,920 7,672 7,356 7,262 7,812 Average attributed equity (3) $ 7,416 $ 7,442 $ 7,866 $ 7,473 $ 7,588 $ 7,743 $ 8,215 Return on attributed equity 11.2 % 9.2 % 8.3 % 8.4 % 7.1 % 0.9 % 1.4 % Operating Income Return on Attributed Equity Numerator: Operating income (1) $ 539 $ 526 $ 552 $ 607 $ 639 $ 641 $ 633 Denominator: Beginning attributed equity (2) $ 7,356 $ 7,262 $ 7,812 $ 7,273 $ 7,819 $ 8,224 $ 8,617 Unrealized net capital gains and losses 1,305 1,285 1,280 946 1,076 1,120 1,702 Adjusted beginning attributed equity 6,051 5,977 6,532 6,327 6,743 7,104 6,915 Ending attributed equity 7,475 7,621 7,920 7,672 7,356 7,262 7,812 Unrealized net capital gains and losses 722 1,030 1,499 1,420 1,305 1,285 1,280 Adjusted ending attributed equity 6,753 6,591 6,421 6,252 6,051 5,977 6,532 Average adjusted attributed equity (3) $ 6,402 $ 6,284 $ 6,477 $ 6,290 $ 6,397 $ 6,541 $ 6,724 Operating income return on attributed equity 8.4 % 8.4 % 8.5 % 9.7 % 10.0 % 9.8 % 9.4 % (1) (2) (3) Allstate Financial attributed equity is the sum of equity for Allstate Life Insurance Company and the applicable equity for Allstate Financial Insurance Holdings Corporation. Average attributed equity and average adjusted attributed equity are determined using a two-point average, with the beginning and ending attributed equity and adjusted attributed equity, respectively, for the twelve-month period as data points. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL RETURN ON ATTRIBUTED EQUITY ($ in millions) Net income available to common shareholders and operating income reflect a trailing twelve-month period. Twelve months ended
40 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 PREMIUMS AND CONTRACT CHARGES - BY PRODUCT Underwritten Products Traditional life insurance premiums $ 135 $ 131 $ 132 $ 133 $ 126 $ 125 $ 127 $ 398 $ 378 Accident and health insurance premiums 194 195 196 180 182 187 195 585 564 Interest-sensitive life insurance contract charges 205 207 206 203 200 202 274 618 676 534 533 534 516 508 514 596 1,601 1,618 Annuities Immediate annuities with life contingencies premiums - - - (1) - - 5 - 5 Other fixed annuity contract charges 4 3 3 5 4 4 6 10 14 4 3 3 4 4 4 11 10 19 Total $ 538 $ 536 $ 537 $ 520 $ 512 $ 518 $ 607 $ 1,611 $ 1,637 PREMIUMS AND CONTRACT CHARGES - BY DISTRIBUTION CHANNEL Allstate agencies $ 300 $ 297 $ 297 $ 294 $ 288 $ 285 $ 291 $ 894 $ 864 Workplace enrolling agents 212 209 210 198 198 203 204 631 605 Other (1) 26 30 30 28 26 30 112 86 168 Total $ 538 $ 536 $ 537 $ 520 $ 512 $ 518 $ 607 $ 1,611 $ 1,637 PREMIUMS AND CONTRACT CHARGES - BY PRODUCT INCLUDED IN LINCOLN BENEFIT LIFE COMPANY SALE (2) Underwritten Products Traditional life insurance premiums $ - $ - $ - $ - $ - $ - $ 6 $ - $ 6 Accident and health insurance premiums - - - - - - 6 - 6 Interest-sensitive life insurance contract charges - - - - - - 71 - 71 - - - - - - 83 - 83 Annuities Immediate annuities with life contingencies premiums - - - - - - - - - Other fixed annuity contract charges - - - - - - 2 - 2 - - - - - - 2 - 2 Total $ - $ - $ - $ - $ - $ - $ 85 $ - $ 85 PROPRIETARY LIFE INSURANCE POLICIES SOLD BY ALLSTATE AGENCIES(3) (5) 16,402 34,494 30,091 38,576 31,974 30,267 27,697 80,987 89,938 ALLSTATE BENEFITS NEW BUSINESS WRITTEN PREMIUMS (4) $ 69 $ 64 $ 65 $ 183 $ 63 $ 58 $ 52 $ 198 $ 173 (1) Primarily represents independent master brokerage agencies and specialized brokers. (2) Amounts are included in section above. On April 1, 2014, the sale of LBL was completed. (3) Policies sold reduced by lapses within twelve months of sale. (4) (5) Beginning on August 1, 2015, sales are measured at policy issuance rather than application submission. This change led to a lag in the recognition of policies sold which impacted the third quarter 2015 results. THE ALLSTATE CORPORATION New business written premiums reflect annualized premiums at initial customer enrollment (including new accounts and new employees or policies of existing accounts), reduced by an estimate for certain policies that are expected to lapse. A significant portion of Allstate Benefits business is seasonally written in the fourth quarter during many clients’ annual employee benefits enrollment. ALLSTATE FINANCIAL PREMIUMS AND CONTRACT CHARGES ($ in millions) Nine months endedThree months ended
41 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Contractholders funds, beginning balance $ 21,968 $ 22,267 $ 22,529 $ 22,848 $ 23,472 $ 23,989 $ 24,304 $ 22,529 $ 24,304 Contractholders funds classified as held for sale, beginning balance - - - - - 10,661 10,945 - 10,945 Total contractholders funds, including those classified as held for sale 21,968 22,267 22,529 22,848 23,472 34,650 35,249 22,529 35,249 Deposits Interest-sensitive life insurance 251 253 249 248 247 246 318 753 811 Fixed annuities 56 53 51 43 48 56 127 160 231 Total deposits 307 306 300 291 295 302 445 913 1,042 Interest credited 193 185 199 202 197 212 308 577 717 Benefits, withdrawals, maturities and other adjustments Benefits (272) (285) (273) (242) (286) (289) (380) (830) (955) Surrenders and partial withdrawals (375) (303) (305) (377) (630) (554) (712) (983) (1,896) Maturities of and interest payments on institutional products - (1) - (1) (1) - - (1) (1) Contract charges (205) (203) (203) (204) (197) (199) (281) (611) (677) Net transfers from separate accounts 2 2 1 1 2 1 3 5 6 Other adjustments (59) - 19 11 (4) 11 18 (40) 25 Total benefits, withdrawals, maturities and other adjustments (909) (790) (761) (812) (1,116) (1,030) (1,352) (2,460) (3,498) Contractholder funds sold in LBL disposition - - - - - (10,662) - - (10,662) Contractholder funds classified as held for sale, ending balance - - - - - - (10,661) - - Contractholder funds, ending balance $ 21,559 $ 21,968 $ 22,267 $ 22,529 $ 22,848 $ 23,472 $ 23,989 $ 21,559 $ 22,848 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL CHANGE IN CONTRACTHOLDER FUNDS ($ in millions) Nine months endedThree months ended
42 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Benefit spread Premiums $ 329 $ 326 $ 328 $ 312 $ 308 $ 312 $ 327 $ 983 $ 947 Cost of insurance contract charges (1) 137 138 138 136 135 135 187 413 457 Contract benefits excluding the implied interest on immediate annuities with life contingencies (2) (333) (319) (312) (301) (302) (283) (358) (964) (943) Total benefit spread 133 145 154 147 141 164 156 432 461 Investment spread Net investment income 491 489 484 480 473 538 640 1,464 1,651 Implied interest on immediate annuities with life contingencies (2) (127) (127) (129) (130) (131) (130) (130) (383) (391) Interest credited to contractholder funds (194) (185) (199) (202) (198) (212) (307) (578) (717) Total investment spread 170 177 156 148 144 196 203 503 543 Surrender charges and contract maintenance expense fees (1) 72 72 71 72 69 71 93 215 233 Realized capital gains and losses 194 59 111 125 28 (10) 1 364 19 Amortization of deferred policy acquisition costs (63) (65) (70) (62) (58) (66) (74) (198) (198) Operating costs and expenses (112) (118) (123) (121) (115) (112) (118) (353) (345) Restructuring and related charges (1) (2) - - 1 (1) (2) (3) (2) Gain (loss) on disposition of operations 3 1 (2) 3 (26) (8) (59) 2 (93) Income tax expense (134) (90) (114) (104) (68) (89) (38) (338) (195) Net income available to common shareholders $ 262 $ 179 $ 183 $ 208 $ 116 $ 145 $ 162 $ 624 $ 423 Benefit spread by product group Life insurance $ 66 $ 65 $ 68 $ 72 $ 72 $ 86 $ 74 $ 199 $ 232 Accident and health insurance 90 97 107 91 99 97 102 294 298 Annuities (23) (17) (21) (16) (30) (19) (20) (61) (69) Total benefit spread $ 133 $ 145 $ 154 $ 147 $ 141 $ 164 $ 156 $ 432 $ 461 Investment spread by product group Annuities and institutional products $ 82 $ 77 $ 69 $ 58 $ 54 $ 98 $ 110 $ 228 $ 262 Life insurance 33 33 33 24 23 26 30 99 79 Accident and health insurance 4 4 4 4 4 4 7 12 15 Net investment income on investments supporting capital 54 57 57 65 61 72 73 168 206 Investment spread before valuation changes on embedded derivatives that are not hedged 173 171 163 151 142 200 220 507 562 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged (3) 6 (7) (3) 2 (4) (17) (4) (19) Total investment spread $ 170 $ 177 $ 156 $ 148 $ 144 $ 196 $ 203 $ 503 $ 543 (1) Reconciliation of contract charges Cost of insurance contract charges $ 137 $ 138 $ 138 $ 136 $ 135 $ 135 $ 187 $ 413 $ 457 Surrender charges and contract maintenance expense fees 72 72 71 72 69 71 93 215 233 Total contract charges $ 209 $ 210 $ 209 $ 208 $ 204 $ 206 $ 280 $ 628 $ 690 (2) Reconciliation of contract benefits Contract benefits excluding the implied interest on immediate annuities with life contingencies $ (333) $ (319) $ (312) $ (301) $ (302) $ (283) $ (358) $ (964) $ (943) Implied interest on immediate annuities with life contingencies (127) (127) (129) (130) (131) (130) (130) (383) (391) Total contract benefits $ (460) $ (446) $ (441) $ (431) $ (433) $ (413) $ (488) $ (1,347) $ (1,334) THE ALLSTATE CORPORATION ALLSTATE FINANCIAL ANALYSIS OF NET INCOME ($ in millions) Nine months endedThree months ended
43 Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads Interest-sensitive life insurance 5.1 % 3.9 % 1.2 % 5.1 % 4.0 % 1.1 % Deferred fixed annuities and institutional products 4.2 2.9 1.3 4.5 2.8 1.7 Immediate fixed annuities with and without life contingencies 8.0 5.9 2.1 6.7 6.0 0.7 Investments supporting capital, traditional life and other products 3.8 n/a n/a 4.3 n/a n/a Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads Interest-sensitive life insurance 5.1 % 3.9 % 1.2 % 5.3 % 3.9 % 1.4 % Deferred fixed annuities and institutional products 4.3 2.8 1.5 4.5 2.9 1.6 Immediate fixed annuities with and without life contingencies 7.6 5.9 1.7 7.4 6.0 1.4 Investments supporting capital, traditional life and other products 4.1 n/a n/a 4.3 n/a n/a (1) For purposes of these calculations, investments, reserves and contractholder funds classified as held for sale were included for periods prior to April 1, 2014. Investment spreads may vary significantly between periods due to the variability in investment income, particularly for immediate fixed annuities where the investment portfolio includes limited partnerships. Nine months ended September 30, 2015 Nine months ended September 30, 2014 (1) THE ALLSTATE CORPORATION ALLSTATE FINANCIAL WEIGHTED AVERAGE INVESTMENT SPREADS Three months ended September 30, 2015 Three months ended September 30, 2014
44 Twelve months ended Sept. 30, 2015 Attributed equity Reserves and excluding unrealized Sept. June March Dec. Sept. June March Contractholder funds capital gains/losses (3)(4) Operating income (5) 2015 2015 2015 2014 2014 2014 2014 Underwritten products Life insurance $ 10,624 $ 2,626 $ 243 10.0 % 9.3 % 9.8 % 11.0 % 11.7 % 8.9 % 9.0 % Accident and health insurance 845 643 90 13.7 14.9 15.9 16.0 15.0 14.5 14.7 Subtotal 11,469 3,269 333 10.8 10.5 11.1 12.1 12.4 9.9 10.1 Immediate Annuities: Sub-standard structured settlements and group pension terminations (1) 5,034 1,553 22 1.6 0.5 0.6 1.1 1.4 2.0 0.7 Standard structured settlements and SPIA (2) 6,974 1,118 89 9.4 8.8 8.4 10.5 12.2 16.8 13.2 Subtotal 12,008 2,671 111 4.7 3.8 3.7 4.5 5.3 7.1 5.0 Deferred Annuities 10,226 811 94 10.1 10.6 10.3 11.1 10.7 12.0 12.3 Institutional products 85 2 1 Subtotal 22,319 3,484 206 6.2 6.1 6.0 7.3 7.7 9.6 8.7 Total Allstate Financial $ 33,788 $ 6,753 $ 539 8.4 8.4 8.5 9.7 10.0 9.8 9.4 Life Accident and Annuities and Allstate insurance health insurance institutional products Financial Operating income $ 184 $ 69 $ 158 $ 411 Realized capital gains and losses, after-tax 14 2 219 235 Valuation changes on embedded derivatives that are not hedged, after-tax - - (3) (3) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (4) - 1 (3) Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - - - (Loss) gain on disposition of operations, after-tax (1) - 2 1 Change in accounting for investments in qualified affordable housing projects, after-tax (6) - (11) (17) Net income available to common shareholders $ 187 $ 71 $ 366 $ 624 (1) (2) (3) (4) (5) Attributed equity is allocated to each product line based on statutory capital adjusted for GAAP reporting differences and the amount of capital held in Allstate Financial may vary from economic capital. The calculation of statutory capital by product incorporates internal factors for invested asset risk, insurance risk (mortality and morbidity), interest rate risk and business risk. Due to the unavailability of final statutory financial statements at the time we release our GAAP financial results, the allocation is derived from average statutory capital over the prior four quarters. Statutory capital is adjusted for appropriate GAAP accounting differences. Changes in internal capital factors, investment portfolio mix and risk as well as changes in GAAP and statutory reporting differences will result in changes to the allocation of attributed equity to products. Product line operating income includes allocation of income on investments supporting capital. Operating income reflects a trailing twelve-month period. Life-contingent structured settlement annuities for annuitants with standard life expectancy, period certain structured settlements and single premium immediate annuities with and without life contingencies. Total Allstate Financial attributed equity is the sum of equity for Allstate Life Insurance Company and the applicable equity for Allstate Financial Insurance Holdings Corporation, excluding unrealized capital gains and losses. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL SUPPLEMENTAL PRODUCT INFORMATION ($ in millions) As of Sept. 30, 2015 Nine months ended Sept. 30, 2015 Annuities and institutional products: Twelve months ended Operating income return on attributed equity (%) Structured settlement annuities for annuitants with severe injuries or other health impairments which significantly reduced their life expectancy at the time the annuity was issued and group annuity contracts issued to sponsors of terminated pension plans.
45 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE BY PRODUCT Underwritten products Life insurance 2,459 2,456 2,448 2,434 2,432 2,436 2,588 Accident and health insurance 2,848 2,843 2,777 2,555 2,530 2,577 2,593 5,307 5,299 5,225 4,989 4,962 5,013 5,181 Annuities Deferred annuities 176 181 186 191 197 205 337 Immediate annuities 104 105 106 108 108 110 111 280 286 292 299 305 315 448 Total 5,587 5,585 5,517 5,288 5,267 5,328 5,629 ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE BY SOURCE OF BUSINESS Allstate Agencies (2) 1,917 1,911 1,904 1,902 1,898 1,895 1,938 Allstate Benefits 3,292 3,287 3,218 2,983 2,957 3,010 3,040 Other (3) 378 387 395 403 412 423 651 Total 5,587 5,585 5,517 5,288 5,267 5,328 5,629 INSURANCE POLICIES AND ANNUITIES IN FORCE INCLUDED IN LINCOLN BENEFIT LIFE COMPANY SALE Life insurance - - - - - - 142 Deferred annuities - - - - - - 124 Total - - - - - - 266 (1) (2) (3) Primarily business sold by independent master brokerage agencies, banks/broker-dealers and specialized structured settlement brokers. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE (1) (in thousands) Allstate Financial insurance policies and annuities in force reflect the number of contracts in force excluding sold blocks of business that remain on the balance sheet due to the dispositions of the business being effected through reinsurance arrangements. Policy counts associated with our voluntary employee benefits group business reflect certificate counts as opposed to group counts. Excludes Allstate Benefits products sold through Allstate Agencies, which are included in the Allstate Benefits line.
46 Allstate Allstate Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial Life Annuities Benefits Segment Life Annuities Benefits Segment $ 374 $ - $ 609 $ 983 $ 360 $ 5 $ 582 $ 947 538 10 80 628 603 14 73 690 362 1,049 53 1,464 403 1,194 54 1,651 - - - - - (1) - (1) (560) (453) (334) (1,347) (555) (471) (308) (1,334) (212) (335) (27) (574) (240) (432) (27) (699) Amortization of deferred policy acquisition costs (95) (4) (93) (192) (102) (9) (84) (195) (159) (29) (165) (353) (173) (21) (151) (345) (3) - - (3) (2) - - (2) (73) (80) (42) (195) (91) (93) (49) (233) 172 158 81 411 203 186 90 479 13 219 3 235 3 9 1 13 - (3) - (3) - (12) - (12) (4) 1 - (3) (4) 1 - (3) - - 1 - - 1 (Loss) gain on disposition of operations, after-tax (1) 2 - 1 (28) (27) - (55) Change in accounting for investments in qualified affordable housing projects, after-tax (6) (11) - (17) - - - - $ 174 $ 366 $ 84 $ 624 $ 175 $ 157 $ 91 $ 423 Premiums and Contract Charges - by Product Underwritten Products $ 372 $ - $ 26 $ 398 $ 353 $ - $ 25 $ 378 2 - 583 585 7 - 557 564 538 - 80 618 603 - 73 676 912 - 689 1,601 963 - 655 1,618 - - - - - 5 - 5 - 10 - 10 - 14 - 14 - 10 - 10 - 19 - 19 $ 912 $ 10 $ 689 $ 1,611 $ 963 $ 19 $ 655 $ 1,637 Life Insurance $ 181 $ - $ 18 $ 199 $ 220 $ - $ 12 $ 232 Accident and health insurance (6) - 300 294 (5) - 303 298 Annuities - (61) - (61) - (69) - (69) $ 175 $ (61) $ 318 $ 432 $ 215 $ (69) $ 315 $ 461 Annuities and institutional products $ - $ 228 $ - $ 228 $ - $ 262 $ - $ 262 Life insurance 93 - 6 99 71 - 8 79 Accident and health insurance 4 - 8 12 7 - 8 15 Net investment income on investments supporting capital 57 99 12 168 87 108 11 206 derivatives that are not hedged 154 327 26 507 165 370 27 562 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged - (4) - (4) - (19) - (19) Total investment spread $ 154 $ 323 $ 26 $ 503 $ 165 $ 351 $ 27 $ 543 THE ALLSTATE CORPORATION ALLSTATE LIFE AND ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION ($ in millions) For the nine months ended Sept. 30, 2015 For the nine months ended Sept. 30, 2014 Realized capital gains and losses, after-tax Premiums Contract charges Net investment income Periodic settlements and accruals on non-hedge derivative instruments Contract benefits Interest credited to contractholder funds Operating costs and expenses Restructuring and related charges Income tax expense on operations Operating income Accident and health insurance Valuation changes on embedded derivatives that are not hedged, after-tax DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax Net income Traditional life insurance premiums Investment spread before valuation changes on embedded Interest-sensitive life insurance contract charges Annuities Immediate annuities with life contingencies premiums Other fixed annuity contract charges Total life and annuity premiums and contract charges Benefit Spread by Product Group Total benefit spread Investment Spread by Product Group
47 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Net investment income $ 9 $ 8 $ 8 $ 5 $ 6 $ 9 $ 7 $ 25 $ 22 Operating costs and expenses (13) (9) (5) (14) (6) (10) (8) (27) (24) Interest expense (73) (73) (73) (73) (77) (84) (87) (219) (248) Income tax benefit on operations 28 28 26 32 28 32 32 82 92 Preferred stock dividends (29) (29) (29) (29) (31) (31) (13) (87) (75) Operating loss (78) (75) (73) (79) (80) (84) (69) (226) (233) Realized capital gains and losses, after-tax - - - - - (1) 1 - - Net loss available to common shareholders $ (78) $ (75) $ (73) $ (79) $ (80) $ (85) $ (68) $ (226) $ (233) THE ALLSTATE CORPORATION CORPORATE AND OTHER RESULTS ($ in millions) Nine months endedThree months ended
48 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2015 2015 2015 2014 2014 2015 2015 2015 2014 2014 Fixed income securities, at fair value: Tax-exempt $ 4,289 $ 4,418 $ 4,362 $ 4,138 $ 4,288 $ 17 $ 23 $ 28 $ 75 $ 39 Taxable 24,868 25,192 25,674 26,696 27,078 26,583 27,768 28,798 29,007 28,984 Equity securities, at fair value 2,808 3,018 3,074 3,076 3,053 1,425 979 1,089 1,028 1,282 Mortgage loans 339 343 333 370 372 4,063 4,000 3,943 3,818 3,771 Limited partnership interests 2,558 2,466 2,571 2,498 2,411 2,261 2,066 2,124 2,024 1,933 Short-term, at fair value 1,692 1,108 932 822 1,328 991 1,053 948 1,026 880 Other 1,659 1,602 1,536 1,483 1,401 1,929 1,909 1,860 1,831 1,718 Total $ 38,213 $ 38,147 $ 38,482 $ 39,083 $ 39,931 $ 37,269 $ 37,798 $ 38,790 $ 38,809 $ 38,607 Fixed income securities, amortized cost: Tax-exempt $ 4,214 $ 4,362 $ 4,276 $ 4,054 $ 4,181 $ 17 $ 24 $ 28 $ 74 $ 39 Taxable 24,883 24,990 25,181 26,376 26,715 25,335 26,091 26,245 26,668 26,785 Ratio of fair value to amortized cost 100.2% 100.9% 102.0% 101.3% 101.5% 104.9% 106.4% 109.7% 108.8% 108.2% Equity securities, cost $ 2,656 $ 2,699 $ 2,706 $ 2,723 $ 2,745 $ 1,464 $ 947 $ 1,043 $ 969 $ 1,132 Short-term, amortized cost 1,692 1,108 932 822 1,328 991 1,053 948 1,026 880 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2015 2015 2015 2014 2014 2015 2015 2015 2014 2014 Fixed income securities, at fair value: Tax-exempt $ 589 $ 569 $ 568 $ 564 $ 561 $ 4,895 $ 5,010 $ 4,958 $ 4,777 $ 4,888 Taxable 1,911 1,960 1,973 1,960 1,363 53,362 54,920 56,445 57,663 57,425 Equity securities, at fair value 3 3 3 - - 4,236 4,000 4,166 4,104 4,335 Mortgage loans - - - - - 4,402 4,343 4,276 4,188 4,143 Limited partnership interests 4 4 4 5 4 4,823 4,536 4,699 4,527 4,348 Short-term, at fair value 353 660 617 692 255 3,036 2,821 2,497 2,540 2,463 Other - - - - - 3,588 3,511 3,396 3,314 3,119 Total $ 2,860 $ 3,196 $ 3,165 $ 3,221 $ 2,183 $ 78,342 $ 79,141 $ 80,437 $ 81,113 $ 80,721 Fixed income securities, amortized cost: Tax-exempt $ 569 $ 551 $ 547 $ 543 $ 536 $ 4,800 $ 4,937 $ 4,851 $ 4,671 $ 4,756 Taxable 1,900 1,953 1,958 1,957 1,360 52,118 53,034 53,384 55,001 54,860 Ratio of fair value to amortized cost 101.3% 101.0% 101.4% 101.0% 101.5% 102.4% 103.4% 105.4% 104.6% 104.5% Equity securities, cost $ 3 $ 3 $ 3 $ - $ - $ 4,123 $ 3,649 $ 3,752 $ 3,692 $ 3,877 Short-term, amortized cost 353 660 617 692 255 3,036 2,821 2,497 2,540 2,463 THE ALLSTATE CORPORATION INVESTMENTS ($ in millions) PROPERTY-LIABILITY CORPORATE AND OTHER ALLSTATE FINANCIAL CONSOLIDATED
49 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Investment position Accounting basis Cost method $ 1,148 $ 1,130 $ 1,137 $ 1,122 $ 1,144 $ 1,157 $ 1,346 Equity method ("EMA") (1) 3,675 3,406 3,562 3,405 3,204 3,152 3,678 Total $ 4,823 $ 4,536 $ 4,699 $ 4,527 $ 4,348 $ 4,309 $ 5,024 Cost method-fair value (2) $ 1,506 $ 1,482 $ 1,494 $ 1,488 $ 1,555 $ 1,577 $ 1,764 Underlying investment Private equity / debt funds $ 3,282 $ 3,012 $ 2,969 $ 2,756 $ 2,759 $ 2,631 $ 2,674 Real estate funds 1,160 1,164 1,366 1,413 1,425 1,517 1,577 Other (3) 381 360 364 358 164 161 773 Total $ 4,823 $ 4,536 $ 4,699 $ 4,527 $ 4,348 $ 4,309 $ 5,024 Segment Property-Liability $ 2,558 $ 2,466 $ 2,571 $ 2,498 $ 2,411 $ 2,438 $ 2,900 Allstate Financial 2,261 2,066 2,124 2,024 1,933 1,866 2,121 Corporate and Other 4 4 4 5 4 5 3 Total $ 4,823 $ 4,536 $ 4,699 $ 4,527 $ 4,348 $ 4,309 $ 5,024 Total Income Accounting basis Cost method $ 63 $ 75 $ 42 $ 60 $ 25 $ 66 $ 50 Equity method 104 43 156 55 137 129 92 Total $ 167 $ 118 $ 198 $ 115 $ 162 $ 195 $ 142 Underlying investment Private equity / debt funds $ 162 $ 113 $ 80 $ 96 $ 66 $ 123 $ 106 Real estate funds 5 10 123 25 93 55 38 Other - (5) (5) (6) 3 17 (2) Total $ 167 $ 118 $ 198 $ 115 $ 162 $ 195 $ 142 Segment Property-Liability $ 62 $ 45 $ 126 $ 57 $ 112 $ 102 $ 75 Allstate Financial 105 73 72 58 51 91 67 Corporate and Other - - - - (1) 2 - Total $ 167 $ 118 $ 198 $ 115 $ 162 $ 195 $ 142 (1) (2) (3) For the period ended March 31, 2014, other included tax credit funds. The fair value of cost method limited partnerships is determined using reported net asset values of the underlying funds. THE ALLSTATE CORPORATION LIMITED PARTNERSHIP INVESTMENTS ($ in millions) As of September 30, 2015, valuations of EMA limited partnerships include approximately $404 million of cumulative pre-tax appreciation that has been recognized in earnings but has not been distributed to investors. As of or for the three months ended
50 Unrealized net Fair value Unrealized net Fair value Unrealized net Fair value capital gains Fair as a percent of capital gains Fair as a percent of capital gains Fair as a percent of and losses value amortized cost (1) and losses value amortized cost (1) and losses value amortized cost (1) Fixed income securities U.S. government and agencies $ 118 $ 3,760 103.2 $ 109 $ 3,936 102.8 $ 134 $ 4,106 103.4 Municipal 412 7,494 105.8 483 8,594 106.0 670 8,713 108.3 Corporate 632 41,629 101.5 1,164 42,317 102.8 2,120 42,375 105.3 Foreign government 59 1,085 105.8 66 1,324 105.2 85 1,375 106.6 Asset-backed securities ("ABS") (16) 2,711 99.4 (5) 2,076 99.8 8 3,055 100.3 Residential mortgage-backed securities ("RMBS") 98 1,011 110.7 101 1,083 110.3 105 1,154 110.0 Commercial mortgage-backed securities ("CMBS") 32 542 106.3 37 575 106.9 42 600 107.5 Redeemable preferred stock 4 25 119.0 4 25 119.0 4 25 119.0 Total fixed income securities 1,339 58,257 102.4 1,959 59,930 103.4 3,168 61,403 105.4 Equity securities 113 4,236 102.7 351 4,000 109.6 414 4,166 111.0 Short-term investments - 3,036 100.0 - 2,821 100.0 - 2,497 100.0 Derivatives 7 29 n/a 3 60 n/a 3 79 n/a EMA limited partnership interests (2) (5) n/a n/a (5) n/a n/a (4) n/a n/a Unrealized net capital gains and losses, pre-tax 1,454 2,308 3,581 Amounts recognized for: Insurance reserves (3) - - (79) DAC and DSI (4) (98) (121) (212) Amounts recognized (98) (121) (291) Deferred income taxes (477) (768) (1,153) Unrealized net capital gains and losses, after-tax $ 879 $ 1,419 $ 2,137 Unrealized net Fair value Unrealized net Fair value Unrealized net Fair value capital gains Fair as a percent of capital gains Fair as a percent of capital gains Fair as a percent of and losses value amortized cost (1) and losses value amortized cost (1) and losses value amortized cost (1) Fixed income securities U.S. government and agencies $ 136 $ 4,328 103.2 $ 128 $ 4,309 103.1 $ 146 $ 4,853 103.1 Municipal 620 8,497 107.9 557 8,535 107.0 552 8,561 106.9 Corporate 1,758 42,144 104.4 1,742 41,071 104.4 2,185 41,467 105.6 Foreign government 102 1,645 106.6 96 1,693 106.0 107 1,676 106.8 ABS 7 3,978 100.2 18 4,709 100.4 40 3,943 101.0 RMBS 99 1,207 108.9 104 1,289 108.8 99 1,362 107.8 CMBS 42 615 107.3 48 681 107.6 54 746 107.8 Redeemable preferred stock 4 26 118.2 4 26 118.2 4 26 118.2 Total fixed income securities 2,768 62,440 104.6 2,697 62,313 104.5 3,187 62,634 105.4 Equity securities 412 4,104 111.2 458 4,335 111.8 736 5,394 115.8 Short-term investments - 2,540 100.0 - 2,463 100.0 - 2,914 100.0 Derivatives (2) 92 n/a (8) 73 n/a (19) 103 n/a EMA limited partnership interests (2) (5) n/a n/a (5) n/a n/a (5) n/a n/a Unrealized net capital gains and losses, pre-tax 3,173 3,142 3,899 Amounts recognized for: Insurance reserves (3) (28) (169) (399) DAC and DSI (4) (179) (158) (189) Amounts recognized (207) (327) (588) Deferred income taxes (1,040) (988) (1,161) Unrealized net capital gains and losses, after-tax $ 1,926 $ 1,827 $ 2,150 (1) (2) (3) (4) THE ALLSTATE CORPORATION UNREALIZED NET CAPITAL GAINS AND LOSSES ON SECURITY PORTFOLIO BY TYPE ($ in millions) September 30, 2015 June 30, 2015 March 31, 2015 The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. Although we evaluate premium deficiencies on the combined performance of our life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies. The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized. The comparison of percentages from period to period may be distorted by investment transactions such as sales, purchases and impairment write-downs. Unrealized net capital gains and losses for limited partnership interest represent the Company's share of EMA limited partnerships' other comprehensive income. Fair value and amortized cost are not applicable. December 31, 2014 September 30, 2014 June 30, 2014
51 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 NET INVESTMENT INCOME Fixed income securities $ 546 $ 567 $ 568 $ 577 $ 581 $ 584 $ 705 $ 1,681 $ 1,870 Equity securities 23 31 23 26 28 35 28 77 91 Mortgage loans 53 57 55 59 54 71 81 165 206 Limited partnership interests 167 118 198 115 162 195 142 483 499 Short-term 4 3 1 2 1 3 1 8 5 Other 49 49 45 43 41 44 42 143 127 Subtotal 842 825 890 822 867 932 999 2,557 2,798 Less: Investment expense (35) (36) (40) (43) (44) (34) (40) (111) (118) Net investment income $ 807 $ 789 $ 850 $ 779 $ 823 $ 898 $ 959 $ 2,446 $ 2,680 PRE-TAX YIELDS (1) Fixed income securities 3.8 % 3.9 % 3.9 % 3.9 % 3.9 % 4.0 % 4.1 % 3.9 % 4.0 % Equity securities 2.4 3.4 2.5 2.7 2.6 3.1 2.5 2.7 2.8 Mortgage loans 4.8 5.3 5.2 5.7 5.2 6.6 5.4 5.1 5.7 Limited partnership interests 14.4 10.1 17.2 10.4 15.0 16.7 11.4 13.9 14.3 Total portfolio 4.4 4.3 4.6 4.2 4.4 4.7 4.5 4.4 4.5 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (47) $ (11) $ (19) $ (20) $ 10 $ (6) $ (16) $ (77) $ (12) Change in intent write-downs (127) (32) (30) (46) (63) (39) (65) (189) (167) Net other-than-temporary impairment losses recognized in earnings (174) (43) (49) (66) (53) (45) (81) (266) (179) Sales and other 183 146 216 183 355 290 147 545 792 Valuation and settlements of derivative instruments 24 5 (28) (11) (8) (5) (12) 1 (25) Total $ 33 $ 108 $ 139 $ 106 $ 294 $ 240 $ 54 $ 280 $ 588 TOTAL RETURN ON INVESTMENT PORTFOLIO (2) - % (0.6) % 1.7 % 1.1 % 0.4 % 2.2 % 2.1 % 1.2 % 4.7 % AVERAGE INVESTMENT BALANCES (in billions) (3) $ 76.9 $ 76.8 $ 77.4 $ 77.7 $ 78.1 $ 78.5 $ 78.5 $ 77.1 $ 78.3 . (1) (2) (3) Pre-tax yields are calculated as annualized investment income before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at the end of each quarter during the year. Investment balances, for purposes of the pre-tax yield calculation, exclude unrealized capital gains and losses. Amounts related to investments classified as held for sale were excluded from the pre-tax yield calculation in 2014. Total return on investment portfolio is calculated from GAAP results including the total of net investment income, realized capital gains and losses, the change in unrealized net capital gains and losses, and the change in the difference between fair value and carrying value of mortgage loans and cost method limited partnerships, divided by the average fair value balances. Amounts related to investments classified as held for sale were excluded from the total return calculation in 2014. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. Amounts related to investments classified as held for sale were excluded from average investment balances calculation in 2014. THE ALLSTATE CORPORATION NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Nine months endedThree months ended
52 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 NET INVESTMENT INCOME Fixed income securities: Tax-exempt $ 24 $ 26 $ 25 $ 26 $ 27 $ 29 $ 31 $ 75 $ 87 Taxable 197 195 190 191 189 183 184 582 556 Equity securities 16 23 18 22 21 29 23 57 73 Mortgage loans 4 3 4 4 4 4 5 11 13 Limited partnership interests (1) 62 45 126 57 112 102 75 233 289 Short-term 3 1 1 1 - 2 1 5 3 Other 20 20 17 17 15 19 14 57 48 Subtotal 326 313 381 318 368 368 333 1,020 1,069 Less: Investment expense (19) (21) (23) (24) (24) (17) (21) (63) (62) Net investment income $ 307 $ 292 $ 358 $ 294 $ 344 $ 351 $ 312 $ 957 $ 1,007 Net investment income, after-tax $ 209 $ 199 $ 242 $ 201 $ 234 $ 240 $ 215 $ 650 $ 689 PRE-TAX YIELDS (2) Fixed income securities: Tax-exempt 2.3 % 2.3 % 2.4 % 2.5 % 2.6 % 2.7 % 2.7 % 2.4 % 2.6 % Equivalent yield for tax-exempt 3.4 3.4 3.5 3.6 3.8 3.9 3.9 3.5 3.8 Taxable 3.2 3.1 2.9 2.9 2.9 3.0 3.1 3.1 3.0 Equity securities 2.5 3.4 2.6 3.2 2.7 3.2 2.5 2.8 2.8 Mortgage loans 4.0 4.1 4.5 4.1 4.1 4.9 4.3 4.2 4.4 Limited partnership interests 10.1 7.0 19.9 9.3 18.4 15.3 10.3 12.3 14.4 Total portfolio 3.5 3.3 4.0 3.3 3.8 3.9 3.5 3.6 3.7 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities: Tax-exempt $ 2 $ 1 $ 2 $ 2 $ 2 $ 8 $ 4 $ 5 $ 14 Taxable (42) 13 10 9 22 49 36 (19) 107 Equity securities (92) 32 46 (15) 218 225 20 (14) 463 Limited partnership interests (35) (1) 2 2 31 (23) 7 (34) 15 Derivatives and other 6 4 (32) (18) (7) (9) (14) (22) (30) Total $ (161) $ 49 $ 28 $ (20) $ 266 $ 250 $ 53 $ (84) $ 569 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (30) $ (6) $ (12) $ (11) $ 8 $ (6) $ (12) $ (48) $ (10) Change in intent write-downs (77) (28) (27) (42) (42) (25) (60) (132) (127) Net other-than-temporary impairment losses recognized in earnings (107) (34) (39) (53) (34) (31) (72) (180) (137) Sales and other (4) (63) 77 99 49 312 289 139 113 740 Valuation and settlements of derivative instruments 9 6 (32) (16) (12) (8) (14) (17) (34) Total $ (161) $ 49 $ 28 $ (20) $ 266 $ 250 $ 53 $ (84) $ 569 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 37.8 $ 37.6 $ 37.9 $ 38.7 $ 38.8 $ 38.0 $ 38.1 $ 37.9 $ 38.4 (1) (2) (3) (4) Sales and other primarily included sales of equity securities in connection with ongoing portfolio management, as well as losses from valuation changes in public securities held in certain limited partnerships. As of September 30, 2015, Property-Liability has commitments to invest in additional limited partnership interests totaling $1.22 billion. Pre-tax yields are calculated as annualized investment income before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at the end of each quarter during the year. Investment balances, for purposes of the pre-tax yield calculation, exclude unrealized capital gains and losses. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. THE ALLSTATE CORPORATION PROPERTY-LIABILITY NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Nine months endedThree months ended
53 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 NET INVESTMENT INCOME Fixed income securities $ 314 $ 338 $ 344 $ 353 $ 359 $ 365 $ 484 $ 996 $ 1,208 Equity securities 7 8 5 4 7 6 5 20 18 Mortgage loans 49 54 51 55 50 67 76 154 193 Limited partnership interests (1) 105 73 72 58 51 91 67 250 209 Short-term 1 1 - 1 - 1 - 2 1 Other 29 28 27 25 25 24 26 84 75 Subtotal 505 502 499 496 492 554 658 1,506 1,704 Less: Investment expense (14) (13) (15) (16) (19) (16) (18) (42) (53) Net investment income $ 491 $ 489 $ 484 $ 480 $ 473 $ 538 $ 640 $ 1,464 $ 1,651 Net investment income, after-tax $ 319 $ 318 $ 315 $ 313 $ 307 $ 350 $ 416 $ 952 $ 1,073 PRE-TAX YIELDS (2) Fixed income securities 4.9 % 5.1 % 5.2 % 5.3 % 5.3 % 5.3 % 5.4 % 5.1 % 5.3 % Equity securities 2.1 3.4 2.1 1.6 2.3 2.7 2.4 2.4 2.5 Mortgage loans 4.9 5.5 5.2 5.8 5.3 6.8 5.5 5.2 5.9 Limited partnership interests 19.4 14.0 13.8 11.8 10.9 18.2 12.8 15.7 14.0 Total portfolio 5.6 5.6 5.5 5.5 5.4 5.9 5.7 5.6 5.7 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities $ 261 $ 46 $ 68 $ (3) $ (1) $ 5 $ (4) $ 375 $ - Equity securities (58) 16 32 123 (5) 14 2 (10) 11 Mortgage loans 1 1 - (1) 2 (2) 3 2 3 Limited partnership interests (20) (2) 4 1 28 (28) (5) (18) (5) Derivatives and other 10 (2) 7 5 4 1 5 15 10 Total $ 194 $ 59 $ 111 $ 125 $ 28 $ (10) $ 1 $ 364 $ 19 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (17) $ (5) $ (7) $ (9) $ 2 $ - $ (4) $ (29) $ (2) Change in intent write-downs (50) (4) (3) (4) (21) (14) (5) (57) (40) Net other-than-temporary impairment losses recognized in earnings (67) (9) (10) (13) (19) (14) (9) (86) (42) Sales and other (4) 246 69 117 133 43 1 8 432 52 Valuation and settlements of derivative instruments 15 (1) 4 5 4 3 2 18 9 Total $ 194 $ 59 $ 111 $ 125 $ 28 $ (10) $ 1 $ 364 $ 19 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 36.1 $ 36.1 $ 36.3 $ 36.3 $ 36.6 $ 37.3 $ 37.7 $ 36.2 $ 37.1 (1) (2) (3) (4) Sales and other primarily included sales of fixed income securities with longer maturity dates to reduce the risk of rising interest rates and equity securities in connection with ongoing portfolio management, as well as losses from valuation changes in public securities held in certain limited partnerships. As of September 30, 2015, Allstate Financial has commitments to invest in additional limited partnership interests totaling $1.25 billion. Pre-tax yields are calculated as annualized investment income before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at the end of each quarter during the year. Investment balances, for purposes of the pre-tax yield calculation, exclude unrealized capital gains and losses. Amounts related to investments classified as held for sale were excluded from the pre-tax yield calculation in 2014. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. Amounts related to investments classified as held for sale were excluded from average investment balances calculation in 2014. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Nine months endedThree months ended
54 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Sept. 30, Sept. 30, 2015 2015 2015 2014 2014 2014 2014 2015 2014 Consolidated investment portfolio Interest-bearing (1) $ 68,913 $ 70,243 $ 71,287 $ 72,201 $ 71,755 $ 72,580 $ 71,084 $ 68,913 $ 71,756 Equity/owned (2) 9,429 8,898 9,150 8,912 8,966 9,983 10,606 9,429 8,965 Total $ 78,342 $ 79,141 $ 80,437 $ 81,113 $ 80,721 $ 82,563 $ 81,690 $ 78,342 $ 80,721 Consolidated portfolio total return (3) Interest-bearing 0.4 % (0.8) % 1.4 % 0.9 % 0.2 % 1.8 % 1.7 % 1.1 % 3.7 % Equity/owned (0.3) 0.2 0.4 0.2 0.2 0.4 0.4 0.2 1.2 Investment expenses (0.1) - (0.1) - - - - (0.1) (0.2) Total - (0.6) 1.7 1.1 0.4 2.2 2.1 1.2 4.7 Consolidated portfolio total return (3) Income 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.1 % 1.1 % 3.0 % 3.1 % Valuation (1.0) (1.6) 0.7 0.1 (0.6) 1.1 1.0 (1.8) 1.6 Total - (0.6) 1.7 1.1 0.4 2.2 2.1 1.2 4.7 Consolidated net investment income Interest-bearing $ 646 $ 670 $ 664 $ 675 $ 672 $ 695 $ 824 $ 1,980 $ 2,191 Equity/owned 196 155 226 147 195 237 175 577 607 Investment expenses (35) (36) (40) (43) (44) (34) (40) (111) (118) Total $ 807 $ 789 $ 850 $ 779 $ 823 $ 898 $ 959 $ 2,446 $ 2,680 Consolidated Interest-bearing pre-tax yield (4) 3.8 % 3.9 % 3.9 % 3.9 % 3.9 % 4.0 % 4.1 % 3.9 % 4.0 % Property-Liability net investment income Interest-bearing excluding prepayment premiums and litigation proceeds $ 240 $ 233 $ 226 $ 225 $ 223 $ 219 $ 219 $ 699 $ 661 Prepayment premiums and litigation proceeds 4 7 7 9 8 12 13 18 33 Total Interest-bearing 244 240 233 234 231 231 232 717 694 Equity/owned 82 73 148 84 137 137 101 303 375 Less: Investment expenses (19) (21) (23) (24) (24) (17) (21) (63) (62) Total 307 292 358 294 344 351 312 957 1,007 Less: prepayment premiums and litigation proceeds (4) (7) (7) (9) (8) (12) (13) (18) (33) Total excluding prepayment premiums and litigation proceeds $ 303 $ 285 $ 351 $ 285 $ 336 $ 339 $ 299 $ 939 $ 974 Property-Liability interest-bearing pre-tax yield 3.0 % 3.0 % 2.9 % 2.8 % 2.8 % 2.9 % 3.0 % 2.9 % 2.9 % Property-Liability interest-bearing pre-tax yield excluding prepayment premiums and litigation proceeds 2.9 % 2.9 % 2.8 % 2.7 % 2.7 % 2.8 % 2.8 % 2.9 % 2.7 % Allstate Financial net investment income Interest-bearing excluding prepayment premiums and litigation proceeds $ 386 $ 408 $ 413 $ 420 $ 426 $ 432 $ 556 $ 1,207 $ 1,414 Prepayment premiums and litigation proceeds 5 12 8 13 7 24 28 25 59 Total interest-bearing 391 420 421 433 433 456 584 1,232 1,473 Equity/owned 114 82 78 63 59 98 74 274 231 Less: Investment expenses (14) (13) (15) (16) (19) (16) (18) (42) (53) Total 491 489 484 480 473 538 640 1,464 1,651 Less: prepayment premiums and litigation proceeds (5) (12) (8) (13) (7) (24) (28) (25) (59) Total excluding prepayment premiums and litigation proceeds $ 486 $ 477 $ 476 $ 467 $ 466 $ 514 $ 612 $ 1,439 $ 1,592 Allstate Financial interest-bearing pre-tax yield 4.8 % 5.1 % 5.1 % 5.2 % 5.2 % 5.3 % 5.3 % 5.0 % 5.2 % Allstate Financial interest-bearing pre-tax yield excluding prepayment premiums and litigation proceeds 4.7 % 4.9 % 5.0 % 5.0 % 5.1 % 5.0 % 5.0 % 4.9 % 5.0 % (1) Includes fixed income securities, mortgage loans, short-term and other investments. (2) Includes limited partnership interests, equity securities and real estate. (3) (4) Total return on investment portfolio is calculated from GAAP results including the total of net investment income, realized capital gains and losses, the change in unrealized net capital gains and losses, and the change in the difference between fair value and carrying value of mortgage loans and cost method limited partnerships, divided by the average fair value balances. Amounts related to investments classified as held for sale were excluded from the total return calculation in 2014. Pre-tax interest-bearing yield is calculated as annualized interest-bearing investment income before investment expense divided by the average of interest-bearing investment balances at the end of each quarter during the year. Interest-bearing investment balances, for purposes of the pre-tax interest-bearing yield calculation, exclude unrealized capital gains and losses. Amounts related to investments classified as held for sale were excluded from the pre-tax interest-bearing yield calculation in 2014. THE ALLSTATE CORPORATION INVESTMENT RESULTS ($ in millions) Nine months endedThree months ended
55 Market- Market- Performance- Performance- Based Based Based Based September 30, 2015 Total Core (1) Active (2) Long-Term (3) Opportunistic (4) Fixed income securities, at fair value $ 58,257 $ 51,644 $ 6,501 $ 64 $ 48 Equity securities, at fair value 4,236 3,438 644 83 71 Mortgage loans 4,402 4,402 - - - Limited partnership interests 4,823 381 - 4,442 - Short-term, at fair value 3,036 2,452 584 - - Other 3,588 2,971 207 401 9 Consolidated total $ 78,342 $ 65,288 $ 7,936 $ 4,990 $ 128 Consolidated % 83% 10% 7% 0% Property-Liability total $ 38,213 $ 28,087 $ 7,286 $ 2,755 $ 85 Property-Liability % 74% 19% 7% 0% Allstate Financial total $ 37,269 $ 34,342 $ 650 $ 2,235 $ 42 Allstate Financial % 92% 2% 6% 0% Market- Market- Performance- Performance- Based Based Based Based December 31, 2014 Total Core (1) Active (2) Long-Term (3) Opportunistic (4) Fixed income securities, at fair value $ 62,440 $ 57,268 $ 5,084 $ 50 $ 38 Equity securities, at fair value 4,104 3,080 870 57 97 Mortgage loans 4,188 4,188 - - - Limited partnership interests 4,527 358 - 4,169 - Short-term, at fair value 2,540 2,488 52 - - Other 3,314 2,811 221 282 - Consolidated total $ 81,113 $ 70,193 $ 6,227 $ 4,558 $ 135 Consolidated % 86% 8% 6% 0% Property-Liability total $ 39,083 $ 30,458 $ 5,943 $ 2,592 $ 90 Property-Liability % 78% 15% 7% 0% Allstate Financial total $ 38,809 $ 36,515 $ 283 $ 1,966 $ 45 Allstate Financial % 94% 1% 5% 0% (1) Market-based core is comprised primarily of highly diversified fixed income securities, mortgage loans and equity securities to align with business segment priorities. (2) Market-based active is comprised primarily of fixed income and equity securities to generate additional returns by taking advantage of market opportunities. (3) Performance-based long-term is comprised primarily of private equity and real estate investments to generate returns over an extended horizon. (4) Performance-based opportunistic primarily generates returns by taking advantage of asset dislocations and by selectively providing liquidity to distressed sellers. THE ALLSTATE CORPORATION INVESTMENT POSITION BY STRATEGY ($ in millions)
56 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2015 2015 2014 2014 2014 2014 Investment position Limited Partnerships Private equity / debt (1) $ 3,131 $ 3,012 $ 2,969 $ 2,756 $ 2,759 $ 2,631 $ 2,674 Real estate (2) 1,160 1,164 1,366 1,413 1,425 1,517 1,577 Timber & Agriculture-Related (3) 151 - - - - - - Total PBLT - Limited Partnerships $ 4,442 $ 4,176 $ 4,335 $ 4,169 $ 4,184 $ 4,148 $ 4,251 Other (4) Private equity / debt $ 93 $ 70 $ 67 $ 53 $ 39 $ - $ - Real estate 288 242 201 168 115 111 117 Timber & Agriculture-Related 167 167 168 168 168 169 169 Total PBLT - Other $ 548 $ 479 $ 436 $ 389 $ 322 $ 280 $ 286 Total Private equity / debt $ 3,224 $ 3,082 $ 3,036 $ 2,809 $ 2,798 $ 2,631 $ 2,674 Real estate 1,448 1,406 1,567 1,581 1,540 1,628 1,694 Timber & Agriculture-Related 318 167 168 168 168 169 169 Total PBLT $ 4,990 $ 4,655 $ 4,771 $ 4,558 $ 4,506 $ 4,428 $ 4,537 Investment income, before expense Limited Partnerships Private equity / debt $ 162 $ 113 $ 80 $ 96 $ 66 $ 123 $ 106 Real estate 5 10 123 25 93 55 38 Timber & Agriculture-Related - - - - - - - Total PBLT - Limited Partnerships $ 167 $ 123 $ 203 $ 121 $ 159 $ 178 $ 144 Other Private equity / debt $ 1 $ - $ - $ - $ - $ - $ - Real estate 7 5 4 3 4 3 4 Timber & Agriculture-Related 1 2 2 2 2 4 1 Total PBLT - Other $ 9 $ 7 $ 6 $ 5 $ 6 $ 7 $ 5 Total Private equity / debt $ 163 $ 113 $ 80 $ 96 $ 66 $ 123 $ 106 Real estate 12 15 127 28 97 58 42 Timber & Agriculture-Related 1 2 2 2 2 4 1 Total PBLT $ 176 $ 130 $ 209 $ 126 $ 165 $ 185 $ 149 Realized Capital Gains and Losses (Pre-Tax) By Asset Type Limited Partnerships Private equity / debt $ (3) $ (2) $ 9 $ (4) $ 8 $ (34) $ (10) Real estate (3) (1) (2) 7 50 (14) 10 Timber & Agriculture-Related - - - - - - - Total PBLT - Limited Partnerships $ (6) $ (3) $ 7 $ 3 $ 58 $ (48) $ - Other Private equity / debt $ 6 $ (1) $ - $ - $ - $ - $ - Real estate (1) - - - 7 - - Timber & Agriculture-Related - - 1 - - - - Total PBLT - Other $ 5 $ (1) $ 1 $ - $ 7 $ - $ - Total Private equity / debt $ 3 $ (3) $ 9 $ (4) $ 8 $ (34) $ (10) Real estate (4) (1) (2) 7 57 (14) 10 Timber & Agriculture-Related - - 1 - - - - Total PBLT $ (1) $ (4) $ 8 $ 3 $ 65 $ (48) $ - (1) Includes Private equity / debt funds on page 49, excluding Timber and Agriculture-Related. (2) Includes Real estate funds from page 49. (3) Includes Timber and Agriculture-Related reflected in Private equity / debt funds on page 49. (4) Includes PBLT - fixed income securities, equity securities and other investments on page 55. THE ALLSTATE CORPORATION PERFORMANCE-BASED LONG-TERM INVESTMENTS ("PBLT") ($ in millions) As of or for the three months ended
57 Operating income is net income available 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. Average underlying loss (incurred pure premium) and expense is calculated as the underlying combined ratio (a non-GAAP measure) multiplied by the GAAP quarterly earned premium, which is annualized (multiplied by 4) (“average premium”). We believe that this measure is useful to investors and it is used by management for the same reasons noted above for the underlying combined ratio. A reconciliation of average underlying loss and expense is provided in the schedule, "Allstate Brand Auto and Homeowners Underlying Loss and Expense". 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. A reconciliation of underlying loss ratio is provided in the schedules "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics" and "Encompass Brand Profitability Measures and Statistics". 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. A reconciliation of the underlying combined ratio to combined ratio is provided in the schedules "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics", "Encompass Brand Profitability Measures and Statistics", "Auto, Homeowners and Other Personal Lines Underlying Combined Ratios", "Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures" and "Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures". Definitions of Non-GAAP Measures 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 available 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. A reconciliation of return on common shareholders' equity and operating income return on common shareholders' equity can be found in the schedule, "Return on Common Shareholders' Equity". Book value per common 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 common 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 common shares outstanding plus dilutive potential common shares outstanding. We use the trend in book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, in conjunction with book value per common 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 common 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 common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, should not be considered a substitute for book value per common share, and does not reflect the recorded net worth of our business. A reconciliation of book value per common share, excluding the impact of unrealized net capital gains on fixed income securities, and book value per common share can be found in the schedule, "Book Value per Common Share". 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. Net income available 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 available 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 available 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 available to common shareholders and does not reflect the overall profitability of our business. A reconciliation of operating income to net income available to common shareholders is provided in the schedule, "Contribution to Income". 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 available to common shareholders is the most directly comparable GAAP measure. Underwriting income should not be considered a substitute for net income available to common shareholders and does not reflect the overall profitability of our business. A reconciliation of Property-Liability underwriting income to net income available to common shareholders is provided in the schedule, "Property-Liability Results". Combined ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between two GAAP operating ratios: the combined ratio and the effect of catastrophes 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. 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. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. The combined ratio excluding the effect of catastrophes should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business. A reconciliation of the combined ratio excluding the effect of catastrophes to combined ratio is provided in the schedule, "Property-Liability Results".