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): August 3, 2016
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))
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Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
The Registrant’s press release dated August 3, 2016, announcing its financial results for the second quarter of 2016, and the Registrant’s second quarter 2016 investor supplement are furnished as Exhibits 99.1 and 99.2, respectively, 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 August 3, 2016
99.2 Second quarter 2016 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: August 3, 2016 | ||
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Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts:
Greg Burns John Griek
Media Relations Investor Relations
(847) 402-5600 (847) 402-2800
Allstate Net Income Impacted By Catastrophes
Proactive Focus on Profits Offsets Higher Auto Frequency
NORTHBROOK, Ill., August 3, 2016 – The Allstate Corporation (NYSE: ALL) today reported financial results for the second quarter of 2016. The financial highlights were:
The Allstate Corporation Consolidated Highlights | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
($ millions, except per share amounts and ratios) | 2016 | 2015 | % / pts Change | 2016 | 2015 | % / pts Change | |||||||||||
Consolidated revenues | $ | 9,164 | $ | 8,982 | 2.0 | $ | 18,035 | $ | 17,934 | 0.6 | |||||||
Net income applicable to common shareholders | 242 | 326 | (25.8 | ) | 459 | 974 | (52.9 | ) | |||||||||
per diluted common share | 0.64 | 0.79 | (19.0 | ) | 1.21 | 2.33 | (48.1 | ) | |||||||||
Operating income* | 235 | 262 | (10.3 | ) | 557 | 878 | (36.6 | ) | |||||||||
per diluted common share* | 0.62 | 0.63 | (1.6 | ) | 1.46 | 2.10 | (30.5 | ) | |||||||||
Return on common shareholders’ equity | |||||||||||||||||
Net income applicable to common shareholders | 8.0 | % | 12.4 | % | (4.4) pts | ||||||||||||
Operating income* | 10.1 | % | 11.9 | % | (1.8) pts | ||||||||||||
Book value per common share | 50.05 | 47.96 | 4.4 | ||||||||||||||
Property-Liability combined ratio | |||||||||||||||||
Recorded | 100.8 | 100.1 | 0.7 pts | 99.6 | 96.9 | 2.7 pts | |||||||||||
Underlying combined ratio* (excludes catastrophes, prior year reserve reestimates and amortization of purchased intangibles) | 88.6 | 89.1 | (0.5) pts | 87.9 | 89.1 | (1.2) pts | |||||||||||
Catastrophe losses | 961 | 797 | 20.6 | 1,788 | 1,091 | 63.9 | |||||||||||
* | 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 delivered $242 million of net income, $0.64 per share, despite the impact of severe weather and increased frequency of auto accidents,” said Tom Wilson, chairman and chief executive officer of The Allstate Corporation. “Homeowners insurance generated an underwriting profit despite seasonally high second quarter catastrophe losses and a record hail storm in Texas. Initiating an aggressive auto insurance profit improvement plan over a year ago enabled us to maintain underlying margins despite higher auto insurance frequency. The underlying combined ratio was 88.6 for the quarter and 87.9 for the first six months of 2016 in comparison to the full year outlook range between 88 and 90(1).”
“Progress on our five operating priorities reflected the adjustments made to proactively adapt to the external operating environment,” Wilson continued. “Our focus on better serving customers, achieving target returns on capital and growing insurance policies in force are interrelated and results reflect the priority on customers and returns. We served customers particularly well in those areas impacted by catastrophes. Overall insurance policies in force were flat as outstanding growth in Allstate Financial’s benefits business was offset by a reduction in auto
____________
(1) A reconciliation of this non-GAAP measure to the combined ratio, a GAAP measure, is not possible on a forward-looking basis because it is not possible to provide a reliable forecast of catastrophes, and prior year reserve reestimates are expected to be zero because reserves are determined based on our best estimate of ultimate loss reserves as of the reporting dates.
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insurance policies. Total return on the investment portfolio was 1.9% for the quarter with an equal contribution from investment income and increased bond values. Our efforts to build long-term growth platforms led us to combine our telematics efforts into a new company, Arity, LLC, which serves Allstate, Esurance and other businesses in the connected car market,” concluded Wilson.
Consolidated Highlights
Total revenue of $9.2 billion in the second quarter of 2016 increased by 2.0% compared to the prior year quarter, as higher insurance premiums outweighed declines in net investment income and realized capital gains. Property-liability insurance premiums increased 3.5% and Allstate Financial premiums and contract charges rose 5.2% compared to the second quarter of 2015. Net investment income was 3.4% lower than the second quarter a year ago, and realized capital gains were $24 million, compared to $108 million in the prior year quarter. Total revenue through the first six months of 2016 was $18.0 billion, 0.6% higher than the first six months of 2015.
Net income applicable to common shareholders was $242 million, or $0.64 per diluted share, in the second quarter of 2016, compared to $326 million, or $0.79 per diluted share, in the second quarter of 2015. For the first six months of 2016, net income applicable to common shareholders was $459 million, compared to $974 million for the same period in 2015. The decline in net income in both periods was due primarily to higher catastrophe losses. Property-liability net income was $198 million in the second quarter of 2016, a decline of $24 million compared to the prior year quarter. Allstate Financial net income was $116 million in the second quarter of 2016, a decline of $63 million compared to the prior year quarter.
Operating income was $235 million in the second quarter of 2016, compared to $262 million in the second quarter of 2015. Property-liability operating income of $186 million in the second quarter of 2016 was $12 million lower than in the second quarter of 2015. The property-liability underwriting loss* of $66 million in the second quarter of 2016 was $56 million worse than in the prior year quarter, driven by an increase in catastrophe losses and higher auto loss costs, partially offset by higher earned premium. Allstate Financial operating income of $120 million in the second quarter of 2016 was $19 million lower than in the second quarter of 2015, due primarily to lower investment income resulting from portfolio repositioning in 2015 to deliver better long-term risk-adjusted returns. Operating income through the first six months of 2016 was $557 million, compared to $878 million for the first six months of 2015.
Financial Results: Second Quarter 2016
Property-liability earned premium increased 3.5% in the second quarter of 2016 compared to the prior year quarter, driven by 3.9% growth in the Allstate brand. The recorded combined ratio was 100.8 for the second quarter of 2016, which included $961 million, or 12.3 points, of catastrophe losses. The underlying combined ratio of 88.6 for the second quarter of 2016 was 0.5 points better than the second quarter of 2015.
Allstate brand earned premium growth of 3.9% in the second quarter of 2016 compared to the prior year quarter reflects a 5.7% increase in Allstate brand auto average premium, the result of increased rates that were driven by higher loss costs. The Allstate brand recorded combined ratio of 100.1 was 1.4 points higher than in the second quarter of 2015, driven by higher catastrophe losses, which were partially offset by a 0.7 point decline in the expense ratio. Allstate brand auto insurance had a second quarter 2016 recorded combined ratio of 101.2, which included 4.1 points of catastrophe losses. The homeowners insurance recorded combined ratio of 97.0 for the second quarter of 2016 included $644 million of catastrophe losses, while the recorded combined ratio on a trailing twelve month basis was 83.5.
Allstate brand auto policies in force declined by 1.0% in the second quarter of 2016 as the company continued to execute its auto profit improvement plan, which adversely impacted both new business and retention. New business volume in the second quarter of 2016 declined 29% compared to the second quarter of 2015. Auto retention levels in the second quarter of 2016 were in line with the first quarter of 2016, but 0.9 points below the prior year quarter. Allstate brand auto approved rate increases for the second quarter of 2016 were 3.2%, bringing the trailing twelve month total increase to 8.4%. Price increases over the past twelve months helped increase net written premium by 3.9% in the second quarter of 2016 compared to the second quarter of 2015. The underlying combined ratio of 97.8 was consistent with the second quarter of 2015, as higher frequency and severity were offset by higher average premium and a lower expense ratio.
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Allstate brand homeowners net written premium grew by 0.7% in the second quarter of 2016 compared to the second quarter of 2015, as average premium increased by 1.8% and policies in force declined by 0.1%. The underlying combined ratio of 58.6 was 2.1 points better than the second quarter of 2015, primarily due to a decline in claim frequency in the second quarter of 2016 compared to the second quarter of 2015.
Esurance net written premium growth of 5.7% compared to the prior year quarter reflects a 1.4% decline in policies in force, which was more than offset by a 6.3% increase in auto average premium. The Esurance recorded combined ratio of 108.9 in the second quarter of 2016 was 1.3 points better than the same quarter a year ago. The loss ratio was 76.9 in the second quarter of 2016 compared to 75.6 in the prior year quarter.
Encompass net written premium declined by 6.8% and policies in force were 11.4% lower in the second quarter of 2016 compared to the prior year quarter, given our continued focus on improving returns in this business. The recorded combined ratio of 104.9 in the second quarter of 2016 was adversely impacted by $34 million, or 11.2 points, of catastrophe losses. The underlying combined ratio of 92.8 was 3.7 points better than the same period a year ago, as we continue to focus on enhanced pricing and underwriting sophistication.
Allstate Financial net income was $116 million in the second quarter of 2016 including $61 million in the life insurance business, $29 million in the benefits business and $26 million in the annuity business. Net income was $179 million in the second quarter of 2015. Operating income of $120 million in the second quarter of 2016 was $19 million lower than the prior year quarter. Life business operating income of $64 million in the second quarter increased $9 million compared to the prior year quarter, driven by favorable mortality experience and premium growth. Benefits business operating income of $29 million for the second quarter was consistent with the prior year quarter, while the annuity business generated operating income of $27 million, down $29 million from second quarter 2015.
Net investment income of $762 million declined $27 million in the second quarter of 2016 compared to the second quarter of 2015, due to lower interest income partially offset by higher dividends on equity securities and performance-based investment results. Interest income from our fixed income portfolio declined compared to the second quarter of 2015, reflecting the Allstate Financial annuity portfolio repositioning into equity securities, performance-based investments and interim positions in shorter maturity fixed income securities. These investments are intended to improve our long-term economic returns.
Net realized capital gains were $24 million in the second quarter of 2016 compared to $108 million in the prior year quarter. Net realized gains on sales totaled $104 million, primarily related to ongoing portfolio management actions. Impairment write-downs were $63 million in the second quarter, including $38 million related to energy investments.
Proactive Capital Management
“Allstate returned $1.07 billion to shareholders during the first six months of 2016, through a combination of common stock dividends and repurchasing outstanding shares,” said Steve Shebik, chief financial officer. “On June 1, 2016, we entered into an accelerated share repurchase (ASR) agreement to purchase $350 million of our outstanding common stock. As of June 30, 2016, there was $1.2 billion remaining on the common share repurchase authorization. Book value per diluted common share of $50.05 was 4.4% higher than the second quarter of 2015 and 2.4% greater than the first quarter of 2016 due to increased unrealized gains in the investment portfolio.”
Visit www.allstateinvestors.com to view additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be held at 9 a.m. ET on Thursday, August 4.
The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer, protecting approximately 16 million households from life’s uncertainties through auto, home, life and other insurance offered through its Allstate, Esurance, Encompass and Answer Financial brand names. Now celebrating its 85th anniversary as an insurer, Allstate is widely known through the slogan “You’re In Good Hands With Allstate®.” Allstate agencies are in virtually every local community in America.
Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.
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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 June 30, | Six months ended June 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Revenues | |||||||||||||||
Property-liability insurance premiums | $ | 7,814 | $ | 7,549 | $ | 15,537 | $ | 14,975 | |||||||
Life and annuity premiums and contract charges | 564 | 536 | 1,130 | 1,073 | |||||||||||
Net investment income | 762 | 789 | 1,493 | 1,639 | |||||||||||
Realized capital gains and losses: | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (77 | ) | (47 | ) | (168 | ) | (100 | ) | |||||||
OTTI losses reclassified to (from) other comprehensive income | (2 | ) | 4 | 8 | 8 | ||||||||||
Net OTTI losses recognized in earnings | (79 | ) | (43 | ) | (160 | ) | (92 | ) | |||||||
Sales and other realized capital gains and losses | 103 | 151 | 35 | 339 | |||||||||||
Total realized capital gains and losses | 24 | 108 | (125 | ) | 247 | ||||||||||
9,164 | 8,982 | 18,035 | 17,934 | ||||||||||||
Costs and expenses | |||||||||||||||
Property-liability insurance claims and claims expense | 5,901 | 5,587 | 11,585 | 10,580 | |||||||||||
Life and annuity contract benefits | 454 | 446 | 909 | 887 | |||||||||||
Interest credited to contractholder funds | 185 | 185 | 375 | 384 | |||||||||||
Amortization of deferred policy acquisition costs | 1,126 | 1,086 | 2,255 | 2,156 | |||||||||||
Operating costs and expenses | 1,040 | 1,061 | 2,022 | 2,151 | |||||||||||
Restructuring and related charges | 11 | 19 | 16 | 23 | |||||||||||
Interest expense | 72 | 73 | 145 | 146 | |||||||||||
8,789 | 8,457 | 17,307 | 16,327 | ||||||||||||
Gain on disposition of operations | 1 | 1 | 3 | — | |||||||||||
Income from operations before income tax expense | 376 | 526 | 731 | 1,607 | |||||||||||
Income tax expense | 105 | 171 | 214 | 575 | |||||||||||
Net income | 271 | 355 | 517 | 1,032 | |||||||||||
Preferred stock dividends | 29 | 29 | 58 | 58 | |||||||||||
Net income applicable to common shareholders | $ | 242 | $ | 326 | $ | 459 | $ | 974 | |||||||
Earnings per common share: | |||||||||||||||
Net income applicable to common shareholders per common share – Basic | $ | 0.65 | $ | 0.80 | $ | 1.22 | $ | 2.37 | |||||||
Weighted average common shares – Basic | 373.6 | 407.0 | 375.8 | 411.4 | |||||||||||
Net income applicable to common shareholders per common share – Diluted | $ | 0.64 | $ | 0.79 | $ | 1.21 | $ | 2.33 | |||||||
Weighted average common shares – Diluted | 378.1 | 412.6 | 380.5 | 417.6 | |||||||||||
Cash dividends declared per common share | $ | 0.33 | $ | 0.30 | $ | 0.66 | $ | 0.60 | |||||||
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THE ALLSTATE CORPORATION | |||||||||||||||
BUSINESS RESULTS | |||||||||||||||
($ in millions, except ratios) | Three months ended | Six months ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Property-Liability | |||||||||||||||
Premiums written | $ | 8,051 | $ | 7,877 | $ | 15,566 | $ | 15,183 | |||||||
Premiums earned | $ | 7,814 | $ | 7,549 | $ | 15,537 | $ | 14,975 | |||||||
Claims and claims expense | (5,901 | ) | (5,587 | ) | (11,585 | ) | (10,580 | ) | |||||||
Amortization of deferred policy acquisition costs | (1,057 | ) | (1,021 | ) | (2,113 | ) | (2,021 | ) | |||||||
Operating costs and expenses | (912 | ) | (934 | ) | (1,765 | ) | (1,896 | ) | |||||||
Restructuring and related charges | (10 | ) | (17 | ) | (15 | ) | (21 | ) | |||||||
Underwriting (loss) income | (66 | ) | (10 | ) | 59 | 457 | |||||||||
Net investment income | 316 | 292 | 618 | 650 | |||||||||||
Periodic settlements and accruals on non-hedge derivative instruments | — | — | (1 | ) | (1 | ) | |||||||||
Amortization of purchased intangible assets | 9 | 13 | 18 | 25 | |||||||||||
Income tax expense on operations | (73 | ) | (97 | ) | (217 | ) | (378 | ) | |||||||
Operating income | 186 | 198 | 477 | 753 | |||||||||||
Realized capital gains and losses, after-tax | 18 | 31 | (46 | ) | 49 | ||||||||||
Gain on disposition of operations, after-tax | — | 1 | — | 1 | |||||||||||
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax | — | — | 1 | 1 | |||||||||||
Amortization of purchased intangible assets, after-tax | (6 | ) | (8 | ) | (12 | ) | (16 | ) | |||||||
Change in accounting for investments in qualified affordable housing projects, after-tax | — | — | — | (28 | ) | ||||||||||
Net income applicable to common shareholders | $ | 198 | $ | 222 | $ | 420 | $ | 760 | |||||||
Catastrophe losses | $ | 961 | $ | 797 | $ | 1,788 | $ | 1,091 | |||||||
Operating ratios: | |||||||||||||||
Claims and claims expense ratio | 75.5 | 74.0 | 74.6 | 70.6 | |||||||||||
Expense ratio | 25.3 | 26.1 | 25.0 | 26.3 | |||||||||||
Combined ratio | 100.8 | 100.1 | 99.6 | 96.9 | |||||||||||
Effect of catastrophe losses on combined ratio | 12.3 | 10.6 | 11.5 | 7.3 | |||||||||||
Effect of prior year reserve reestimates on combined ratio | — | 0.3 | 0.1 | 0.4 | |||||||||||
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio | 0.2 | 0.1 | — | — | |||||||||||
Effect of amortization of purchased intangible assets on combined ratio | 0.1 | 0.2 | 0.1 | 0.1 | |||||||||||
Effect of Discontinued Lines and Coverages on combined ratio | — | — | — | — | |||||||||||
Allstate Financial | |||||||||||||||
Premiums and contract charges | $ | 564 | $ | 536 | $ | 1,130 | $ | 1,073 | |||||||
Net investment income | 435 | 489 | 854 | 973 | |||||||||||
Contract benefits | (454 | ) | (446 | ) | (909 | ) | (887 | ) | |||||||
Interest credited to contractholder funds | (179 | ) | (191 | ) | (363 | ) | (383 | ) | |||||||
Amortization of deferred policy acquisition costs | (68 | ) | (62 | ) | (139 | ) | (131 | ) | |||||||
Operating costs and expenses | (121 | ) | (118 | ) | (244 | ) | (241 | ) | |||||||
Restructuring and related charges | (1 | ) | (2 | ) | (1 | ) | (2 | ) | |||||||
Income tax expense on operations | (56 | ) | (67 | ) | (104 | ) | (129 | ) | |||||||
Operating income | 120 | 139 | 224 | 273 | |||||||||||
Realized capital gains and losses, after-tax | — | 38 | (32 | ) | 110 | ||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | (4 | ) | 4 | (8 | ) | (1 | ) | ||||||||
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 | ) | (2 | ) | (2 | ) | |||||||
Gain (loss) on disposition of operations, after-tax | 1 | — | 2 | (1 | ) | ||||||||||
Change in accounting for investments in qualified affordable housing projects, after-tax | — | — | — | (17 | ) | ||||||||||
Net income applicable to common shareholders | $ | 116 | $ | 179 | $ | 184 | $ | 362 | |||||||
Corporate and Other | |||||||||||||||
Net investment income | $ | 11 | $ | 8 | $ | 21 | $ | 16 | |||||||
Operating costs and expenses | (79 | ) | (82 | ) | (158 | ) | (160 | ) | |||||||
Income tax benefit on operations | 26 | 28 | 51 | 54 | |||||||||||
Preferred stock dividends | (29 | ) | (29 | ) | (58 | ) | (58 | ) | |||||||
Operating loss | (71 | ) | (75 | ) | (144 | ) | (148 | ) | |||||||
Realized capital gains and losses, after-tax | (1 | ) | — | (1 | ) | — | |||||||||
Net loss applicable to common shareholders | $ | (72 | ) | $ | (75 | ) | $ | (145 | ) | $ | (148 | ) | |||
Consolidated net income applicable to common shareholders | $ | 242 | $ | 326 | $ | 459 | $ | 974 | |||||||
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THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||
($ in millions, except par value data) | June 30, 2016 | December 31, 2015 | |||||
Assets | (unaudited) | ||||||
Investments: | |||||||
Fixed income securities, at fair value (amortized cost $55,770 and $57,201) | $ | 58,129 | $ | 57,948 | |||
Equity securities, at fair value (cost $4,924 and $4,806) | 5,265 | 5,082 | |||||
Mortgage loans | 4,453 | 4,338 | |||||
Limited partnership interests | 5,407 | 4,874 | |||||
Short-term, at fair value (amortized cost $2,850 and $2,122) | 2,850 | 2,122 | |||||
Other | 3,590 | 3,394 | |||||
Total investments | 79,694 | 77,758 | |||||
Cash | 446 | 495 | |||||
Premium installment receivables, net | 5,593 | 5,544 | |||||
Deferred policy acquisition costs | 3,819 | 3,861 | |||||
Reinsurance recoverables, net | 8,650 | 8,518 | |||||
Accrued investment income | 564 | 569 | |||||
Property and equipment, net | 1,011 | 1,024 | |||||
Goodwill | 1,219 | 1,219 | |||||
Other assets | 2,850 | 2,010 | |||||
Separate Accounts | 3,438 | 3,658 | |||||
Total assets | $ | 107,284 | $ | 104,656 | |||
Liabilities | |||||||
Reserve for property-liability insurance claims and claims expense | $ | 24,904 | $ | 23,869 | |||
Reserve for life-contingent contract benefits | 12,215 | 12,247 | |||||
Contractholder funds | 20,845 | 21,295 | |||||
Unearned premiums | 12,300 | 12,202 | |||||
Claim payments outstanding | 946 | 842 | |||||
Deferred income taxes | 782 | 90 | |||||
Other liabilities and accrued expenses | 6,192 | 5,304 | |||||
Long-term debt | 5,109 | 5,124 | |||||
Separate Accounts | 3,438 | 3,658 | |||||
Total liabilities | 86,731 | 84,631 | |||||
Shareholders’ equity | |||||||
Preferred stock and additional capital paid-in, $1 par value, 72.2 thousand shares issued and outstanding, $1,805 aggregate liquidation preference | 1,746 | 1,746 | |||||
Common stock, $.01 par value, 900 million issued, 371 million and 381 million shares outstanding | 9 | 9 | |||||
Additional capital paid-in | 3,203 | 3,245 | |||||
Retained income | 39,623 | 39,413 | |||||
Deferred ESOP expense | (13 | ) | (13 | ) | |||
Treasury stock, at cost (529 million and 519 million shares) | (24,310 | ) | (23,620 | ) | |||
Accumulated other comprehensive income: | |||||||
Unrealized net capital gains and losses: | |||||||
Unrealized net capital gains and losses on fixed income securities with OTTI | 49 | 56 | |||||
Other unrealized net capital gains and losses | 1,702 | 608 | |||||
Unrealized adjustment to DAC, DSI and insurance reserves | (127 | ) | (44 | ) | |||
Total unrealized net capital gains and losses | 1,624 | 620 | |||||
Unrealized foreign currency translation adjustments | (41 | ) | (60 | ) | |||
Unrecognized pension and other postretirement benefit cost | (1,288 | ) | (1,315 | ) | |||
Total accumulated other comprehensive income (loss) | 295 | (755 | ) | ||||
Total shareholders’ equity | 20,553 | 20,025 | |||||
Total liabilities and shareholders’ equity | $ | 107,284 | $ | 104,656 | |||
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THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
($ in millions) | Six months ended June 30, | ||||||
2016 | 2015 | ||||||
Cash flows from operating activities | (unaudited) | ||||||
Net income | $ | 517 | $ | 1,032 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and other non-cash items | 188 | 179 | |||||
Realized capital gains and losses | 125 | (247 | ) | ||||
Gain on disposition of operations | (3 | ) | — | ||||
Interest credited to contractholder funds | 375 | 384 | |||||
Changes in: | |||||||
Policy benefits and other insurance reserves | 577 | 526 | |||||
Unearned premiums | 62 | 244 | |||||
Deferred policy acquisition costs | (72 | ) | (132 | ) | |||
Premium installment receivables, net | (27 | ) | (158 | ) | |||
Reinsurance recoverables, net | (120 | ) | (144 | ) | |||
Income taxes | (176 | ) | (283 | ) | |||
Other operating assets and liabilities | (88 | ) | (98 | ) | |||
Net cash provided by operating activities | 1,358 | 1,303 | |||||
Cash flows from investing activities | |||||||
Proceeds from sales | |||||||
Fixed income securities | 12,589 | 16,012 | |||||
Equity securities | 2,487 | 2,074 | |||||
Limited partnership interests | 363 | 591 | |||||
Other investments | 144 | 132 | |||||
Investment collections | |||||||
Fixed income securities | 2,138 | 2,243 | |||||
Mortgage loans | 150 | 357 | |||||
Other investments | 168 | 177 | |||||
Investment purchases | |||||||
Fixed income securities | (12,947 | ) | (16,482 | ) | |||
Equity securities | (2,672 | ) | (1,920 | ) | |||
Limited partnership interests | (703 | ) | (563 | ) | |||
Mortgage loans | (264 | ) | (509 | ) | |||
Other investments | (449 | ) | (518 | ) | |||
Change in short-term investments, net | (669 | ) | (391 | ) | |||
Change in other investments, net | (39 | ) | (16 | ) | |||
Purchases of property and equipment, net | (120 | ) | (133 | ) | |||
Net cash provided by investing activities | 176 | 1,054 | |||||
Cash flows from financing activities | |||||||
Repayments of long-term debt | (16 | ) | (9 | ) | |||
Contractholder fund deposits | 522 | 527 | |||||
Contractholder fund withdrawals | (1,013 | ) | (1,152 | ) | |||
Dividends paid on common stock | (240 | ) | (243 | ) | |||
Dividends paid on preferred stock | (58 | ) | (58 | ) | |||
Treasury stock purchases | (904 | ) | (1,424 | ) | |||
Shares reissued under equity incentive plans, net | 72 | 109 | |||||
Excess tax benefits on share-based payment arrangements | 20 | 43 | |||||
Other | 34 | (2 | ) | ||||
Net cash used in financing activities | (1,583 | ) | (2,209 | ) | |||
Net (decrease) increase in cash | (49 | ) | 148 | ||||
Cash at beginning of period | 495 | 657 | |||||
Cash at end of period | $ | 446 | $ | 805 | |||
8
The following table presents the investment portfolio by strategy as of June 30, 2016.
($ in millions) | Total | Market-Based Core | Market-Based Active | Performance-Based Long-Term | Performance-Based Opportunistic | ||||||||||||||
Fixed income securities | $ | 58,129 | $ | 50,788 | $ | 7,242 | $ | 64 | $ | 35 | |||||||||
Equity securities | 5,265 | 4,334 | 858 | 52 | 21 | ||||||||||||||
Mortgage loans | 4,453 | 4,453 | — | — | — | ||||||||||||||
Limited partnership interests | 5,407 | 370 | — | 5,037 | — | ||||||||||||||
Short-term investments | 2,850 | 2,264 | 586 | — | — | ||||||||||||||
Other | 3,590 | 2,902 | 157 | 505 | 26 | ||||||||||||||
Total | $ | 79,694 | $ | 65,111 | $ | 8,843 | $ | 5,658 | $ | 82 | |||||||||
Property-Liability | $ | 39,689 | $ | 28,826 | $ | 7,774 | $ | 3,034 | $ | 55 | |||||||||
Allstate Financial | 37,760 | 34,040 | 1,069 | 2,624 | 27 | ||||||||||||||
Corporate & Other | 2,245 | 2,245 | — | — | — | ||||||||||||||
Total | $ | 79,694 | $ | 65,111 | $ | 8,843 | $ | 5,658 | $ | 82 | |||||||||
The following table presents investment income by investment strategy for the three months and six months ended June 30.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
($ in millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Market-Based Core | $ | 595 | $ | 640 | $ | 1,176 | $ | 1,269 | |||||||
Market-Based Active | 67 | 52 | 128 | 102 | |||||||||||
Performance-Based Long-Term | 138 | 130 | 269 | 339 | |||||||||||
Performance-Based Opportunistic | 3 | 3 | 5 | 5 | |||||||||||
Investment income, before expense | 803 | 825 | 1,578 | 1,715 | |||||||||||
Investment expense | (41 | ) | (36 | ) | (85 | ) | (76 | ) | |||||||
Net investment income | $ | 762 | $ | 789 | $ | 1,493 | $ | 1,639 | |||||||
9
The following table presents investment income by investment type and strategy for the three months and six months ended June 30, 2016.
($ in millions) | Total | Market-Based Core | Market-Based Active | Performance-Based Long-Term | Performance-Based Opportunistic | ||||||||||||||
Three months ended June 30, 2016 | |||||||||||||||||||
Fixed income securities | $ | 520 | $ | 461 | $ | 56 | $ | 1 | $ | 2 | |||||||||
Equity securities | 44 | 37 | 7 | — | — | ||||||||||||||
Mortgage loans | 53 | 53 | — | — | — | ||||||||||||||
Limited partnership interests | 126 | — | — | 126 | — | ||||||||||||||
Short-term investments | 3 | 2 | 1 | — | — | ||||||||||||||
Other | 57 | 42 | 3 | 11 | 1 | ||||||||||||||
Investment income, before expense | 803 | $ | 595 | $ | 67 | $ | 138 | $ | 3 | ||||||||||
Investment expense | (41 | ) | |||||||||||||||||
Net investment income | $ | 762 | |||||||||||||||||
Property-Liability | $ | 338 | $ | 211 | $ | 58 | $ | 67 | $ | 2 | |||||||||
Allstate Financial | 452 | 371 | 9 | 71 | 1 | ||||||||||||||
Corporate & Other | 13 | 13 | — | — | — | ||||||||||||||
Investment income, before expense | $ | 803 | $ | 595 | $ | 67 | $ | 138 | $ | 3 | |||||||||
Six months ended June 30, 2016 | |||||||||||||||||||
Fixed income securities | $ | 1,038 | $ | 922 | $ | 110 | $ | 2 | $ | 4 | |||||||||
Equity securities | 72 | 61 | 11 | — | — | ||||||||||||||
Mortgage loans | 106 | 106 | — | — | — | ||||||||||||||
Limited partnership interests | 247 | — | — | 247 | — | ||||||||||||||
Short-term investments | 7 | 5 | 2 | — | — | ||||||||||||||
Other | 108 | 82 | 5 | 20 | 1 | ||||||||||||||
Investment income, before expense | 1,578 | $ | 1,176 | $ | 128 | $ | 269 | $ | 5 | ||||||||||
Investment expense | (85 | ) | |||||||||||||||||
Net investment income | $ | 1,493 | |||||||||||||||||
Property-Liability | $ | 664 | $ | 417 | $ | 112 | $ | 132 | $ | 3 | |||||||||
Allstate Financial | 889 | 734 | 16 | 137 | 2 | ||||||||||||||
Corporate & Other | 25 | 25 | — | — | — | ||||||||||||||
Investment income, before expense | $ | 1,578 | $ | 1,176 | $ | 128 | $ | 269 | $ | 5 | |||||||||
10
Definitions of Non-GAAP Measures
We believe that investors’ understanding of Allstate’s performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Operating income is net income applicable to common shareholders, excluding:
• | realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in operating income, |
• | valuation changes on embedded derivatives that are not hedged, after-tax, |
• | amortization of deferred policy acquisition costs (DAC) and deferred sales inducements (DSI), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives that are not hedged, after-tax, |
• | amortization of purchased intangible assets, after-tax, |
• | gain (loss) on disposition of operations, after-tax, and |
• | adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years. |
Net income applicable to common shareholders is the GAAP measure that is most directly comparable to operating income.
We use operating income as an important measure to evaluate our results of operations. We believe that the measure provides investors with a valuable measure of the company’s ongoing performance because it reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses, valuation changes on embedded derivatives that are not hedged, amortization of purchased intangible assets, gain (loss) on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items. Realized capital gains and losses, valuation changes on embedded derivatives that are not hedged and gain (loss) on disposition of operations may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to the insurance underwriting process. Consistent with our intent to protect results or earn additional income, operating income includes periodic settlements and accruals on certain derivative instruments that are reported in realized capital gains and losses because they do not qualify for hedge accounting or are not designated as hedges for accounting purposes. These instruments are used for economic hedges and to replicate fixed income securities, and by including them in operating income, we are appropriately reflecting their trends in our performance and in a manner consistent with the economically hedged investments, product attributes (e.g. net investment income and interest credited to contractholder funds) or replicated investments. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine operating income is the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Operating income is used by management along with the other components of net income applicable to common shareholders to assess our performance. We use adjusted measures of operating income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income applicable to common shareholders, operating income and their components separately and in the aggregate when reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize operating income results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management’s performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses operating income as the denominator. Operating income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business.
11
The following tables reconcile operating income and net income applicable to common shareholders. Taxes on adjustments to reconcile operating income and net income applicable to common shareholders use a 35% effective tax rate and are reported net with the reconciling adjustment. If the effective tax rate is other than 35%, this is specified in the disclosure.
($ in millions, except per share data) | For the three months ended June 30, | ||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Operating income | $ | 186 | $ | 198 | $ | 120 | $ | 139 | $ | 235 | $ | 262 | $ | 0.62 | $ | 0.63 | |||||||||||||||
Realized capital gains and losses, after-tax | 18 | 31 | — | 38 | 17 | 69 | 0.04 | 0.17 | |||||||||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | (4 | ) | 4 | (4 | ) | 4 | (0.01 | ) | 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 | ) | (2 | ) | (1 | ) | (2 | ) | — | — | |||||||||||||||||||
Amortization of purchased intangible assets, after-tax | (6 | ) | (8 | ) | — | — | (6 | ) | (8 | ) | (0.01 | ) | (0.02 | ) | |||||||||||||||||
Gain on disposition of operations, after-tax | — | 1 | 1 | — | 1 | 1 | — | — | |||||||||||||||||||||||
Net income applicable to common shareholders | $ | 198 | $ | 222 | $ | 116 | $ | 179 | $ | 242 | $ | 326 | $ | 0.64 | $ | 0.79 | |||||||||||||||
For the six months ended June 30, | |||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Operating income | $ | 477 | $ | 753 | $ | 224 | $ | 273 | $ | 557 | $ | 878 | $ | 1.46 | $ | 2.10 | |||||||||||||||
Realized capital gains and losses, after-tax | (46 | ) | 49 | (32 | ) | 110 | (79 | ) | 159 | (0.21 | ) | 0.38 | |||||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | (8 | ) | (1 | ) | (8 | ) | (1 | ) | (0.02 | ) | — | ||||||||||||||||||
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax | — | — | (2 | ) | (2 | ) | (2 | ) | (2 | ) | — | — | |||||||||||||||||||
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax | 1 | 1 | — | — | 1 | 1 | — | — | |||||||||||||||||||||||
Amortization of purchased intangible assets, after-tax | (12 | ) | (16 | ) | — | — | (12 | ) | (16 | ) | (0.03 | ) | (0.04 | ) | |||||||||||||||||
Gain (loss) on disposition of operations, after-tax | — | 1 | 2 | (1 | ) | 2 | — | 0.01 | — | ||||||||||||||||||||||
Change in accounting for investments in qualified affordable housing projects, after-tax (all tax) | — | (28 | ) | — | (17 | ) | — | (45 | ) | — | (0.11 | ) | |||||||||||||||||||
Net income applicable to common shareholders | $ | 420 | $ | 760 | $ | 184 | $ | 362 | $ | 459 | $ | 974 | $ | 1.21 | $ | 2.33 | |||||||||||||||
Operating income return on common shareholders’ equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of common shareholders’ equity at the beginning and at the end of the 12-months, after excluding the effect of unrealized net capital gains and losses. Return on common shareholders’ equity is the most directly comparable GAAP measure. We use operating income as the numerator for the same reasons we use operating income, as discussed above. We use average common shareholders’ equity excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily attributable to the company’s earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income applicable to common shareholders and return on common shareholders’ equity because it excludes the effect of items that tend to be highly variable from period to period. We believe that this measure is useful to investors and that it provides a valuable tool for investors when considered along with return on common shareholders’ equity because it eliminates the after-tax effects of realized and unrealized net capital gains and losses that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by management. In addition, it eliminates non-recurring items that are not indicative of our ongoing business or economic trends. A byproduct of excluding the items noted above to determine operating income return on common shareholders’ equity from return on common shareholders’ equity is the transparency and understanding of their significance to return on common shareholders’ equity variability and profitability while recognizing these or similar items may recur in subsequent periods. We use adjusted measures of operating income return on common shareholders’ equity in incentive compensation. Therefore, we believe it is useful for investors to have operating income return on common shareholders’ equity and return on common shareholders’ equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize operating income return on common shareholders’ equity results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management’s utilization of capital. Operating income return on common shareholders’ equity should not be considered a substitute for return on common shareholders’ equity and does not reflect the overall profitability of our business.
12
The following tables reconcile return on common shareholders’ equity and operating income return on common shareholders’ equity.
($ in millions) | For the twelve months ended June 30, | ||||||
2016 | 2015 | ||||||
Return on common shareholders’ equity | |||||||
Numerator: | |||||||
Net income applicable to common shareholders | $ | 1,540 | $ | 2,519 | |||
Denominator: | |||||||
Beginning common shareholders’ equity (1) | $ | 19,552 | $ | 21,126 | |||
Ending common shareholders’ equity (1) | 18,807 | 19,552 | |||||
Average common shareholders’ equity | $ | 19,180 | $ | 20,339 | |||
Return on common shareholders’ equity | 8.0 | % | 12.4 | % | |||
For the twelve months ended June 30, | |||||||
2016 | 2015 | ||||||
Operating income return on common shareholders’ equity | |||||||
Numerator: | |||||||
Operating income | $ | 1,792 | $ | 2,212 | |||
Denominator: | |||||||
Beginning common shareholders’ equity | $ | 19,552 | $ | 21,126 | |||
Unrealized net capital gains and losses | 1,419 | 2,150 | |||||
Adjusted beginning common shareholders’ equity | 18,133 | 18,976 | |||||
Ending common shareholders’ equity | 18,807 | 19,552 | |||||
Unrealized net capital gains and losses | 1,624 | 1,419 | |||||
Adjusted ending common shareholders’ equity | 17,183 | 18,133 | |||||
Average adjusted common shareholders’ equity | $ | 17,658 | $ | 18,555 | |||
Operating income return on common shareholders’ equity | 10.1 | % | 11.9 | % | |||
_____________
(1) Excludes equity related to preferred stock of $1,746 million.
Underwriting income is calculated as premiums earned, less claims and claims expense (“losses”), amortization of DAC, operating costs and expenses and restructuring and related charges as determined using GAAP. Management uses this measure in its evaluation of the results of operations to analyze the profitability of our Property-Liability insurance operations separately from investment results. It is also an integral component of incentive compensation. It is useful for investors to evaluate the components of income separately and in the aggregate when reviewing performance. Net income applicable to common shareholders is the most directly comparable GAAP measure. Underwriting income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business. A reconciliation of Property-Liability underwriting income to net income applicable to common shareholders is provided in the “Business Results” page.
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets (“underlying combined ratio”) is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of catastrophes on the combined ratio, the effect of prior year non-catastrophe reserve reestimates on the combined ratio, and the effect of amortization of purchased intangible assets on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our Property-Liability business that may be obscured by catastrophe losses, prior year reserve reestimates and amortization of purchased intangible assets. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves. Amortization of purchased intangible assets relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide it to facilitate a comparison to our outlook on the underlying combined ratio. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business.
13
The following table reconciles the Property-Liability underlying combined ratio to the Property-Liability combined ratio.
Three months ended June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets (“underlying combined ratio”) | 88.6 | 89.1 | 87.9 | 89.1 | |||||||
Effect of catastrophe losses | 12.3 | 10.6 | 11.5 | 7.3 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (0.2 | ) | 0.2 | 0.1 | 0.4 | ||||||
Effect of amortization of purchased intangible assets | 0.1 | 0.2 | 0.1 | 0.1 | |||||||
Combined ratio | 100.8 | 100.1 | 99.6 | 96.9 | |||||||
Effect of prior year catastrophe reserve reestimates | 0.2 | 0.1 | — | — | |||||||
Underwriting margin is calculated as 100% minus the combined ratio.
The following table reconciles the Allstate brand underlying combined ratio to the Allstate brand combined ratio.
Three months ended June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying combined ratio | 87.5 | 87.7 | 86.8 | 87.6 | |||||||
Effect of catastrophe losses | 12.9 | 10.7 | 12.1 | 7.4 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (0.3 | ) | 0.3 | — | 0.5 | ||||||
Combined ratio | 100.1 | 98.7 | 98.9 | 95.5 | |||||||
Effect of prior year catastrophe reserve reestimates | 0.3 | 0.1 | — | — | |||||||
The following table reconciles the Allstate brand auto underlying combined ratio to the Allstate brand auto combined ratio.
Three months ended June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying combined ratio | 97.8 | 97.8 | 96.9 | 96.7 | |||||||
Effect of catastrophe losses | 4.1 | 3.2 | 3.5 | 1.7 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (0.7 | ) | 0.4 | (0.3 | ) | 0.7 | |||||
Combined ratio | 101.2 | 101.4 | 100.1 | 99.1 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) | — | — | (0.1 | ) | |||||
The following table reconciles the Allstate brand homeowners underlying combined ratio to the Allstate brand homeowners combined ratio.
Three months ended June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying combined ratio | 58.6 | 60.7 | 59.0 | 62.6 | |||||||
Effect of catastrophe losses | 38.3 | 32.1 | 36.2 | 23.0 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 0.1 | (0.5 | ) | — | (0.1 | ) | |||||
Combined ratio | 97.0 | 92.3 | 95.2 | 85.5 | |||||||
Effect of prior year catastrophe reserve reestimates | 1.0 | 0.5 | 0.3 | 0.2 | |||||||
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 June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying combined ratio | 77.3 | 79.2 | 77.7 | 80.7 | |||||||
Effect of catastrophe losses | 15.6 | 11.9 | 15.8 | 9.7 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (1.7 | ) | 1.1 | (1.6 | ) | 0.3 | |||||
Combined ratio | 91.2 | 92.2 | 91.9 | 90.7 | |||||||
Effect of prior year catastrophe reserve reestimates | — | — | — | (0.1 | ) | ||||||
14
The following table reconciles the Encompass brand underlying combined ratio to the Encompass brand combined ratio.
Three months ended June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying combined ratio | 92.8 | 96.5 | 90.5 | 93.6 | |||||||
Effect of catastrophe losses | 11.2 | 18.6 | 12.3 | 12.4 | |||||||
Effect of prior year non-catastrophe reserve reestimates | 0.9 | 0.6 | 2.6 | (0.3 | ) | ||||||
Combined ratio | 104.9 | 115.7 | 105.4 | 105.7 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.6 | ) | 0.3 | (0.2 | ) | (0.3 | ) | ||||
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 June 30, | Six months ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Underlying loss ratio | 74.5 | 74.3 | 73.8 | 76.3 | |||||||
Expense ratio, excluding the effect of amortization of purchased intangible assets | 30.3 | 32.4 | 31.1 | 35.2 | |||||||
Underlying combined ratio | 104.8 | 106.7 | 104.9 | 111.5 | |||||||
Effect of catastrophe losses | 3.4 | 2.0 | 2.1 | 1.0 | |||||||
Effect of prior year non-catastrophe reserve reestimates | (1.0 | ) | (0.7 | ) | (1.0 | ) | (0.9 | ) | |||
Effect of amortization of purchased intangible assets | 1.7 | 2.2 | 1.6 | 2.3 | |||||||
Combined ratio | 108.9 | 110.2 | 107.6 | 113.9 | |||||||
# # # # #
15
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
Second Quarter 2016
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
Property-Liability 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 Claim Frequency Analysis 18-20
Esurance Brand Profitability Measures and Statistics 21
Encompass Brand Profitability Measures and Statistics 22
Auto Profitability Measures 23
Homeowners Profitability Measures 24
Other Personal Lines Profitability Measures 25
Commercial Lines Profitability Measures 26
Other Business Lines Profitability Measures 27
Auto, Homeowners and Other Personal Lines Underlying Combined Ratios 28
Allstate Brand Auto and Homeowners Underlying Loss and Expense 29
Homeowners Supplemental Information 30
Catastrophe Losses by Brand 31
Effect of Catastrophe Losses on the Combined Ratio 32
Catastrophe by Size of Event 33
Prior Year Reserve Reestimates 34
Asbestos and Environmental Reserves 35
Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures 36
Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures 37
Allstate Financial Operations
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, Allstate Annuities and Allstate Benefits Results and Product Information 46,47
Corporate and Other Results 48
Investments
Investments 49
Limited Partnership Investments 50
Unrealized Net Capital Gains and Losses on Security Portfolio by Type 51
Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 52
Property-Liability Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 53
Allstate Financial Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 54
Investment Results 55
Investment Position by Strategy 56
Investment Results by Strategy 57
Investment Income and Realized Capital Gains and Losses By Investment Type and Strategy 58
Performance-Based Long-Term Investments 59
Definitions of Non-GAAP Measures 60
THE ALLSTATE CORPORATION
Investor Supplement - Second Quarter 2016
Table of Contents
1
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Revenues
Property-liability insurance premiums $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975
Life and annuity premiums and contract charges 564 566 547 538 536 537 1,130 1,073
Net investment income 762 731 710 807 789 850 1,493 1,639
Realized capital gains and losses:
Total other-than-temporary impairment ("OTTI") losses (77) (91) (166) (186) (47) (53) (168) (100)
OTTI losses reclassified to (from) other comprehensive
income (2) 10 16 12 4 4 8 8
Net OTTI losses recognized in earnings (79) (81) (150) (174) (43) (49) (160) (92)
Sales and other realized capital gains and losses 103 (68) (100) 207 151 188 35 339
Total realized capital gains and losses 24 (149) (250) 33 108 139 (125) 247
Total revenues 9,164 8,871 8,691 9,028 8,982 8,952 18,035 17,934
Costs and expenses
Property-liability insurance claims and claims expense 5,901 5,684 5,199 5,255 5,587 4,993 11,585 10,580
Life and annuity contract benefits 454 455 456 460 446 441 909 887
Interest credited to contractholder funds 185 190 183 194 185 199 375 384
Amortization of deferred policy acquisition costs 1,126 1,129 1,116 1,092 1,086 1,070 2,255 2,156
Operating costs and expenses 1,040 982 938 992 1,061 1,090 2,022 2,151
Restructuring and related charges 11 5 7 9 19 4 16 23
Interest expense 72 73 73 73 73 73 145 146
Total costs and expenses 8,789 8,518 7,972 8,075 8,457 7,870 17,307 16,327
Gain (loss) on disposition of operations 1 2 1 2 1 (1) 3 -
Income from operations before income
tax expense 376 355 720 955 526 1,081 731 1,607
Income tax expense 105 109 231 305 171 404 214 575
Net income $ 271 $ 246 $ 489 $ 650 $ 355 $ 677 $ 517 $ 1,032
Preferred stock dividends 29 29 29 29 29 29 58 58
Net income applicable to common shareholders $ 242 $ 217 $ 460 $ 621 $ 326 $ 648 $ 459 $ 974
Earnings per common share:
Net income applicable to common shareholders
per common share - Basic $ 0.65 $ 0.57 $ 1.19 $ 1.56 $ 0.80 $ 1.56 $ 1.22 $ 2.37
Weighted average common shares - Basic 373.6 378.1 385.0 397.0 407.0 415.8 375.8 411.4
Net income applicable to common shareholders
per common share - Diluted $ 0.64 $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 $ 1.21 $ 2.33
Weighted average common shares - Diluted 378.1 382.9 390.2 402.1 412.6 422.6 380.5 417.6
Cash dividends declared per common share $ 0.33 $ 0.33 $ 0.30 $ 0.30 $ 0.30 $ 0.30 $ 0.66 $ 0.60
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six months endedThree months ended
2
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Contribution to income
Operating income before the impact of
restructuring and related charges $ 242 $ 325 $ 629 $ 616 $ 274 $ 619 $ 567 $ 893
Restructuring and related charges, after-tax (7) (3) (4) (6) (12) (3) (10) (15)
Operating income * 235 322 625 610 262 616 557 878
Realized capital gains and losses, after-tax 17 (96) (161) 21 69 90 (79) 159
Valuation changes on embedded derivatives that
are not hedged, after-tax (4) (4) 2 (2) 4 (5) (8) (1)
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on embedded
derivatives that are not hedged, after-tax (1) (1) - (1) (2) - (2) (2)
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax - 1 1 - - 1 1 1
Amortization of purchased intangible assets, after-tax (6) (6) (8) (8) (8) (8) (12) (16)
Gain (loss) on disposition of operations, after-tax 1 1 1 1 1 (1) 2 -
Change in accounting for investments in qualified
affordable housing projects, after-tax - - - - - (45) - (45)
Net income applicable to common shareholders $ 242 $ 217 $ 460 $ 621 $ 326 $ 648 $ 459 $ 974
Income per common share - Diluted
Operating income before the impact of
restructuring and related charges $ 0.64 $ 0.85 $ 1.61 $ 1.53 $ 0.66 $ 1.46 $ 1.49 $ 2.14
Restructuring and related charges, after-tax (0.02) (0.01) (0.01) (0.01) (0.03) - (0.03) (0.04)
Operating income 0.62 0.84 1.60 1.52 0.63 1.46 1.46 2.10
Realized capital gains and losses, after-tax 0.04 (0.25) (0.41) 0.05 0.17 0.21 (0.21) 0.38
Valuation changes on embedded derivatives that
are not hedged, after-tax (0.01) (0.01) 0.01 (0.01) 0.01 (0.01) (0.02) -
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 - - - - - - - -
Amortization of purchased intangible assets, after-tax (0.01) (0.01) (0.02) (0.02) (0.02) (0.02) (0.03) (0.04)
Gain (loss) on disposition of operations, after-tax - - - - - - 0.01 -
Change in accounting for investments in qualified
affordable housing projects, after-tax - - - - - (0.11) - (0.11)
Net income applicable to common shareholders $ 0.64 $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 $ 1.21 $ 2.33
Weighted average common shares - Diluted 378.1 382.9 390.2 402.1 412.6 422.6 380.5 417.6
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
($ in millions, except per share data)
Six months endedThree months ended
3
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Property-Liability
Property-Liability insurance premiums $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975
Net investment income 316 302 280 307 292 358 618 650
Realized capital gains and losses 26 (99) (153) (161) 49 28 (73) 77
Total Property-Liability revenues 8,156 7,926 7,811 7,796 7,890 7,812 16,082 15,702
Allstate Financial
Life and annuity premiums and contract charges 564 566 547 538 536 537 1,130 1,073
Net investment income 435 419 420 491 489 484 854 973
Realized capital gains and losses - (49) (97) 194 59 111 (49) 170
Total Allstate Financial revenues 999 936 870 1,223 1,084 1,132 1,935 2,216
Corporate and Other
Service fees (1) 1 1 1 - 1 1 2 2
Net investment income 11 10 10 9 8 8 21 16
Realized capital gains and losses (2) (1) - - - - (3) -
Total Corporate and Other revenues before
reclassification of services fees 10 10 11 9 9 9 20 18
Reclassification of service fees (1) (1) (1) (1) - (1) (1) (2) (2)
Total Corporate and Other revenues 9 9 10 9 8 8 18 16
Consolidated revenues $ 9,164 $ 8,871 $ 8,691 $ 9,028 $ 8,982 $ 8,952 $ 18,035 $ 17,934
(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)
Six months endedThree months ended
4
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2016 2016 2015 2015 2015 2016 2016 2015 2015 2015
Assets Liabilities
Investments Reserve for property-liability insurance claims and claims expense $ 24,904 $ 24,605 $ 23,869 $ 23,757 $ 23,702
Fixed income securities, at fair value Reserve for life-contingent contract benefits 12,215 12,224 12,247 12,229 12,227
(amortized cost $55,770, $55,627, Contractholder funds 20,845 21,092 21,295 21,559 21,968
$57,201, $56,918 and $57,971) $ 58,129 $ 57,291 $ 57,948 $ 58,257 $ 59,930 Unearned premiums 12,300 12,036 12,202 12,343 11,858
Equity securities, at fair value Claim payments outstanding 946 852 842 804 820
(cost $4,924, $4,792, $4,806, Deferred income taxes 782 479 90 243 475
$4,123 and $3,649) 5,265 5,117 5,082 4,236 4,000 Other liabilities and accrued expenses 6,192 5,704 5,304 5,558 5,462
Mortgage loans 4,453 4,302 4,338 4,402 4,343 Long-term debt 5,109 5,108 5,124 5,123 5,133
Limited partnership interests 5,407 5,091 4,874 4,823 4,536 Separate Accounts 3,438 3,507 3,658 3,677 4,121
Short-term, at fair value Total liabilities 86,731 85,607 84,631 85,293 85,766
(amortized cost $2,850,$3,526, $2,122,
$3,036 and $2,821) 2,850 3,526 2,122 3,036 2,821
Other 3,590 3,550 3,394 3,588 3,511
Total investments 79,694 78,877 77,758 78,342 79,141
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, 371 million, 375 million, 381 million,
390 million and 402 million shares outstanding 9 9 9 9 9
Additional capital paid-in 3,203 3,237 3,245 3,224 3,205
Retained income 39,623 39,505 39,413 39,068 38,567
Deferred ESOP expense (13) (13) (13) (23) (23)
Treasury stock, at cost (529 million, 525 million, 519 million,
510 million and 498 million shares) (24,310) (23,994) (23,620) (23,058) (22,273)
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 49 31 56 57 62
Cash 446 531 495 905 805 Other unrealized net capital gains and losses 1,702 1,259 608 886 1,435
Premium installment receivables, net 5,593 5,558 5,544 5,711 5,599 Unrealized adjustment to DAC, DSI and insurance
Deferred policy acquisition costs 3,819 3,807 3,861 3,811 3,708 reserves (127) (90) (44) (64) (78)
Reinsurance recoverables, net (1) 8,650 8,573 8,518 8,468 8,520 Total unrealized net capital gains and losses 1,624 1,200 620 879 1,419
Accrued investment income 564 567 569 575 610 Unrealized foreign currency translation
Property and equipment, net 1,011 1,011 1,024 1,050 1,038 adjustments (41) (46) (60) (52) (38)
Goodwill 1,219 1,219 1,219 1,219 1,219 Unrecognized pension and other
Other assets 2,850 2,297 2,010 2,039 2,303 postretirement benefit cost (1,288) (1,304) (1,315) (1,289) (1,314)
Separate Accounts 3,438 3,507 3,658 3,677 4,121 Total accumulated other comprehensive income (loss) 295 (150) (755) (462) 67
Total shareholders' equity 20,553 20,340 20,025 20,504 21,298
Total assets $ 107,284 $ 105,947 $ 104,656 $ 105,797 $ 107,064 Total liabilities and shareholders' equity $ 107,284 $ 105,947 $ 104,656 $ 105,797 $ 107,064
(1)
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in millions)
Reinsurance recoverables of unpaid losses related to Property-Liability were $6.03 billion, $5.96 billion, $5.89 billion, $5.85 billion and $5.85 billion as of June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively.
5
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Book value per common share
Numerator:
Common shareholders' equity (1) $ 18,807 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433
Denominator:
Common shares outstanding and dilutive potential
common shares outstanding 375.8 380.3 386.1 394.6 407.7 415.4
Book value per common share $ 50.05 $ 48.89 $ 47.34 $ 47.54 $ 47.96 $ 49.19
Book value per common share, excluding the
impact of unrealized net capital gains
and losses on fixed income securities *
Numerator:
Common shareholders' equity $ 18,807 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433
Unrealized net capital gains and losses on
fixed income securities 1,407 993 443 807 1,196 1,871
Adjusted common shareholders' equity $ 17,400 $ 17,601 $ 17,836 $ 17,951 $ 18,356 $ 18,562
Denominator:
Common shares outstanding and dilutive potential
common shares outstanding 375.8 380.3 386.1 394.6 407.7 415.4
Book value per common share, excluding the
impact of unrealized net capital gains
and losses on fixed income securities $ 46.30 $ 46.28 $ 46.20 $ 45.49 $ 45.02 $ 44.68
(1)
BOOK VALUE PER COMMON SHARE
THE ALLSTATE CORPORATION
($ in millions, except per share data)
Excludes equity related to preferred stock of $1,746 million in each period.
6
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Return on Common Shareholders' Equity
Numerator:
Net income applicable to common shareholders (1) $ 1,540 $ 1,624 $ 2,055 $ 2,390 $ 2,519 $ 2,807
Denominator:
Beginning common shareholders' equity $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600
Ending common shareholders' equity 18,807 18,594 18,279 18,758 19,552 20,433
Average common shareholders' equity (2) $ 19,180 $ 19,514 $ 19,419 $ 19,671 $ 20,339 $ 20,517
Return on common shareholders' equity 8.0 % 8.3 % 10.6 % 12.2 % 12.4 % 13.7 %
Operating Income Return on Common Shareholders' Equity *
Numerator:
Operating income (1) $ 1,792 $ 1,819 $ 2,113 $ 2,224 $ 2,212 $ 2,395
Denominator:
Beginning common shareholders' equity $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600
Unrealized net capital gains and losses 1,419 2,137 1,926 1,827 2,150 2,091
Adjusted beginning common shareholders' equity 18,133 18,296 18,632 18,756 18,976 18,509
Ending common shareholders' equity 18,807 18,594 18,279 18,758 19,552 20,433
Unrealized net capital gains and losses 1,624 1,200 620 879 1,419 2,137
Adjusted ending common shareholders' equity 17,183 17,394 17,659 17,879 18,133 18,296
Average adjusted common shareholders' equity (2) $ 17,658 $ 17,845 $ 18,146 $ 18,318 $ 18,555 $ 18,403
Operating income return on common shareholders' equity 10.1 % 10.2 % 11.6 % 12.1 % 11.9 % 13.0 %
(1) Net income applicable 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
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Debt
Short-term debt $ - $ - $ - $ - $ - $ -
Long-term debt 5,109 5,108 5,124 5,123 5,133 5,140
Total debt $ 5,109 $ 5,108 $ 5,124 $ 5,123 $ 5,133 $ 5,140
Capital resources
Debt $ 5,109 $ 5,108 $ 5,124 $ 5,123 $ 5,133 $ 5,140
Shareholders' equity
Preferred stock and additional capital paid-in 1,746 1,746 1,746 1,746 1,746 1,746
Common stock 9 9 9 9 9 9
Additional capital paid-in 3,203 3,237 3,245 3,224 3,205 3,109
Retained income 39,623 39,505 39,413 39,068 38,567 38,363
Deferred ESOP expense (13) (13) (13) (23) (23) (23)
Treasury stock (24,310) (23,994) (23,620) (23,058) (22,273) (21,799)
Unrealized net capital gains and losses 1,624 1,200 620 879 1,419 2,137
Unrealized foreign currency translation
adjustments (41) (46) (60) (52) (38) (29)
Unrecognized pension and other
postretirement benefit cost (1,288) (1,304) (1,315) (1,289) (1,314) (1,334)
Total shareholders' equity 20,553 20,340 20,025 20,504 21,298 22,179
Total capital resources $ 25,662 $ 25,448 $ 25,149 $ 25,627 $ 26,431 $ 27,319
Ratio of debt to shareholders' equity 24.9 % 25.1 % 25.6 % 25.0 % 24.1 % 23.2 %
Ratio of debt to capital resources 19.9 % 20.1 % 20.4 % 20.0 % 19.4 % 18.8 %
THE ALLSTATE CORPORATION
DEBT TO CAPITAL
($ in millions)
8
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 271 $ 246 $ 489 $ 650 $ 355 $ 677 $ 517 $ 1,032
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other non-cash items 97 91 96 96 92 87 188 179
Realized capital gains and losses (24) 149 250 (33) (108) (139) 125 (247)
(Gain) loss on disposition of operations (1) (2) (1) (2) (1) 1 (3) -
Interest credited to contractholder funds 185 190 183 194 185 199 375 384
Changes in:
Policy benefits and other insurance reserves 118 459 (27) (26) 411 115 577 526
Unearned premiums 267 (205) (124) 518 361 (117) 62 244
Deferred policy acquisition costs (65) (7) (20) (87) (97) (35) (72) (132)
Premium installment receivables, net (38) 11 156 (132) (92) (66) (27) (158)
Reinsurance recoverables, net (80) (40) (45) 11 (120) (24) (120) (144)
Income taxes (150) (26) (59) 223 (342) 59 (176) (283)
Other operating assets and liabilities 64 (152) 32 (29) 93 (191) (88) (98)
Net cash provided by operating activities 644 714 930 1,383 737 566 1,358 1,303
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales
Fixed income securities 6,373 6,216 5,897 6,784 6,559 9,453 12,589 16,012
Equity securities 823 1,664 1,066 614 922 1,152 2,487 2,074
Limited partnership interests 183 180 306 204 295 296 363 591
Mortgage loans (7) 7 - 6 - - - -
Other investments 57 87 367 46 85 47 144 132
Investment collections
Fixed income securities 1,189 949 1,184 1,005 1,030 1,213 2,138 2,243
Mortgage loans 71 79 233 (52) 243 114 150 357
Other investments 125 43 39 77 117 60 168 177
Investment purchases
Fixed income securities (7,546) (5,401) (7,830) (6,446) (7,272) (9,210) (12,947) (16,482)
Equity securities (939) (1,733) (1,722) (1,318) (748) (1,172) (2,672) (1,920)
Limited partnership interests (433) (270) (413) (367) (198) (365) (703) (563)
Mortgage loans (220) (44) (163) (15) (307) (202) (264) (509)
Other investments (196) (253) (159) (225) (325) (193) (449) (518)
Change in short-term investments, net 688 (1,357) 962 (186) (328) (63) (669) (391)
Change in other investments, net (20) (19) (36) - (18) 2 (39) (16)
Purchases of property and equipment, net (68) (52) (84) (86) (74) (59) (120) (133)
Net cash provided by (used in) investing activities 80 96 (353) 41 (19) 1,073 176 1,054
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt - (16) - (11) (9) - (16) (9)
Contractholder fund deposits 261 261 268 257 266 261 522 527
Contractholder fund withdrawals (521) (492) (534) (641) (580) (572) (1,013) (1,152)
Dividends paid on common stock (125) (115) (118) (122) (125) (118) (240) (243)
Dividends paid on preferred stock (29) (29) (29) (29) (29) (29) (58) (58)
Treasury stock purchases (448) (456) (592) (792) (414) (1,010) (904) (1,424)
Shares reissued under equity incentive plans, net 42 30 9 12 45 64 72 109
Excess tax benefits on share-based payment arrangements 8 12 1 1 17 26 20 43
Other 3 31 8 1 - (2) 34 (2)
Net cash used in financing activities (809) (774) (987) (1,324) (829) (1,380) (1,583) (2,209)
NET (DECREASE) INCREASE IN CASH (85) 36 (410) 100 (111) 259 (49) 148
CASH AT BEGINNING OF PERIOD 531 495 905 805 916 657 495 657
CASH AT END OF PERIOD $ 446 $ 531 $ 495 $ 905 $ 805 $ 916 $ 446 $ 805
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
($ in millions)
Six 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
Mar. 31, 2016 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2016
Property-Liability $ 2,041 $ 1,117 $ (1,057) $ - $ - $ - $ 2,101
Allstate Financial:
Traditional life and
accident and health 796 48 (38) - - - 806
Interest-sensitive life 924 26 (28) (1) - (53) 868
Fixed annuity 46 - (2) - - - 44
Subtotal 1,766 74 (68) (1) - (53) 1,718
Consolidated $ 3,807 $ 1,191 $ (1,125) $ (1) $ - $ (53) $ 3,819
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
Mar. 31, 2015 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2015
Property-Liability $ 1,852 $ 1,111 $ (1,021) $ - $ - $ - $ 1,942
Allstate Financial:
Traditional life and
accident and health 757 44 (33) - - - 768
Interest-sensitive life 874 29 (27) (3) - 75 948
Fixed annuity 44 - (2) - - 8 50
Subtotal 1,675 73 (62) (3) - 83 1,766
Consolidated $ 3,527 $ 1,184 $ (1,083) $ (3) $ - $ 83 $ 3,708
(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 June 30, 2015
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 June 30, 2016
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, 2015 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2016 and losses and losses and losses
Property-Liability $ 2,029 $ 2,185 $ (2,113) $ - $ - $ - $ 2,101 $ 2,101 $ - $ 2,101
Allstate Financial:
Traditional life and
accident and health 792 94 (80) - - - 806 806 - 806
Interest-sensitive life 993 52 (56) (3) - (118) 868 1,052 (184) 868
Fixed annuity 47 - (3) - - - 44 44 - 44
Subtotal 1,832 146 (139) (3) - (118) 1,718 1,902 (184) 1,718
Consolidated $ 3,861 $ 2,331 $ (2,252) $ (3) $ - $ (118) $ 3,819 $ 4,003 $ (184) $ 3,819
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 Jun. 30, 2015 and losses and losses and losses
Property-Liability $ 1,820 $ 2,143 $ (2,021) $ - $ - $ - $ 1,942 $ 1,942 $ - $ 1,942
Allstate Financial:
Traditional life and
accident and health 753 88 (73) - - - 768 768 - 768
Interest-sensitive life 905 55 (55) (5) - 48 948 1,065 (117) 948
Fixed annuity 47 - (3) 1 - 5 50 50 - 50
Subtotal 1,705 143 (131) (4) - 53 1,766 1,883 (117) 1,766
Consolidated $ 3,525 $ 2,286 $ (2,152) $ (4) $ - $ 53 $ 3,708 $ 3,825 $ (117) $ 3,708
(1)
(2) Included as a component of amortization of DAC on the Consolidated Statements of Operations.
For the six months ended June 30, 2015
Reconciliation of Deferred Policy
Acquisition Costs as of June 30, 2015
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 Reconciliation of Deferred Policy
For the six months ended June 30, 2016 Acquisition Costs as of June 30, 2016
Change in Deferred Policy Acquisition Costs
11
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Premiums written $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183
(Increase) decrease in unearned premiums (264) 166 140 (485) (370) 166 (98) (204)
Other 27 42 (7) (2) 42 (46) 69 (4)
Premiums earned 7,814 7,723 7,684 7,650 7,549 7,426 15,537 14,975
Claims and claims expense (5,901) (5,684) (5,199) (5,255) (5,587) (4,993) (11,585) (10,580)
Amortization of deferred policy acquisition costs (1,057) (1,056) (1,052) (1,029) (1,021) (1,000) (2,113) (2,021)
Operating costs and expenses (912) (853) (812) (867) (934) (962) (1,765) (1,896)
Restructuring and related charges (10) (5) (10) (8) (17) (4) (15) (21)
Underwriting (loss) income* (66) 125 611 491 (10) 467 59 457
Net investment income 316 302 280 307 292 358 618 650
Periodic settlements and accruals on non-hedge
derivative instruments - (1) (1) (1) - (1) (1) (1)
Amortization of purchased intangible assets 9 9 13 12 13 12 18 25
Income tax expense on operations (73) (144) (304) (259) (97) (281) (217) (378)
Operating income 186 291 599 550 198 555 477 753
Realized capital gains and losses, after-tax 18 (64) (99) (104) 31 18 (46) 49
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax - 1 1 - - 1 1 1
Amortization of purchased intangible assets, after-tax (6) (6) (8) (8) (8) (8) (12) (16)
(Loss) gain on disposition of operations, after-tax - - - (1) 1 - - 1
Change in accounting for investments in qualified
affordable housing projects, after-tax - - - - - (28) - (28)
Net income applicable to common shareholders $ 198 $ 222 $ 493 $ 437 $ 222 $ 538 $ 420 $ 760
Catastrophe losses $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091
Operating ratios
Claims and claims expense ("loss") ratio 75.5 73.6 67.6 68.7 74.0 67.2 74.6 70.6
Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3
Combined ratio 100.8 98.4 92.0 93.6 100.1 93.7 99.6 96.9
Loss ratio 75.5 73.6 67.6 68.7 74.0 67.2 74.6 70.6
Less: effect of catastrophe losses 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3
effect of prior year non-catastrophe reserve reestimates (0.2) 0.4 (0.2) 0.6 0.2 0.6 0.1 0.4
Underlying loss ratio * 63.4 62.5 63.1 64.6 63.2 62.6 63.0 62.9
Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3
Less: effect of amortization of purchased intangible assets 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1
Expense ratio, excluding the effect of amortization of purchased
intangible assets 25.2 24.7 24.3 24.7 25.9 26.4 24.9 26.2
Underlying combined ratio * 88.6 87.2 87.4 89.3 89.1 89.0 87.9 89.1
Effect of catastrophe losses on combined ratio 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3
Effect of prior year non-catastrophe reserve reestimates (0.2) 0.4 (0.2) 0.6 0.2 0.6 0.1 0.4
Effect of amortization of purchased intangible assets on combined ratio 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1
Combined ratio 100.8 98.4 92.0 93.6 100.1 93.7 99.6 96.9
Effect of restructuring and related charges on combined ratio 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1
Effect of Discontinued Lines and Coverages on combined ratio - - - 0.7 - - - -
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY RESULTS
($ in millions)
Six months endedThree months ended
12
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Property-Liability Underwriting Summary
Allstate Protection $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461
Discontinued Lines and Coverages (2) (2) (2) (49) (2) (2) (4) (4)
Underwriting (loss) income $ (66) $ 125 $ 611 $ 491 $ (10) $ 467 $ 59 $ 457
Allstate Protection Underwriting Summary
Premiums written $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183
Premiums earned $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975
Claims and claims expense (5,899) (5,683) (5,197) (5,207) (5,585) (4,992) (11,582) (10,577)
Amortization of deferred policy acquisition costs (1,057) (1,056) (1,052) (1,029) (1,021) (1,000) (2,113) (2,021)
Operating costs and expenses (912) (852) (812) (866) (934) (961) (1,764) (1,895)
Restructuring and related charges (10) (5) (10) (8) (17) (4) (15) (21)
Underwriting (loss) income $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461
Catastrophe losses $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091
Operating ratios
Loss ratio 75.5 73.6 67.6 68.0 74.0 67.2 74.6 70.6
Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3
Combined ratio 100.8 98.4 92.0 92.9 100.1 93.7 99.6 96.9
Effect of catastrophe losses on combined ratio 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3
Effect of restructuring and related charges
on combined ratio 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1
Effect of amortization of purchased intangible
assets on combined ratio 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1
Discontinued Lines and Coverages
Underwriting Summary
Premiums written $ - $ - $ - $ - $ - $ - $ - $ -
Premiums earned $ - $ - $ - $ - $ - $ - $ - $ -
Claims and claims expense (2) (1) (2) (48) (2) (1) (3) (3)
Operating costs and expenses - (1) - (1) - (1) (1) (1)
Underwriting loss $ (2) $ (2) $ (2) $ (49) $ (2) $ (2) $ (4) $ (4)
Effect of Discontinued Lines and Coverages
on the Property-Liability combined ratio - 0.1 - 0.7 - - - -
Allstate Protection Underwriting Income (Loss) by Brand
Allstate brand $ (10) $ 171 $ 629 $ 571 $ 86 $ 526 $ 161 $ 612
Esurance brand (37) (25) (28) (26) (41) (69) (62) (110)
Encompass brand (15) (18) 14 (4) (50) 14 (33) (36)
Answer Financial (2) (1) (2) (1) (3) (2) (3) (5)
Underwriting (loss) income $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY UNDERWRITING RESULTS BY AREA OF BUSINESS
($ in millions)
Six months endedThree months ended
13
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Allstate brand (1)
Auto (2) $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123
Homeowners (3) 1,831 1,392 1,634 1,879 1,819 1,379 3,223 3,198
Other personal lines 428 353 376 429 424 357 781 781
Commercial lines 135 126 126 124 138 128 261 266
Other business lines 183 183 168 205 199 184 366 383
7,344 6,800 6,880 7,383 7,168 6,583 14,144 13,751
Esurance brand
Auto 376 439 368 411 363 434 815 797
Homeowners 14 11 9 9 7 5 25 12
Other personal lines 2 2 1 3 1 2 4 3
392 452 378 423 371 441 844 812
Encompass brand
Auto 162 138 152 169 173 147 300 320
Homeowners 126 104 116 134 136 111 230 247
Other personal lines 27 21 25 28 29 24 48 53
315 263 293 331 338 282 578 620
Allstate Protection 8,051 7,515 7,551 8,137 7,877 7,306 15,566 15,183
Discontinued Lines and Coverages - - - - - - - -
Property-Liability $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183
Allstate Protection
Auto $ 5,305 $ 5,323 $ 5,096 $ 5,326 $ 5,124 $ 5,116 $ 10,628 $ 10,240
Homeowners 1,971 1,507 1,759 2,022 1,962 1,495 3,478 3,457
Other personal lines 457 376 402 460 454 383 833 837
Commercial lines 135 126 126 124 138 128 261 266
Other business lines 183 183 168 205 199 184 366 383
$ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183
(1) Canada premiums included
in Allstate brand
Auto $ 234 $ 164 $ 183 $ 215 $ 235 $ 173 $ 398 $ 408
Homeowners 64 41 50 60 63 41 105 104
Other personal lines 16 10 12 15 15 11 26 26
$ 314 $ 215 $ 245 $ 290 $ 313 $ 225 $ 529 $ 538
(2)
(3)
Fluctuation in the Canadian exchange rate has reduced the auto premiums written growth rate in the second quarter and first six months of 2016 by 0.2 points and 0.3 points, respectively.
Fluctuation in the Canadian exchange rate has reduced the homeowner premiums written growth rate in both the second quarter and first six months of 2016 by 0.2 points.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY BRAND
($ in millions)
Six 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) 35 (6) 3.2 6.2 25 (6) 1.7 7.3 34 (6) 1.9 5.5
Homeowners (3) 11 (7) 0.8 4.9 15 (7) (0.4) (8) (2.3) 16 (7) 1.5 6.1
Esurance brand
Auto 15 1.3 5.6 6 0.3 2.7 18 3.0 6.7
Encompass brand
Auto 10 4.1 9.5 4 1.6 14.3 9 2.0 5.7
Homeowners 6 1.7 8.1 5 1.4 11.6 5 1.7 7.4
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 (7) 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
(1)
(2)
(3)
(4)
(5)
(6) Includes three, three, one, five, four and two Canadian provinces for auto for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.
(7)
(8) Includes the impact of a rate decrease in California in first quarter 2016. Excluding California, Allstate brand homeowners total brand and location specific rate changes were 1.4% and 4.3% for the six months ended June 30, 2016, respectively.
Represents the impact in the 50 states, the District of Columbia 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 50 states, the District of Columbia 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. Allstate brand auto and
homeowners operates in 50 states, the District of Columbia, and 5 Canadian provinces. Esurance brand auto operates in 43 states and 1 Canadian province. Esurance brand homeowners operates in 26 states. Encompass brand auto and homeowners operates
in 40 states and the District of Columbia.
Includes one, two, three, zero, one and two Canadian provinces for homeowners for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.
June 30, 2015 March 31, 2015
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 50 states, the District of
Columbia and Canadian provinces, rate changes approved for the three month period ending June 30, 2016 are estimated to total $692 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 3.4%, 1.4%, 1.8%, 1.5%, 1.1% and 0.8% for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30,
2015, June 30, 2015 and March 31, 2015, 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%, 0.7%, 0.5%, 0.5%, 0.4% and 0.9% for the three months ended June 30, 2016, March 31, 2016, December 31, 2015,
September 30, 2015, June 30, 2015 and March 31, 2015, respectively.
December 31, 2015
September 30, 2015
Three months ended Three months ended Three months ended
March 31, 2016June 30, 2016 (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
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Policies in Force (in thousands) (1)
Allstate Brand
Auto (2) 20,061 20,145 20,326 20,367 20,258 20,036
Homeowners (3) 6,135 6,152 6,174 6,163 6,141 6,114
Landlord 726 732 737 736 737 738
Renter 1,554 1,556 1,555 1,550 1,518 1,494
Condominium 667 667 668 665 662 658
Other 1,256 1,253 1,259 1,257 1,253 1,245
Other personal lines 4,203 4,208 4,219 4,208 4,170 4,135
Commercial lines 308 318 324 328 330 326
Other business lines 824 856 894 920 937 941
Excess and surplus 23 24 25 26 26 27
Total 31,554 31,703 31,962 32,012 31,862 31,579
Esurance Brand
Auto 1,409 1,428 1,415 1,433 1,458 1,470
Homeowners 44 37 32 26 20 15
Other personal lines 47 46 44 44 44 42
Total 1,500 1,511 1,491 1,503 1,522 1,527
Encompass Brand
Auto 676 701 723 746 767 778
Homeowners 318 329 338 347 355 361
Other personal lines 105 108 111 114 118 120
Total 1,099 1,138 1,172 1,207 1,240 1,259
Total Policies in Force 34,153 34,352 34,625 34,722 34,624 34,365
Non-Proprietary Premiums ($ in millions)
Ivantage (4) $ 1,528 $ 1,504 $ 1,490 $ 1,481 $ 1,461 $ 1,446
Answer Financial (5) 150 151 138 149 145 149
Agency Data
Total Allstate agencies (6)(7) 12,200 12,100 12,300 12,100 12,000
Licensed sales professionals (7)(8) 23,800 24,000 24,400 24,000 23,500
Allstate independent agencies (7)(9) 2,200 2,100 2,100 2,200 2,000
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Rounded to the nearest hundred.
Employees of Allstate agencies who are licensed to sell Allstate products.
Includes 450 and 880 engaged Allstate independent agencies (“AIAs”) as of June 30, 2016 and December 31, 2015, respectively. Engaged AIAs, as currently determined, include those that
increase the number of policies in force from the prior year.
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. Fees for the three months ended June 30, 2016 were $25.4 million.
Represents non-proprietary premiums written for the period. Commissions earned for the three months ended June 30, 2016 were $18.9 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 19 states, including 4 out of our largest 10 states, as of June 30, 2016 compared to June 30, 2015.
Allstate brand homeowners PIF increased in 23 states, including 4 out of our largest 10 states, as of June 30, 2016 compared to June 30, 2015.
16
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written $ 7,344 $ 6,800 $ 6,880 $ 7,383 $ 7,168 $ 6,583 $ 14,144 $ 13,751
Net premiums earned
Auto $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956
Homeowners 1,684 1,678 1,674 1,663 1,645 1,631 3,362 3,276
Other personal lines 397 393 395 396 395 391 790 786
Commercial lines 127 129 129 128 128 125 256 253
Other business lines 142 143 135 148 137 141 285 278
Total 7,095 7,010 6,971 6,932 6,829 6,720 14,105 13,549
Incurred losses
Auto $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606
Homeowners 1,260 1,190 816 820 1,147 894 2,450 2,041
Other personal lines 256 261 216 241 259 244 517 503
Commercial lines 135 119 100 97 105 98 254 203
Other business lines 64 61 57 71 66 69 125 135
Total 5,349 5,150 4,684 4,684 5,008 4,480 10,499 9,488
Expenses
Auto $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268
Homeowners 373 377 372 385 372 389 750 761
Other personal lines 106 103 101 109 105 105 209 210
Commercial lines 35 38 36 36 40 38 73 78
Other business lines 74 68 72 61 63 69 142 132
Total 1,756 1,689 1,658 1,677 1,735 1,714 3,445 3,449
Underwriting income (loss)
Auto $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82
Homeowners 51 111 486 458 126 348 162 474
Other personal lines 35 29 78 46 31 42 64 73
Commercial lines (43) (28) (7) (5) (17) (11) (71) (28)
Other business lines 4 14 6 16 8 3 18 11
Total (10) 171 629 571 86 526 161 612
Loss ratio 75.4 73.5 67.2 67.6 73.3 66.7 74.5 70.0
Expense ratio 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5
Combined ratio 100.1 97.6 91.0 91.8 98.7 92.2 98.9 95.5
Loss ratio 75.4 73.5 67.2 67.6 73.3 66.7 74.5 70.0
Less: effect of catastrophe losses 12.9 11.2 4.9 3.6 10.7 4.1 12.1 7.4
effect of prior year non-catastrophe reserve reestimates (0.3) 0.3 (0.1) (0.1) 0.3 0.7 - 0.5
Underlying loss ratio 62.8 62.0 62.4 64.1 62.3 61.9 62.4 62.1
Expense ratio 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5
Less: effect of amortization of purchased intangible assets - - - - - - - -
Expense ratio, excluding the effect of amortization of purchased
intangible assets 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5
Underlying combined ratio 87.5 86.1 86.2 88.3 87.7 87.4 86.8 87.6
Effect of catastrophe losses 12.9 11.2 4.9 3.6 10.7 4.1 12.1 7.4
Effect of prior year non-catastrophe reserve reestimates (0.3) 0.3 (0.1) (0.1) 0.3 0.7 - 0.5
Combined ratio 100.1 97.6 91.0 91.8 98.7 92.2 98.9 95.5
Effect of prior year reserve reestimates on combined ratio - 0.2 (0.3) (0.2) 0.4 0.7 0.1 0.5
Effect of advertising expenses on combined ratio 2.2 1.5 1.5 2.0 2.4 2.3 1.9 2.3
THE ALLSTATE CORPORATION
ALLSTATE BRAND PROFITABILITY MEASURES
($ in millions)
Three months ended Six months ended
17
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
New Issued Applications (in thousands) (2)
Auto 582 584 562 790 818 792 1,166 1,610
Homeowners 193 164 174 218 212 177 357 389
Average Premium - Gross Written ($) (3)
Auto (4) 516 507 502 494 488 484 511 486
Homeowners (5) 1,171 1,174 1,163 1,158 1,150 1,148 1,173 1,149
Average Premium - Net Earned ($) (6)
Auto 471 461 456 452 450 444 466 447
Homeowners 1,090 1,082 1,078 1,074 1,066 1,060 1,086 1,063
Renewal Ratio (%) (7)
Auto 88.0 88.0 88.2 88.6 88.9 88.8 88.0 88.8
Homeowners 87.8 88.1 88.5 88.7 88.4 88.4 88.0 88.4
Auto Claim Frequency (8)
(% change year-over-year)
Bodily Injury Gross 2.8 1.1 3.9 6.4 6.8 6.8 2.0 6.8
Bodily Injury Paid 1.5 5.9 - 3.5 6.0 2.3 3.6 4.2
Property Damage Gross (9) 5.6 2.1 7.5 8.9 6.9 2.1 3.8 4.4
Property Damage Paid (0.1) 2.4 3.7 4.7 4.2 2.5 1.1 3.4
Auto Paid Claim Severity (10)
(% change year-over-year)
Bodily injury (2.3) (5.5) (7.0) (2.9) 0.6 3.9 (3.9) 2.2
Property damage 5.3 7.5 4.0 5.4 3.7 4.8 6.3 4.2
Homeowners Excluding Catastrophe Losses
(% change year-over-year)
Gross Claim frequency (8) (12.5) (7.7) 0.9 (1.9) 0.4 (7.9) (10.2) (3.7)
Paid Claim frequency (8) (14.3) (2.0) (2.1) (3.7) (0.9) (7.0) (8.6) (3.8)
Paid Claim severity 4.7 (2.7) 2.6 4.5 3.6 6.6 1.4 5.0
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
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.
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.
The percent change in paid or gross frequency is calculated as the increase or decrease in the paid or gross frequency amount in the current period compared to the same period in the prior year; divided by the prior year paid
or gross frequency amount. The paid frequency amount is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period.
The gross frequency amount is calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period. Frequency statistics exclude counts
associated with catastrophe events.
A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims, however, experience indicates that for these types of
claims, payments are not always required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the
change was more broadly adopted. Quarterly increases (decreases) in property damage gross claim frequency consistently measured were 3.0%, (0.8)%, 5.5% and 7.4% in the three months ended June 30, 2016, March 31,
2016, December 31, 2015 and September 30, 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted.
Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. The rate of change in paid severity is the year over year percent increase or decrease in
paid claim severity for the period.
Statistics presented for Allstate brand exclude excess and surplus lines.
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 number allowed on a policy, which in 2015 was either four or ten depending on the state. In 2016, all states
allow ten automobiles on a policy.
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.
Fluctuation in the Canadian exchange rate has reduced the auto average premium written growth rate in the second quarter and first six months of 2016 by 0.2 points and 0.3 points, respectively.
Fluctuation in the Canadian exchange rate has reduced the homeowner premiums written growth rate in both the second quarter and first six months of 2016 by 0.2 points, respectively.
THE ALLSTATE CORPORATION
ALLSTATE BRAND STATISTICS (1)
Six months endedThree months ended
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Change in auto claim frequency (2)
(% change in frequency rate year over year)
% Change in gross claim frequency 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% 3.9% 1.1% 2.8%
% Change in paid claim frequency 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% 0.0% 5.9% 1.5%
(1) Frequency statistics exclude counts associated with catastrophe events.
(2) The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the amount of prior
year paid or gross claim frequency. The paid claim frequency amount is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. The
gross claim frequency amount is calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period.
THE ALLSTATE CORPORATION
ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1)
BODILY INJURY % CHANGE IN GROSS AND PAID CLAIM FREQUENCY RATE
2011 2012 2013 2014 2015 2016
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013 2014 2015 2016
%
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Rates of change in auto bodily injury frequency
% change in gross claim frequency % change in paid claim frequency
19
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Change in auto claim frequency (2)
(% change in frequency rate year over year)
% Change in gross claim frequency (3) 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% 7.5% 2.1% 5.6%
% Change in paid claim frequency 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% 3.7% 2.4% -0.1%
(1) Frequency statistics exclude counts associated with catastrophe events.
(2)
(3)
The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the amount of prior year paid or gross
claim frequency. The paid claim frequency amount is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. The gross claim frequency amount is
calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period.
A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims; however, experience indicates that for these types of claims, payments are not always
required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the change was more broadly adopted. Quarterly increases (decreases) in
property damage gross claim frequency consistently measured were 3.0%, (0.8)%, 5.5% and 7.4% in the three months ended June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively. Auto underwriting results for 2016 and
2015 were not impacted.
THE ALLSTATE CORPORATION
ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1)
PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY
2011 2012 2013 2014 2015 2016
-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
2011 2012 2013 2014 2015 2016
%
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Rates of change in auto property damage frequency
% change in gross claim frequency % change in paid claim frequency
20
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Q2
2016
(% change in frequency rate year over year)
% Change in gross claim frequency (2) (3) -2.7% -1.3% 1.7% -0.9% -1.3% -5.2% -6.3% -1.8% -2.0% -2.9% 2.9% -6.7% 5.7% 1.4% -2.6% -2.6% 0.3% 0.5% 6.3% 3.4%
% Change in gross claim frequency indexed to 1996 (4) 97.3% 96.0% 97.7% 96.8% 95.5% 90.6% 84.9% 83.3% 81.7% 79.3% 81.6% 76.1% 80.5% 81.6% 79.5% 77.4% 77.6% 78.0% 82.9% 85.8%
% Change in paid claim frequency (2) -2.1% -1.5% 2.9% -2.7% 0.3% -1.8% -3.2% -2.6% -2.6% -2.4% 0.8% -3.6% 6.1% 0.7% -2.3% -3.1% 0.1% 1.3% 3.8% -0.6%
% Change in paid claim frequency indexed to 1996 (4) 97.9% 96.4% 99.2% 96.5% 96.8% 95.1% 92.1% 89.7% 87.3% 85.2% 85.9% 82.8% 87.9% 88.5% 86.5% 83.8% 83.9% 84.9% 88.2% 87.6%
(1) Frequency statistics exclude counts associated with catastrophe events.
(2)
(3)
(4) The percent change in gross or paid claim frequency indexed to 1996 equals the current year percent change plus 100%, times the prior year indexed amount beginning with 100% in 1996.
The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the amount of prior
year paid or gross claim frequency. The paid claim frequency amount is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. The
gross claim frequency amount is calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period. The Q2 2016 amounts are calculated using the amounts
for the three months ended June 30, 2016 and the twelve months ended December 31, 2015.
A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims; however, experience indicates that for these types of claims, payments
are not always required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the change was more broadly adopted. Full
year increases in property damage gross claim frequency and indexed amounts consistently measured were 1.7% and 83.6% in the three months ended June 30, 2016 compared to 12 months ended December 31, 2015 and 5.4% and 82.2% for
the 12 months ended December 31, 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted.
THE ALLSTATE CORPORATION
ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1)
PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY AND INDEXED TO 1996
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016
%
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Rates of change in auto property damage frequency
% Change in gross claim frequency indexed to 1996 % Change in paid claim frequency indexed to 1996
21
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written $ 392 $ 452 $ 378 $ 423 $ 371 $ 441 $ 844 $ 812
Net premiums earned
Auto $ 403 $ 394 $ 391 $ 392 $ 397 $ 382 $ 797 $ 779
Homeowners 10 8 7 5 4 3 18 7
Other personal lines 2 2 2 2 1 2 4 3
Total 415 404 400 399 402 387 819 789
Incurred losses
Auto $ 308 $ 289 $ 294 $ 285 $ 300 $ 297 $ 597 $ 597
Homeowners 10 4 4 4 3 1 14 4
Other personal lines 1 1 1 1 1 1 2 2
Total 319 294 299 290 304 299 613 603
Expenses
Auto $ 107 $ 123 $ 119 $ 125 $ 132 $ 155 $ 230 $ 287
Homeowners 25 11 9 10 7 - 36 7
Other personal lines 1 1 1 - - 2 2 2
Total 133 135 129 135 139 157 268 296
Underwriting income (loss)
Auto $ (12) $ (18) $ (22) $ (18) $ (35) $ (70) $ (30) $ (105)
Homeowners (25) (7) (6) (9) (6) 2 (32) (4)
Other personal lines - - - 1 - (1) - (1)
Total (37) (25) (28) (26) (41) (69) (62) (110)
Loss ratio 76.9 72.8 74.8 72.7 75.6 77.2 74.9 76.4
Expense ratio 32.0 33.4 32.2 33.8 34.6 40.6 32.7 37.5
Combined ratio 108.9 106.2 107.0 106.5 110.2 117.8 107.6 113.9
Loss ratio 76.9 72.8 74.8 72.7 75.6 77.2 74.9 76.4
Less: effect of catastrophe losses 3.4 0.7 0.8 0.8 2.0 - 2.1 1.0
effect of prior year non-catastrophe reserve reestimates (1.0) (1.0) (1.3) (1.6) (0.7) (1.0) (1.0) (0.9)
Underlying loss ratio 74.5 73.1 75.3 73.5 74.3 78.2 73.8 76.3
Expense ratio 32.0 33.4 32.2 33.8 34.6 40.6 32.7 37.5
Less: effect of amortization of purchased intangible assets 1.7 1.5 2.2 2.0 2.2 2.3 1.6 2.3
Expense ratio, excluding the effect of amortization of purchased
intangible assets 30.3 31.9 30.0 31.8 32.4 38.3 31.1 35.2
Underlying combined ratio 104.8 105.0 105.3 105.3 106.7 116.5 104.9 111.5
Effect of catastrophe losses 3.4 0.7 0.8 0.8 2.0 - 2.1 1.0
Effect of prior year non-catastrophe reserve reestimates (1.0) (1.0) (1.3) (1.6) (0.7) (1.0) (1.0) (0.9)
Effect of amortization of purchased intangible assets 1.7 1.5 2.2 2.0 2.2 2.3 1.6 2.3
Combined ratio 108.9 106.2 107.0 106.5 110.2 117.8 107.6 113.9
Effect of prior year reserve reestimates on combined ratio (1.0) (1.0) (1.3) (1.3) (0.7) (1.0) (1.0) (0.9)
Effect of advertising expenses on combined ratio 12.2 11.6 9.8 11.0 12.4 17.3 12.0 14.8
Policies in Force (in thousands)
Auto 1,409 1,428 1,415 1,433 1,458 1,470 1,409 1,458
Homeowners 44 37 32 26 20 15 44 20
Other personal lines 47 46 44 44 44 42 47 44
1,500 1,511 1,491 1,503 1,522 1,527 1,500 1,522
New Issued Applications (in thousands)
Auto 141 168 139 145 148 195 309 343
Homeowners 11 7 7 8 7 6 18 13
Other personal lines 8 10 7 9 10 12 18 22
160 185 153 162 165 213 345 378
Average Premium - Gross Written ($)
Auto 538 547 526 513 506 520 543 514
Homeowners 855 891 821 838 814 849 870 832
Renewal Ratio (%)
Auto 80.0 79.6 78.8 78.7 80.4 79.9 79.8 80.1
THE ALLSTATE CORPORATION
ESURANCE PROFITABILITY MEASURES AND STATISTICS
($ in millions)
Three months ended Six months ended
22
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written $ 315 $ 263 $ 293 $ 331 $ 338 $ 282 $ 578 $ 620
Net premiums earned
Auto $ 158 $ 159 $ 162 $ 165 $ 165 $ 165 $ 317 $ 330
Homeowners 121 124 124 127 126 127 245 253
Other personal lines 25 26 27 27 27 27 51 54
Total 304 309 313 319 318 319 613 637
Incurred losses
Auto $ 130 $ 123 $ 126 $ 135 $ 129 $ 116 $ 253 $ 245
Homeowners 85 85 61 75 117 74 170 191
Other personal lines 16 31 27 23 27 23 47 50
Total 231 239 214 233 273 213 470 486
Expenses
Auto $ 45 $ 45 $ 44 $ 46 $ 50 $ 47 $ 90 $ 97
Homeowners 36 36 34 36 38 37 72 75
Other personal lines 7 7 7 8 7 8 14 15
Total 88 88 85 90 95 92 176 187
Underwriting income (loss)
Auto $ (17) $ (9) $ (8) $ (16) $ (14) $ 2 $ (26) $ (12)
Homeowners - 3 29 16 (29) 16 3 (13)
Other personal lines 2 (12) (7) (4) (7) (4) (10) (11)
Total (15) (18) 14 (4) (50) 14 (33) (36)
Loss ratio 76.0 77.3 68.4 73.1 85.8 66.8 76.7 76.3
Expense ratio 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4
Combined ratio 104.9 105.8 95.5 101.3 115.7 95.6 105.4 105.7
Loss ratio 76.0 77.3 68.4 73.1 85.8 66.8 76.7 76.3
Less: effect of catastrophe losses 11.2 13.3 4.8 5.3 18.6 6.3 12.3 12.4
effect of prior year non-catastrophe reserve reestimates 0.9 4.2 (1.6) 5.1 0.6 (1.3) 2.6 (0.3)
Underlying loss ratio 63.9 59.8 65.2 62.7 66.6 61.8 61.8 64.2
Expense ratio 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4
Less: effect of amortization of purchased intangible assets - - - - - - - -
Expense ratio, excluding the effect of amortization of purchased
intangible assets 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4
Underlying combined ratio 92.8 88.3 92.3 90.9 96.5 90.6 90.5 93.6
Effect of catastrophe losses 11.2 13.3 4.8 5.3 18.6 6.3 12.3 12.4
Effect of prior year non-catastrophe reserve reestimates 0.9 4.2 (1.6) 5.1 0.6 (1.3) 2.6 (0.3)
Combined ratio 104.9 105.8 95.5 101.3 115.7 95.6 105.4 105.7
Effect of prior year reserve reestimates on combined ratio 0.3 4.5 (1.9) 5.4 0.9 (2.2) 2.4 (0.6)
Effect of advertising expenses on combined ratio 0.3 - - 0.3 0.6 0.6 0.2 0.6
Policies in Force (in thousands)
Auto 676 701 723 746 767 778 676 767
Homeowners 318 329 338 347 355 361 318 355
Other personal lines 105 108 111 114 118 120 105 118
1,099 1,138 1,172 1,207 1,240 1,259 1,099 1,240
New Issued Applications (in thousands)
Auto 15 15 16 20 23 23 30 46
Homeowners 9 9 10 12 14 12 18 26
Average Premium - Gross Written ($)
Auto 988 981 981 963 925 913 985 919
Homeowners 1,629 1,618 1,587 1,583 1,532 1,519 1,624 1,526
Renewal Ratio (%)
Auto 75.5 76.1 76.1 76.7 78.0 78.5 75.8 78.2
Homeowners 79.9 81.5 81.3 82.5 83.2 83.2 80.6 83.2
THE ALLSTATE CORPORATION
ENCOMPASS BRAND PROFITABILITY MEASURES AND STATISTICS
($ in millions)
Three months ended Six months ended
23
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written
Allstate brand $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123
Esurance brand 376 439 368 411 363 434 815 797
Encompass brand 162 138 152 169 173 147 300 320
5,305 5,323 5,096 5,326 5,124 5,116 10,628 10,240
Net premiums earned
Allstate brand $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956
Esurance brand 403 394 391 392 397 382 797 779
Encompass brand 158 159 162 165 165 165 317 330
5,306 5,220 5,191 5,154 5,086 4,979 10,526 10,065
Incurred losses
Allstate brand $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606
Esurance brand 308 289 294 285 300 297 597 597
Encompass brand 130 123 126 135 129 116 253 245
4,072 3,931 3,915 3,875 3,860 3,588 8,003 7,448
Expenses
Allstate brand $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268
Esurance brand 107 123 119 125 132 155 230 287
Encompass brand 45 45 44 46 50 47 90 97
1,320 1,271 1,240 1,257 1,337 1,315 2,591 2,652
Underwriting income (loss)
Allstate brand $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82
Esurance brand (12) (18) (22) (18) (35) (70) (30) (105)
Encompass brand (17) (9) (8) (16) (14) 2 (26) (12)
(86) 18 36 22 (111) 76 (68) (35)
Loss ratio
Allstate brand 76.6 75.4 75.4 75.2 75.9 71.7 76.0 73.8
Esurance brand 76.4 73.4 75.2 72.7 75.6 77.7 74.9 76.6
Encompass brand 82.3 77.4 77.8 81.8 78.2 70.3 79.8 74.2
Allstate Protection 76.7 75.3 75.4 75.2 75.9 72.1 76.0 74.0
Expense ratio
Allstate brand 24.6 23.6 23.2 23.6 25.5 25.1 24.1 25.3
Esurance brand 26.6 31.2 30.4 31.9 33.2 40.6 28.9 36.9
Encompass brand 28.5 28.3 27.1 27.9 30.3 28.5 28.4 29.4
Allstate Protection 24.9 24.4 23.9 24.4 26.3 26.4 24.6 26.3
Combined ratio
Allstate brand 101.2 99.0 98.6 98.8 101.4 96.8 100.1 99.1
Esurance brand 103.0 104.6 105.6 104.6 108.8 118.3 103.8 113.5
Encompass brand 110.8 105.7 104.9 109.7 108.5 98.8 108.2 103.6
Allstate Protection 101.6 99.7 99.3 99.6 102.2 98.5 100.6 100.3
Effect of catastrophe losses on combined ratio
Allstate brand 4.1 2.9 1.1 0.5 3.2 0.3 3.5 1.7
Esurance brand 2.2 0.5 0.5 0.5 1.8 - 1.4 0.9
Encompass brand 1.9 1.3 0.6 0.6 3.0 - 1.6 1.5
Allstate Protection 3.9 2.7 1.0 0.5 3.1 0.3 3.3 1.7
Effect of prior year reserve reestimates on combined ratio
Allstate brand (0.8) 0.1 (0.3) 0.1 0.4 0.8 (0.3) 0.6
Esurance brand (1.0) (1.0) (1.3) (1.3) (0.8) (1.0) (1.0) (0.9)
Encompass brand 3.2 1.3 (0.6) 7.9 (1.2) (4.8) 2.2 (3.0)
Allstate Protection (0.7) 0.1 (0.4) 0.3 0.2 0.5 (0.3) 0.3
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand (0.1) (0.1) (0.2) (0.1) - (0.1) - (0.1)
Esurance brand - - - 0.2 - - - -
Encompass brand (0.6) - - - - (0.6) (0.3) (0.3)
Allstate Protection (0.1) (0.1) (0.2) - (0.1) - - -
Effect of amortization of purchased intangible assets on
combined ratio
Esurance brand 1.8 1.5 2.3 2.0 2.3 2.3 1.6 2.3
Allstate Protection 0.1 0.1 0.2 0.2 0.1 0.2 0.1 -
THE ALLSTATE CORPORATION
AUTO PROFITABILITY MEASURES
Six months endedThree months ended
24
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written
Allstate brand $ 1,831 $ 1,392 $ 1,634 $ 1,879 $ 1,819 $ 1,379 $ 3,223 $ 3,198
Esurance brand 14 11 9 9 7 5 25 12
Encompass brand 126 104 116 134 136 111 230 247
1,971 1,507 1,759 2,022 1,962 1,495 3,478 3,457
Net premiums earned
Allstate brand $ 1,684 $ 1,678 $ 1,674 $ 1,663 $ 1,645 $ 1,631 $ 3,362 $ 3,276
Esurance brand 10 8 7 5 4 3 18 7
Encompass brand 121 124 124 127 126 127 245 253
1,815 1,810 1,805 1,795 1,775 1,761 3,625 3,536
Incurred losses
Allstate brand $ 1,260 $ 1,190 $ 816 $ 820 $ 1,147 $ 894 $ 2,450 $ 2,041
Esurance brand 10 4 4 4 3 1 14 4
Encompass brand 85 85 61 75 117 74 170 191
1,355 1,279 881 899 1,267 969 2,634 2,236
Expenses
Allstate brand $ 373 $ 377 $ 372 $ 385 $ 372 $ 389 $ 750 $ 761
Esurance brand 25 11 9 10 7 - 36 7
Encompass brand 36 36 34 36 38 37 72 75
434 424 415 431 417 426 858 843
Underwriting income (loss)
Allstate brand $ 51 $ 111 $ 486 $ 458 $ 126 $ 348 $ 162 $ 474
Esurance brand (25) (7) (6) (9) (6) 2 (32) (4)
Encompass brand - 3 29 16 (29) 16 3 (13)
26 107 509 465 91 366 133 457
Loss ratio
Allstate brand 74.8 70.9 48.8 49.3 69.7 54.8 72.9 62.3
Esurance brand 100.0 50.0 57.1 80.0 75.0 33.3 77.8 57.1
Encompass brand 70.2 68.6 49.2 59.1 92.8 58.3 69.4 75.5
Allstate Protection 74.7 70.7 48.8 50.1 71.4 55.0 72.6 63.2
Expense ratio
Allstate brand 22.2 22.5 22.2 23.2 22.6 23.9 22.3 23.2
Esurance brand 250.0 137.5 128.6 200.0 175.0 - 200.0 100.0
Encompass brand 29.8 29.0 27.4 28.3 30.2 29.1 29.4 29.6
Allstate Protection 23.9 23.4 23.0 24.0 23.5 24.2 23.7 23.9
Combined ratio
Allstate brand 97.0 93.4 71.0 72.5 92.3 78.7 95.2 85.5
Esurance brand 350.0 187.5 185.7 280.0 250.0 33.3 277.8 157.1
Encompass brand 100.0 97.6 76.6 87.4 123.0 87.4 98.8 105.1
Allstate Protection 98.6 94.1 71.8 74.1 94.9 79.2 96.3 87.1
Effect of catastrophe losses on combined ratio
Allstate brand 38.3 34.2 15.0 12.4 32.1 13.9 36.2 23.0
Esurance brand 50.0 12.5 14.3 20.0 25.0 - 33.4 14.2
Encompass brand 24.0 30.7 9.7 11.8 41.3 14.2 27.4 27.7
Allstate Protection 37.4 33.9 14.6 12.4 32.7 13.9 35.6 23.4
Effect of prior year reserve reestimates on combined ratio
Allstate brand 1.1 (0.5) (0.5) (0.9) - 0.2 0.3 0.1
Esurance brand - - - - - - - -
Encompass brand - 0.8 (4.9) - 2.3 (1.6) 0.4 0.4
Allstate Protection 1.0 (0.4) (0.8) (0.8) 0.2 0.1 0.3 0.1
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand 1.0 (0.3) (0.5) (0.1) 0.5 (0.1) 0.3 0.2
Esurance brand - - - - - - - -
Encompass brand (0.8) 1.6 (0.8) 1.6 - (1.6) 0.4 (0.7)
Allstate Protection 0.8 (0.2) (0.5) 0.1 0.4 (0.1) 0.3 0.1
THE ALLSTATE CORPORATION
HOMEOWNERS PROFITABILITY MEASURES
Six months endedThree months ended
25
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written
Allstate brand $ 428 $ 353 $ 376 $ 429 $ 424 $ 357 $ 781 $ 781
Esurance brand 2 2 1 3 1 2 4 3
Encompass brand 27 21 25 28 29 24 48 53
457 376 402 460 454 383 833 837
Net premiums earned
Allstate brand $ 397 $ 393 $ 395 $ 396 $ 395 $ 391 $ 790 $ 786
Esurance brand 2 2 2 2 1 2 4 3
Encompass brand 25 26 27 27 27 27 51 54
424 421 424 425 423 420 845 843
Incurred losses
Allstate brand $ 256 $ 261 $ 216 $ 241 $ 259 $ 244 $ 517 $ 503
Esurance brand 1 1 1 1 1 1 2 2
Encompass brand 16 31 27 23 27 23 47 50
273 293 244 265 287 268 566 555
Expenses
Allstate brand $ 106 $ 103 $ 101 $ 109 $ 105 $ 105 $ 209 $ 210
Esurance brand 1 1 1 - - 2 2 2
Encompass brand 7 7 7 8 7 8 14 15
114 111 109 117 112 115 225 227
Underwriting income (loss)
Allstate brand $ 35 $ 29 $ 78 $ 46 $ 31 $ 42 $ 64 $ 73
Esurance brand - - - 1 - (1) - (1)
Encompass brand 2 (12) (7) (4) (7) (4) (10) (11)
37 17 71 43 24 37 54 61
Loss ratio
Allstate brand 64.5 66.4 54.7 60.9 65.6 62.4 65.4 64.0
Esurance brand 50.0 50.0 50.0 50.0 100.0 50.0 50.0 66.7
Encompass brand 64.0 119.3 100.0 85.2 100.0 85.2 92.2 92.6
Allstate Protection 64.4 69.6 57.6 62.4 67.8 63.8 67.0 65.9
Expense ratio
Allstate brand 26.7 26.2 25.6 27.5 26.6 26.9 26.5 26.7
Esurance brand 50.0 50.0 50.0 - - 100.0 50.0 66.6
Encompass brand 28.0 26.9 25.9 29.6 25.9 29.6 27.4 27.8
Allstate Protection 26.9 26.4 25.7 27.5 26.5 27.4 26.6 26.9
Combined ratio
Allstate brand 91.2 92.6 80.3 88.4 92.2 89.3 91.9 90.7
Esurance brand 100.0 100.0 100.0 50.0 100.0 150.0 100.0 133.3
Encompass brand 92.0 146.2 125.9 114.8 125.9 114.8 119.6 120.4
Allstate Protection 91.3 96.0 83.3 89.9 94.3 91.2 93.6 92.8
Effect of catastrophe losses on combined ratio
Allstate brand 15.6 16.0 8.4 4.5 11.9 7.4 15.8 9.7
Esurance brand - - - - - - - -
Encompass brand 8.0 3.8 7.4 3.7 7.4 7.4 5.9 7.4
Allstate Protection 15.1 15.2 8.3 4.5 11.6 7.4 15.1 9.5
Effect of prior year reserve reestimates on combined ratio
Allstate brand (1.7) (1.5) (0.3) 1.8 1.1 (0.5) (1.6) 0.2
Esurance brand - - - - - - - -
Encompass brand (16.0) 42.3 3.7 14.8 7.4 11.1 13.7 9.3
Allstate Protection (2.6) 1.2 - 2.6 1.4 0.2 (0.7) 0.9
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand - - (0.3) - - (0.3) - (0.1)
Esurance brand - - - - - - - -
Encompass brand - (3.9) - (3.7) 3.7 - (2.0) 1.9
Allstate Protection - (0.3) (0.2) (0.2) 0.3 (0.3) (0.1) -
(1) Other personal lines include renter, condominium, landlord and other personal lines products.
THE ALLSTATE CORPORATION
OTHER PERSONAL LINES PROFITABILITY MEASURES (1)
Six months endedThree months ended
26
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written $ 135 $ 126 $ 126 $ 124 $ 138 $ 128 $ 261 $ 266
Net premiums earned $ 127 $ 129 $ 129 $ 128 $ 128 $ 125 $ 256 $ 253
Incurred losses $ 135 $ 119 $ 100 $ 97 $ 105 $ 98 $ 254 $ 203
Expenses $ 35 $ 38 $ 36 $ 36 $ 40 $ 38 $ 73 $ 78
Underwriting loss $ (43) $ (28) $ (7) $ (5) $ (17) $ (11) $ (71) $ (28)
Loss ratio 106.3 92.2 77.5 75.8 82.0 78.4 99.2 80.3
Expense ratio 27.6 29.5 27.9 28.1 31.3 30.4 28.5 30.8
Combined ratio 133.9 121.7 105.4 103.9 113.3 108.8 127.7 111.1
Effect of catastrophe losses on combined ratio 9.5 7.0 4.6 2.3 9.4 4.0 8.2 6.7
Effect of prior year reserve reestimates on combined ratio 18.1 15.5 - (9.3) 3.1 8.0 16.8 5.5
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio 0.8 2.4 0.8 - 2.3 0.8 1.6 1.5
(1) Commercial lines are all Allstate Brand products.
THE ALLSTATE CORPORATION
COMMERCIAL LINES PROFITABILITY MEASURES (1)
Six months endedThree months ended
27
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written $ 183 $ 183 $ 168 $ 205 $ 199 $ 184 $ 366 $ 383
Net premiums earned $ 142 $ 143 $ 135 $ 148 $ 137 $ 141 $ 285 $ 278
Incurred losses $ 64 $ 61 $ 57 $ 71 $ 66 $ 69 $ 125 $ 135
Expenses $ 74 $ 68 $ 72 $ 61 $ 63 $ 69 $ 142 $ 132
Underwriting income $ 4 $ 14 $ 6 $ 16 $ 8 $ 3 $ 18 $ 11
Loss ratio 45.1 42.7 42.2 48.0 48.2 49.0 43.9 48.5
Expense ratio 52.1 47.5 53.4 41.2 46.0 48.9 49.8 47.5
Combined ratio 97.2 90.2 95.6 89.2 94.2 97.9 93.7 96.0
Effect of catastrophe losses on combined ratio - - - - - - - -
Effect of prior year reserve reestimates on combined ratio - - - 0.7 0.7 - - 0.3
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio - - - - - - - -
Effect of amortization of purchased intangible assets 0.7 0.7 0.8 0.7 0.8 0.7 0.7 0.7
(1) Other business lines include Allstate Roadside Services and Allstate Dealer Services.
THE ALLSTATE CORPORATION
OTHER BUSINESS LINES PROFITABILITY MEASURES (1)
Six months endedThree months ended
28
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Auto
Allstate brand underlying combined ratio 97.8 95.9 97.6 98.1 97.8 95.6 96.9 96.7
Effect of catastrophe losses on combined ratio 4.1 2.9 1.1 0.5 3.2 0.3 3.5 1.7
Effect of prior year non-catastrophe reserve reestimates
on combined ratio (0.7) 0.2 (0.1) 0.2 0.4 0.9 (0.3) 0.7
Allstate brand combined ratio 101.2 99.0 98.6 98.8 101.4 96.8 100.1 99.1
Esurance brand underlying combined ratio 100.0 103.6 104.1 103.6 105.5 117.0 101.8 111.2
Effect of catastrophe losses on combined ratio 2.2 0.5 0.5 0.5 1.8 - 1.4 0.9
Effect of prior year non-catastrophe reserve reestimates
on combined ratio (1.0) (1.0) (1.3) (1.5) (0.8) (1.0) (1.0) (0.9)
Effect of amortization of purchased intangible assets
on combined ratio 1.8 1.5 2.3 2.0 2.3 2.3 1.6 2.3
Esurance brand combined ratio 103.0 104.6 105.6 104.6 108.8 118.3 103.8 113.5
Encompass brand underlying combined ratio 105.1 103.1 104.9 101.2 106.7 103.0 104.1 104.8
Effect of catastrophe losses on combined ratio 1.9 1.3 0.6 0.6 3.0 - 1.6 1.5
Effect of prior year non-catastrophe reserve reestimates
on combined ratio 3.8 1.3 (0.6) 7.9 (1.2) (4.2) 2.5 (2.7)
Encompass brand combined ratio 110.8 105.7 104.9 109.7 108.5 98.8 108.2 103.6
Homeowners
Allstate brand underlying combined ratio 58.6 59.4 56.0 60.9 60.7 64.5 59.0 62.6
Effect of catastrophe losses on combined ratio 38.3 34.2 15.0 12.4 32.1 13.9 36.2 23.0
Effect of prior year non-catastrophe reserve reestimates
on combined ratio 0.1 (0.2) - (0.8) (0.5) 0.3 - (0.1)
Allstate brand combined ratio 97.0 93.4 71.0 72.5 92.3 78.7 95.2 85.5
Encompass brand underlying combined ratio 75.2 67.7 71.0 77.2 79.4 73.2 71.4 76.3
Effect of catastrophe losses on combined ratio 24.0 30.7 9.7 11.8 41.3 14.2 27.4 27.7
Effect of prior year non-catastrophe reserve reestimates
on combined ratio 0.8 (0.8) (4.1) (1.6) 2.3 - - 1.1
Encompass brand combined ratio 100.0 97.6 76.6 87.4 123.0 87.4 98.8 105.1
Other Personal Lines
Allstate brand underlying combined ratio 77.3 78.1 71.9 82.1 79.2 82.1 77.7 80.7
Effect of catastrophe losses on combined ratio 15.6 16.0 8.4 4.5 11.9 7.4 15.8 9.7
Effect of prior year non-catastrophe reserve reestimates
on combined ratio (1.7) (1.5) - 1.8 1.1 (0.2) (1.6) 0.3
Allstate brand combined ratio 91.2 92.6 80.3 88.4 92.2 89.3 91.9 90.7
Encompass brand underlying combined ratio 100.0 96.2 114.8 92.6 114.8 96.3 98.0 105.6
Effect of catastrophe losses on combined ratio 8.0 3.8 7.4 3.7 7.4 7.4 5.9 7.4
Effect of prior year non-catastrophe reserve reestimates
on combined ratio (16.0) 46.2 3.7 18.5 3.7 11.1 15.7 7.4
Encompass brand combined ratio 92.0 146.2 125.9 114.8 125.9 114.8 119.6 120.4
THE ALLSTATE CORPORATION
AUTO, HOMEOWNERS AND OTHER PERSONAL LINES UNDERLYING COMBINED RATIOS
Six months endedThree months ended
29
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Auto
Annualized average premium (1) $ 946 $ 927 $ 913 $ 903 $ 893 $ 885
Underlying combined ratios 97.8 95.9 97.6 98.1 97.8 95.6
Average underlying loss (incurred pure premium)
and expense * $ 925 $ 889 $ 891 $ 886 $ 874 $ 846
Homeowners
Annualized average premium (1) $ 1,098 $ 1,091 $ 1,085 $ 1,079 $ 1,071 $ 1,067
Underlying combined ratios 58.6 59.4 56.0 60.9 60.7 64.5
Average underlying loss (incurred pure premium)
and expense $ 643 $ 648 $ 607 $ 657 $ 650 $ 688
(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
30
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 $ 51 $ 35 68.6% $ 4 7.8%
Other hurricane exposure states 1,941 1,635 84.2% 980 50.5%
Total hurricane exposure states (2) 1,992 1,670 83.8% 984 49.4% 13 6.6%
Other catastrophe exposure states (4) 1,633 964 59.0% 307 18.8% 18 -3.0%
Total $ 3,625 $ 2,634 72.6% $ 1,291 35.6% 40 31 1.7%
(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.
Six months ended June 30, 2016
31
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Allstate brand
Auto $ 195 $ 137 $ 50 $ 22 $ 143 $ 13 $ 332 $ 156
Homeowners 644 574 251 207 528 227 1,218 755
Other personal lines 62 63 33 18 47 29 125 76
Commercial lines 12 9 6 3 12 5 21 17
Other business lines - - - - - - - -
Total 913 783 340 250 730 274 1,696 1,004
Esurance brand
Auto 9 2 2 2 7 - 11 7
Homeowners 5 1 1 1 1 - 6 1
Other personal lines - - - - - - - -
Total 14 3 3 3 8 - 17 8
Encompass brand
Auto 3 2 1 1 5 - 5 5
Homeowners 29 38 12 15 52 18 67 70
Other personal lines 2 1 2 1 2 2 3 4
Total 34 41 15 17 59 20 75 79
Allstate Protection $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091
Allstate Protection
Auto $ 207 $ 141 $ 53 $ 25 $ 155 $ 13 $ 348 $ 168
Homeowners 678 613 264 223 581 245 1,291 826
Other personal lines 64 64 35 19 49 31 128 80
Commercial lines 12 9 6 3 12 5 21 17
Other business lines - - - - - - - -
$ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091
THE ALLSTATE CORPORATION
CATASTROPHE LOSSES BY BRAND
($ in millions)
Six months endedThree months ended
32
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
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 4.7 5.7 30,309 1,719 1,749 5.8
2016 10.7 12.3 11.5 15,537 1,788 1,789 11.5
Average 6.4 13.1 8.3 5.3 8.4 7.3
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
33
Average
Number Claims and Combined catastrophe
Size of catastrophe of events claims expense ratio impact loss per event
Greater than $250 million 1 4.4 % $ 341 35.5 % 4.4 % $ 341
$101 million to $250 million - - - - - -
$50 million to $100 million 3 13.0 207 21.5 2.6 69
Less than $50 million 19 82.6 458 47.6 5.9 24
Total 23 100.0 % 1,006 104.6 12.9 44
Prior year reserve reestimates 13 1.4 0.2
Prior quarter reserve reestimates (58) (6.0) (0.8)
Total catastrophe losses $ 961 100.0 % 12.3 %
Average
Number Claims and Combined catastrophe
Size of catastrophe of events claims expense ratio impact loss per event
Greater than $250 million 2 5.0 % $ 638 35.7 % 4.1 % $ 319
$101 million to $250 million 1 2.5 186 10.4 1.2 186
$50 million to $100 million 4 10.0 263 14.7 1.7 66
Less than $50 million 33 82.5 691 38.6 4.5 21
Total 40 100.0 % 1,778 99.4 11.5 44
Prior year reserve reestimates 10 0.6 -
Total catastrophe losses $ 1,788 100.0 % 11.5 %
Six months ended June 30, 2016
THE ALLSTATE CORPORATION
CATASTROPHE BY SIZE OF EVENT
($ in millions)
Three months ended June 30, 2016
34
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Prior Year Reserve Reestimates (1)
Auto $ (36) $ 5 $ (19) $ 14 $ 11 $ 24 $ (31) $ 35
Homeowners 19 (7) (14) (15) 4 1 12 5
Other personal lines (11) 5 - 11 6 1 (6) 7
Commercial lines 23 20 - (12) 4 10 43 14
Other business lines - - - 1 1 - - 1
Allstate Protection (5) 23 (33) (1) 26 36 18 62
Discontinued Lines and Coverages 2 1 2 48 2 1 3 3
Property-Liability $ (3) $ 24 $ (31) $ 47 $ 28 $ 37 $ 21 $ 65
Allstate brand (2) $ (2) $ 13 $ (22) $ (13) $ 26 $ 47 $ 11 $ 73
Esurance brand (2) (4) (4) (5) (5) (3) (4) (8) (7)
Encompass brand (2) 1 14 (6) 17 3 (7) 15 (4)
Allstate Protection (2) $ (5) $ 23 $ (33) $ (1) $ 26 $ 36 $ 18 $ 62
Effect of Prior Year Reserve
Reestimates on Combined Ratio (1)(3)
Auto (0.5) - (0.2) 0.2 0.2 0.3 (0.2) 0.2
Homeowners 0.3 (0.1) (0.2) (0.2) - - 0.1 -
Other personal lines (0.1) - - 0.1 0.1 - (0.1) 0.1
Commercial lines 0.3 0.3 - (0.1) - 0.2 0.3 0.1
Other business lines - - - - - - - -
Allstate Protection - 0.2 (0.4) - 0.3 0.5 0.1 0.4
Discontinued Lines and Coverages - 0.1 - 0.6 - - - -
Property-Liability - 0.3 (0.4) 0.6 0.3 0.5 0.1 0.4
Allstate brand (2) - 0.1 (0.3) (0.2) 0.3 0.6 0.1 0.5
Esurance brand (2) - (0.1) - - - - (0.1) (0.1)
Encompass brand (2) - 0.2 (0.1) 0.2 - (0.1) 0.1 -
Allstate Protection (2) - 0.2 (0.4) - 0.3 0.5 0.1 0.4
(1)
(2)
(3) Calculated using Property-Liability premiums earned for the respective period.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
PRIOR YEAR RESERVE REESTIMATES
($ in millions)
Six months ended
Favorable reserve reestimates are shown in parentheses.
Unfavorable (favorable) reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $15 million, $0 million, $(2) million, $13 million
and $7 million, $0 million, $1 million and $8 million, respectively, in the three months ended June 30, 2016 and 2015, respectively. Unfavorable (favorable) reserve reestimates included in catastrophe losses
for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $11 million, $0 million, $(1) million, $10 million and $5 million, $0 million, $(2) million and $3 million, respectively, in the six
months ended June 30, 2016 and 2015, respectively.
Three months ended
35
June 30, March 31,
2016 2016 2015 2014 2013 2012 2011
(net of reinsurance)
Asbestos claims
Beginning reserves $ 907 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078 $ 1,100
Incurred claims and claims expense - - 39 87 74 26 26
Claims and claims expense paid (17) (53) (93) (90) (83) (78) (48)
Ending reserves $ 890 $ 907 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078
Claims and claims expense paid
as a percent of ending reserves 1.9% 5.8% 9.7% 8.9% 8.2% 7.6% 4.5%
Environmental claims
Beginning reserves $ 177 $ 179 $ 203 $ 208 $ 193 $ 185 $ 201
Incurred claims and claims expense - - 1 15 30 22 -
Claims and claims expense paid (4) (2) (25) (20) (15) (14) (16)
Ending reserves $ 173 $ 177 $ 179 $ 203 $ 208 $ 193 $ 185
Claims and claims expense paid
as a percent of ending reserves 2.3% 1.1% 14.0% 9.9% 7.2% 7.3% 8.6%
THE ALLSTATE CORPORATION
ASBESTOS AND ENVIRONMENTAL RESERVES
($ in millions)
Twelve months ended December 31,Three months ended
36
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written
Auto $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123
Homeowners 1,831 1,392 1,634 1,879 1,819 1,379 3,223 3,198
Landlord 133 122 137 143 138 128 255 266
Renter 75 67 65 84 73 67 142 140
Condominium 67 53 58 64 63 51 120 114
Other 153 111 116 138 150 111 264 261
Other personal lines 428 353 376 429 424 357 781 781
Commercial lines 135 126 126 124 138 128 261 266
Total 7,161 6,617 6,712 7,178 6,969 6,399 13,778 13,368
Net premiums earned
Auto $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956
Homeowners 1,684 1,678 1,674 1,663 1,645 1,631 3,362 3,276
Other personal lines 397 393 395 396 395 391 790 786
Commercial lines 127 129 129 128 128 125 256 253
Total 6,953 6,867 6,836 6,784 6,692 6,579 13,820 13,271
Incurred losses
Auto $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606
Homeowners 1,260 1,190 816 820 1,147 894 2,450 2,041
Other personal lines 256 261 216 241 259 244 517 503
Commercial lines 135 119 100 97 105 98 254 203
Total 5,285 5,089 4,627 4,613 4,942 4,411 10,374 9,353
Expenses
Auto $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268
Homeowners 373 377 372 385 372 389 750 761
Other personal lines 106 103 101 109 105 105 209 210
Commercial lines 35 38 36 36 40 38 73 78
Total 1,682 1,621 1,586 1,616 1,672 1,645 3,303 3,317
Underwriting income (loss)
Auto $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82
Homeowners 51 111 486 458 126 348 162 474
Other personal lines 35 29 78 46 31 42 64 73
Commercial lines (43) (28) (7) (5) (17) (11) (71) (28)
Total (14) 157 623 555 78 523 143 601
Loss ratio 76.0 74.1 67.7 68.0 73.8 67.1 75.1 70.5
Expense ratio 24.2 23.6 23.2 23.8 25.0 25.0 23.9 25.0
Combined ratio 100.2 97.7 90.9 91.8 98.8 92.1 99.0 95.5
Effect of catastrophe losses on combined ratio 13.1 11.4 5.0 3.7 10.9 4.2 12.3 7.6
Effect of prior year reserve reestimates on combined ratio - 0.2 (0.3) (0.2) 0.3 0.7 0.1 0.5
Underlying combined ratio 87.3 86.1 86.0 88.3 87.7 87.1 86.7 87.4
Effect of catastrophe losses 13.1 11.4 5.0 3.7 10.9 4.2 12.3 7.6
Effect of prior year non-catastrophe reserve reestimates (0.2) 0.2 (0.1) (0.2) 0.2 0.8 - 0.5
Combined ratio 100.2 97.7 90.9 91.8 98.8 92.1 99.0 95.5
Policies in Force (in thousands)
Auto 20,061 20,145 20,326 20,367 20,258 20,036 20,061 20,258
Homeowners 6,135 6,152 6,174 6,163 6,141 6,114 6,135 6,141
Other personal lines 4,203 4,208 4,219 4,208 4,170 4,135 4,203 4,170
Commercial lines 308 318 324 328 330 326 308 330
Excess and surplus 23 24 25 26 26 27 23 26
Total 30,730 30,847 31,068 31,092 30,925 30,638 30,730 30,925
(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.
THE ALLSTATE CORPORATION
ALLSTATE PERSONAL LINES - AUTO, HOMEOWNERS, OTHER PERSONAL LINES AND COMMERCIAL LINES PROFITABILITY MEASURES (1)
($ in millions)
Six months endedThree months ended
37
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net premiums written
Esurance $ 392 $ 452 $ 378 $ 423 $ 371 $ 441 $ 844 $ 812
Encompass 315 263 293 331 338 282 578 620
Allstate Roadside Services 77 77 70 87 88 91 154 179
Allstate Dealer Services 106 106 98 118 111 93 212 204
Other business lines 183 183 168 205 199 184 366 383
Total 890 898 839 959 908 907 1,788 1,815
Net premiums earned
Esurance $ 415 $ 404 $ 400 $ 399 $ 402 $ 387 $ 819 $ 789
Encompass 304 309 313 319 318 319 613 637
Other business lines 142 143 135 148 137 141 285 278
Total 861 856 848 866 857 847 1,717 1,704
Incurred losses
Esurance $ 319 $ 294 $ 299 $ 290 $ 304 $ 299 $ 613 $ 603
Encompass 231 239 214 233 273 213 470 486
Other business lines 64 61 57 71 66 69 125 135
Total 614 594 570 594 643 581 1,208 1,224
Expenses
Esurance $ 133 $ 135 $ 129 $ 135 $ 139 $ 157 $ 268 $ 296
Encompass 88 88 85 90 95 92 176 187
Other business lines 74 68 72 61 63 69 142 132
Answer Financial 2 1 2 1 3 2 3 5
Total 297 292 288 287 300 320 589 620
Underwriting income (loss)
Esurance $ (37) $ (25) $ (28) $ (26) $ (41) $ (69) $ (62) $ (110)
Encompass (15) (18) 14 (4) (50) 14 (33) (36)
Other business lines 4 14 6 16 8 3 18 11
Answer Financial (2) (1) (2) (1) (3) (2) (3) (5)
Total (50) (30) (10) (15) (86) (54) (80) (140)
Loss ratio 71.3 69.4 67.2 68.6 75.0 68.6 70.4 71.8
Expense ratio 34.5 34.1 34.0 33.1 35.0 37.8 34.3 36.4
Combined ratio 105.8 103.5 101.2 101.7 110.0 106.4 104.7 108.2
Effect of catastrophe losses on combined ratio 5.6 5.1 2.1 2.3 7.8 2.4 5.4 5.1
Effect of prior year reserve reestimates on combined ratio (0.3) 1.2 (1.3) 1.5 0.1 (1.3) 0.4 (0.6)
Effect of amortization of purchased intangible assets 1.0 1.0 1.6 1.4 1.5 1.4 1.0 1.5
Underlying combined ratio 99.3 96.3 98.7 96.8 100.7 103.5 97.8 102.1
Effect of catastrophe losses 5.6 5.1 2.1 2.3 7.8 2.4 5.4 5.1
Effect of prior year non-catastrophe reserve reestimates (0.1) 1.1 (1.2) 1.2 - (0.9) 0.5 (0.5)
Effect of amortization of purchased intangible assets 1.0 1.0 1.6 1.4 1.5 1.4 1.0 1.5
Combined ratio 105.8 103.5 101.2 101.7 110.0 106.4 104.7 108.2
Policies in Force (in thousands)
Esurance 1,500 1,511 1,491 1,503 1,522 1,527 1,500 1,522
Encompass 1,099 1,138 1,172 1,207 1,240 1,259 1,099 1,240
Other business lines 824 856 894 920 937 941 824 937
Total 3,423 3,505 3,557 3,630 3,699 3,727 3,423 3,699
(1) Emerging businesses include Esurance, Encompass, Allstate Roadside Services, Allstate Dealer Services, Ivantage and Answer Financial.
THE ALLSTATE CORPORATION
EMERGING BUSINESSES - ESURANCE, ENCOMPASS, OTHER BUSINESS LINES AND ANSWER FINANCIAL PROFITABILITY MEASURES (1)
($ in millions)
Six months endedThree months ended
38
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Premiums $ 353 $ 354 $ 339 $ 329 $ 326 $ 328 $ 707 $ 654
Contract charges 211 212 208 209 210 209 423 419
Net investment income 435 419 420 491 489 484 854 973
Contract benefits (454) (455) (456) (460) (446) (441) (909) (887)
Interest credited to contractholder funds (179) (184) (186) (191) (191) (192) (363) (383)
Amortization of deferred policy acquisition costs (68) (71) (65) (61) (62) (69) (139) (131)
Operating costs and expenses (121) (123) (119) (112) (118) (123) (244) (241)
Restructuring and related charges (1) - 3 (1) (2) - (1) (2)
Income tax expense on operations (56) (48) (46) (66) (67) (62) (104) (129)
Operating income 120 104 98 138 139 134 224 273
Realized capital gains and losses, after-tax - (32) (62) 125 38 72 (32) 110
Valuation changes on embedded derivatives that are not
hedged, after-tax (4) (4) 2 (2) 4 (5) (8) (1)
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on embedded
derivatives that are not hedged, after-tax (1) (1) - (1) (2) - (2) (2)
Gain (loss) on disposition of operations, after-tax 1 1 1 2 - (1) 2 (1)
Change in accounting for investments in qualified
affordable housing projects, after-tax - - - - - (17) - (17)
Net income applicable to common shareholders $ 116 $ 68 $ 39 $ 262 $ 179 $ 183 $ 184 $ 362
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL RESULTS
($ in millions)
Six months endedThree months ended
39
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Return on Attributed Equity
Numerator:
Net income applicable to common shareholders (1) $ 485 $ 548 $ 663 $ 832 $ 686 $ 652
Denominator:
Beginning attributed equity (2) $ 7,621 $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812
Ending attributed equity 8,055 7,680 7,350 7,475 7,621 7,920
Average attributed equity (3) $ 7,838 $ 7,800 $ 7,511 $ 7,416 $ 7,442 $ 7,866
Return on attributed equity 6.2 % 7.0 % 8.8 % 11.2 % 9.2 % 8.3 %
Operating Income Return on Attributed Equity
Numerator:
Operating income (1) $ 460 $ 479 $ 509 $ 539 $ 526 $ 552
Denominator:
Beginning attributed equity (2) $ 7,621 $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812
Unrealized net capital gains and losses 1,030 1,499 1,420 1,305 1,285 1,280
Adjusted beginning attributed equity 6,591 6,421 6,252 6,051 5,977 6,532
Ending attributed equity 8,055 7,680 7,350 7,475 7,621 7,920
Unrealized net capital gains and losses 1,077 824 556 722 1,030 1,499
Adjusted ending attributed equity 6,978 6,856 6,794 6,753 6,591 6,421
Average adjusted attributed equity (3) $ 6,785 $ 6,639 $ 6,523 $ 6,402 $ 6,284 $ 6,477
Operating income return on attributed equity 6.8 % 7.2 % 7.8 % 8.4 % 8.4 % 8.5 %
(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 applicable to common shareholders and operating income reflect a trailing twelve-month period.
Twelve months ended
40
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
PREMIUMS AND CONTRACT CHARGES -
BY PRODUCT
Underwritten Products
Traditional life insurance premiums $ 139 $ 138 $ 144 $ 135 $ 131 $ 132 $ 277 $ 263
Accident and health insurance premiums 214 216 195 194 195 196 430 391
Interest-sensitive life insurance contract charges 208 209 204 205 207 206 417 413
561 563 543 534 533 534 1,124 1,067
Annuities
Immediate annuities with life contingencies premiums - - - - - - - -
Other fixed annuity contract charges 3 3 4 4 3 3 6 6
3 3 4 4 3 3 6 6
Total $ 564 $ 566 $ 547 $ 538 $ 536 $ 537 $ 1,130 $ 1,073
PREMIUMS AND CONTRACT CHARGES -
BY DISTRIBUTION CHANNEL
Allstate agencies $ 306 $ 305 $ 304 $ 300 $ 297 $ 297 $ 611 $ 594
Workplace enrolling agents 232 233 215 212 209 210 465 419
Other (1) 26 28 28 26 30 30 54 60
Total $ 564 $ 566 $ 547 $ 538 $ 536 $ 537 $ 1,130 $ 1,073
PROPRIETARY LIFE INSURANCE POLICIES SOLD
BY ALLSTATE AGENCIES (2) (3) 29,839 25,458 39,701 16,402 34,494 30,091 55,297 64,585
ALLSTATE BENEFITS NEW BUSINESS
WRITTEN PREMIUMS (4) $ 70 $ 82 $ 179 $ 69 $ 64 $ 65 $ 152 $ 129
(1) Primarily represents independent master brokerage agencies.
(2) Policies sold reduced by lapses within twelve months of sale.
(3)
(4)
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.
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.
Three months ended
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND CONTRACT CHARGES
($ in millions)
Six months ended
41
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Contractholders funds, beginning balance $ 21,092 $ 21,295 $ 21,559 $ 21,968 $ 22,267 $ 22,529 $ 21,295 $ 22,529
Deposits
Interest-sensitive life insurance 251 252 251 251 253 249 503 502
Fixed annuities 40 44 39 56 53 51 84 104
Total deposits 291 296 290 307 306 300 587 606
Interest credited 184 189 183 193 185 199 373 384
Benefits, withdrawals, maturities and other adjustments
Benefits (225) (252) (247) (272) (285) (273) (477) (558)
Surrenders and partial withdrawals (300) (245) (295) (375) (303) (305) (545) (608)
Maturities of and interest payments on institutional products - - - - (1) - - (1)
Contract charges (206) (206) (207) (205) (203) (203) (412) (406)
Net transfers from separate accounts 1 1 2 2 2 1 2 3
Other adjustments 8 14 10 (59) - 19 22 19
Total benefits, withdrawals, maturities and other adjustments (722) (688) (737) (909) (790) (761) (1,410) (1,551)
Contractholder funds, ending balance $ 20,845 $ 21,092 $ 21,295 $ 21,559 $ 21,968 $ 22,267 $ 20,845 $ 21,968
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL CHANGE IN CONTRACTHOLDER FUNDS
($ in millions)
Six months ended Three months ended
42
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Benefit spread
Premiums $ 353 $ 354 $ 339 $ 329 $ 326 $ 328 $ 707 $ 654
Cost of insurance contract charges (1) 140 141 137 137 138 138 281 276
Contract benefits excluding the implied interest
on immediate annuities with life contingencies (2) (325) (327) (328) (333) (319) (312) (652) (631)
Total benefit spread 168 168 148 133 145 154 336 299
Investment spread
Net investment income 435 419 420 491 489 484 854 973
Implied interest on immediate annuities with
life contingencies (2) (129) (128) (128) (127) (127) (129) (257) (256)
Interest credited to contractholder funds (185) (190) (183) (194) (185) (199) (375) (384)
Total investment spread 121 101 109 170 177 156 222 333
Surrender charges and contract maintenance
expense fees (1) 71 71 71 72 72 71 142 143
Realized capital gains and losses - (49) (97) 194 59 111 (49) 170
Amortization of deferred policy
acquisition costs (69) (73) (64) (63) (65) (70) (142) (135)
Operating costs and expenses (121) (123) (119) (112) (118) (123) (244) (241)
Restructuring and related charges (1) - 3 (1) (2) - (1) (2)
Gain (loss) on disposition of operations 1 2 1 3 1 (2) 3 (1)
Income tax expense (54) (29) (13) (134) (90) (114) (83) (204)
Net income applicable to common shareholders $ 116 $ 68 $ 39 $ 262 $ 179 $ 183 $ 184 $ 362
Benefit spread by product group
Life insurance $ 85 $ 80 $ 75 $ 66 $ 65 $ 68 $ 165 $ 133
Accident and health insurance 108 105 92 90 97 107 213 204
Annuities (25) (17) (19) (23) (17) (21) (42) (38)
Total benefit spread $ 168 $ 168 $ 148 $ 133 $ 145 $ 154 $ 336 $ 299
Investment spread by product group
Annuities and institutional products $ 35 $ 17 $ 10 $ 82 $ 77 $ 69 $ 52 $ 146
Life insurance 29 34 41 33 33 33 63 66
Accident and health insurance 4 4 4 4 4 4 8 8
Net investment income on investments supporting capital 59 52 52 54 57 57 111 114
Investment spread before valuation changes on
embedded derivatives that are not hedged 127 107 107 173 171 163 234 334
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged (6) (6) 2 (3) 6 (7) (12) (1)
Total investment spread $ 121 $ 101 $ 109 $ 170 $ 177 $ 156 $ 222 $ 333
(1) Reconciliation of contract charges
Cost of insurance contract charges $ 140 $ 141 $ 137 $ 137 $ 138 $ 138 $ 281 $ 276
Surrender charges and contract maintenance
expense fees 71 71 71 72 72 71 142 143
Total contract charges $ 211 $ 212 $ 208 $ 209 $ 210 $ 209 $ 423 $ 419
(2) Reconciliation of contract benefits
Contract benefits excluding the implied interest
on immediate annuities with life contingencies $ (325) $ (327) $ (328) $ (333) $ (319) $ (312) $ (652) $ (631)
Implied interest on immediate annuities with
life contingencies (129) (128) (128) (127) (127) (129) (257) (256)
Total contract benefits $ (454) $ (455) $ (456) $ (460) $ (446) $ (441) $ (909) $ (887)
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL ANALYSIS OF NET INCOME
($ in millions)
Six 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 4.8 % 3.9 % 0.9 % 5.1 % 3.9 % 1.2 %
Deferred fixed annuities and
institutional products 4.2 2.8 1.4 4.4 2.8 1.6
Immediate fixed annuities with and
without life contingencies 6.5 5.8 0.7 7.5 5.9 1.6
Investments supporting capital,
traditional life and other products 3.9 n/a n/a 4.1 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 4.9 % 3.9 % 1.0 % 5.1 % 3.9 % 1.2 %
Deferred fixed annuities and
institutional products 4.1 2.8 1.3 4.4 2.8 1.6
Immediate fixed annuities with and
without life contingencies 6.3 5.9 0.4 7.4 5.9 1.5
Investments supporting capital,
traditional life and other products 3.8 n/a n/a 4.2 n/a n/a
Six months ended June 30, 2016 Six months ended June 30, 2015
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL WEIGHTED AVERAGE INVESTMENT SPREADS
Three months ended June 30, 2016 Three months ended June 30, 2015
44
Twelve months ended
June 30, 2016
Attributed equity
Reserves and excluding unrealized June March Dec. Sept. June March
Contractholder funds capital gains/losses (3)(4) Operating income (5) 2016 2016 2015 2015 2015 2015
Underwritten products
Life insurance $ 10,735 $ 2,594 $ 275 10.8 % 11.1 % 10.6 % 10.0 % 9.3 % 9.8 %
Accident and health insurance 854 648 81 12.4 12.2 12.7 13.7 14.9 15.9
Subtotal 11,589 3,242 356 11.1 11.3 11.1 10.8 10.5 11.1
Immediate Annuities:
Sub-standard structured settlements and group
pension terminations (1) 5,029 1,907 (15) (0.9) (0.2) 0.5 1.6 0.5 0.6
Standard structured settlements and SPIA (2) 6,769 1,194 47 4.1 4.9 6.8 9.4 8.8 8.4
Subtotal (6) 11,798 3,101 32 1.1 2.0 3.1 4.7 3.8 3.7
Deferred Annuities 9,588 634 71 10.0 10.4 10.1 10.1 10.6 10.3
Institutional products 85 1 1
Subtotal 21,471 3,736 104 2.9 3.7 4.8 6.2 6.1 6.0
Total Allstate Financial $ 33,060 $ 6,978 $ 460 6.8 7.2 7.8 8.4 8.4 8.5
Life Accident and Annuities and Allstate
insurance health insurance institutional products Financial
Operating income $ 139 $ 43 $ 42 $ 224
Realized capital gains and losses, after-tax (11) (2) (19) (32)
Valuation changes on embedded derivatives that are not
hedged, after-tax - - (8) (8)
DAC and DSI amortization relating to realized
capital gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax (2) - - (2)
Gain on disposition of operations, after-tax - - 2 2
Net income applicable to common shareholders $ 126 $ 41 $ 17 $ 184
(1)
(2)
(3)
(4)
(5)
(6)
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.
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL SUPPLEMENTAL PRODUCT INFORMATION
($ in millions)
As of June 30, 2016
Six months ended June 30, 2016
Annuities and institutional products:
Twelve months ended
Operating income return on attributed equity (%)
Of the total immediate annuities, $8,657 are reported in reserve for life-contingent contract benefits and $3,141 are reported in contractholder funds.
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 prior quarter
statutory capital. 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.
45
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
ALLSTATE FINANCIAL INSURANCE POLICIES
AND ANNUITIES IN FORCE BY PRODUCT
Underwritten products
Life insurance 2,478 2,467 2,463 2,459 2,456 2,448
Accident and health insurance 3,294 3,278 2,873 2,848 2,843 2,777
5,772 5,745 5,336 5,307 5,299 5,225
Annuities
Deferred annuities 163 168 172 176 181 186
Immediate annuities 100 101 102 104 105 106
263 269 274 280 286 292
Total 6,035 6,014 5,610 5,587 5,585 5,517
ALLSTATE FINANCIAL INSURANCE POLICIES
AND ANNUITIES IN FORCE BY SOURCE
OF BUSINESS
Allstate Agencies (2) 1,924 1,922 1,924 1,917 1,911 1,904
Allstate Benefits 3,755 3,729 3,315 3,292 3,287 3,218
Other (3) 356 363 371 378 387 395
Total 6,035 6,014 5,610 5,587 5,585 5,517
(1)
(2)
(3) Primarily business sold by banks/broker-dealers, independent master brokerage agencies 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
$ 131 $ - $ 222 $ 353 $ 124 $ - $ 202 $ 326
179 3 29 211 180 3 27 210
118 299 18 435 120 351 18 489
(177) (156) (121) (454) (189) (146) (111) (446)
(71) (98) (10) (179) (71) (112) (8) (191)
Amortization of deferred policy acquisition costs (32) (1) (35) (68) (30) (2) (30) (62)
(54) (7) (60) (121) (53) (10) (55) (118)
(1) - - (1) (2) - - (2)
(29) (13) (14) (56) (24) (28) (15) (67)
64 27 29 120 55 56 28 139
(2) 2 - - 10 28 - 38
- (4) - (4) - 4 - 4
(1) - - (1) (2) - - (2)
Gain on disposition of operations, after-tax - 1 - 1 - - - -
$ 61 $ 26 $ 29 $ 116 $ 63 $ 88 $ 28 $ 179
Premiums and Contract Charges - by Product
Underwritten Products
$ 130 $ - $ 9 $ 139 $ 124 $ - $ 7 $ 131
1 - 213 214 - - 195 195
179 - 29 208 180 - 27 207
310 - 251 561 304 - 229 533
- - - - - - - -
- 3 - 3 - 3 - 3
- 3 - 3 - 3 - 3
$ 310 $ 3 $ 251 $ 564 $ 304 $ 3 $ 229 $ 536
Life Insurance $ 78 $ - $ 7 $ 85 $ 59 $ - $ 6 $ 65
Accident and health insurance (2) - 110 108 (3) - 100 97
Annuities - (25) - (25) - (17) - (17)
$ 76 $ (25) $ 117 $ 168 $ 56 $ (17) $ 106 $ 145
Annuities and institutional products $ - $ 35 $ - $ 35 $ - $ 77 $ - $ 77
Life insurance 26 - 3 29 30 - 3 33
Accident and health insurance 2 - 2 4 1 - 3 4
Net investment income on investments supporting capital 19 37 3 59 19 34 4 57
derivatives that are not hedged 47 72 8 127 50 111 10 171
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged - (6) - (6) - 6 - 6
Total investment spread $ 47 $ 66 $ 8 $ 121 $ 50 $ 117 $ 10 $ 177
Premiums
THE ALLSTATE CORPORATION
ALLSTATE LIFE, ALLSTATE ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION
($ in millions)
For the three months ended June 30, 2016 For the three months ended June 30, 2015
Valuation changes on embedded derivatives
Contract charges
Net investment income
Contract benefits
Interest credited to contractholder funds
Operating costs and expenses
Restructuring and related charges
Income tax expense on operations
Operating income
Realized capital gains and losses, after-tax
Annuities
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
Net income
Traditional life insurance premiums
Accident and health insurance
Interest-sensitive life insurance contract charges
Investment Spread by Product Group
Investment spread before valuation changes on embedded
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
47
Allstate Allstate
Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial
Life Annuities Benefits Segment Life Annuities Benefits Segment
$ 261 $ - $ 446 $ 707 $ 249 $ - $ 405 $ 654
361 6 56 423 360 6 53 419
238 580 36 854 241 696 36 973
(357) (303) (249) (909) (373) (299) (215) (887)
(141) (203) (19) (363) (140) (225) (18) (383)
Amortization of deferred policy acquisition costs (63) (3) (73) (139) (62) (3) (66) (131)
(110) (15) (119) (244) (111) (20) (110) (241)
(1) - - (1) (2) - - (2)
(58) (20) (26) (104) (48) (51) (30) (129)
130 42 52 224 114 104 55 273
(10) (19) (3) (32) 12 98 - 110
- (8) - (8) - (1) - (1)
(2) - - (2) (3) 1 - (2)
Gain (loss) on disposition of operations, after-tax - 2 - 2 (1) - - (1)
Change in accounting for investments in qualified
affordable housing projects, after-tax - - - - (6) (11) - (17)
$ 118 $ 17 $ 49 $ 184 $ 116 $ 191 $ 55 $ 362
Premiums and Contract Charges - by Product
Underwritten Products
$ 260 $ - $ 17 $ 277 $ 248 $ - $ 15 $ 263
1 - 429 430 1 - 390 391
361 - 56 417 360 - 53 413
622 - 502 1,124 609 - 458 1,067
- - - - - - - -
- 6 - 6 - 6 - 6
- 6 - 6 - 6 - 6
$ 622 $ 6 $ 502 $ 1,130 $ 609 $ 6 $ 458 $ 1,073
Life Insurance $ 153 $ - $ 12 $ 165 $ 122 $ - $ 11 $ 133
Accident and health insurance (2) - 215 213 (4) - 208 204
Annuities - (42) - (42) - (38) - (38)
$ 151 $ (42) $ 227 $ 336 $ 118 $ (38) $ 219 $ 299
Annuities and institutional products $ - $ 52 $ - $ 52 $ - $ 146 $ - $ 146
Life insurance 58 - 5 63 61 - 5 66
Accident and health insurance 3 - 5 8 3 - 5 8
Net investment income on investments supporting capital 36 68 7 111 39 67 8 114
derivatives that are not hedged 97 120 17 234 103 213 18 334
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged - (12) - (12) - (1) - (1)
Total investment spread $ 97 $ 108 $ 17 $ 222 $ 103 $ 212 $ 18 $ 333
Investment Spread by Product Group
Investment spread before valuation changes on embedded
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
Annuities
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
Net income
Traditional life insurance premiums
Accident and health insurance
Interest-sensitive life insurance contract charges
Valuation changes on embedded derivatives
Contract charges
Net investment income
Contract benefits
Interest credited to contractholder funds
Operating costs and expenses
Income tax expense on operations
Operating income
Realized capital gains and losses, after-tax
Restructuring and related charges
Premiums
THE ALLSTATE CORPORATION
ALLSTATE LIFE, ALLSTATE ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION
($ in millions)
For the six months ended June 30, 2016 For the six months ended June 30, 2015
48
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Net investment income $ 11 $ 10 $ 10 $ 9 $ 8 $ 8 $ 21 $ 16
Operating costs and expenses (7) (6) (7) (13) (9) (5) (13) (14)
Interest expense (72) (73) (73) (73) (73) (73) (145) (146)
Income tax benefit on operations 26 25 27 28 28 26 51 54
Preferred stock dividends (29) (29) (29) (29) (29) (29) (58) (58)
Operating loss (71) (73) (72) (78) (75) (73) (144) (148)
Realized capital gains and losses, after-tax (1) - - - - - (1) -
Net loss applicable to common shareholders $ (72) $ (73) $ (72) $ (78) $ (75) $ (73) $ (145) $ (148)
THE ALLSTATE CORPORATION
CORPORATE AND OTHER RESULTS
($ in millions)
Six months endedThree months ended
49
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2016 2016 2015 2015 2015 2016 2016 2015 2015 2015
Fixed income securities, at fair value:
Tax-exempt $ 4,612 $ 4,466 $ 4,285 $ 4,289 $ 4,418 $ 2 $ 2 $ 4 $ 17 $ 23
Taxable 25,139 24,615 25,447 24,868 25,192 26,169 25,858 26,034 26,583 27,768
Equity securities, at fair value 3,632 3,709 3,480 2,808 3,018 1,630 1,405 1,599 1,425 979
Mortgage loans 313 294 296 339 343 4,140 4,008 4,042 4,063 4,000
Limited partnership interests 2,842 2,688 2,575 2,558 2,466 2,564 2,399 2,295 2,261 2,066
Short-term, at fair value 1,619 1,452 959 1,692 1,108 1,197 1,626 861 991 1,053
Other 1,532 1,512 1,437 1,659 1,602 2,058 2,038 1,957 1,929 1,909
Total $ 39,689 $ 38,736 $ 38,479 $ 38,213 $ 38,147 $ 37,760 $ 37,336 $ 36,792 $ 37,269 $ 37,798
Fixed income securities, amortized cost:
Tax-exempt $ 4,509 $ 4,384 $ 4,218 $ 4,214 $ 4,362 $ 2 $ 2 $ 4 $ 17 $ 24
Taxable 24,746 24,454 25,672 24,883 24,990 24,357 24,481 25,145 25,335 26,091
Ratio of fair value to amortized cost 101.7% 100.8% 99.5% 100.2% 100.9% 107.4% 105.6% 103.5% 104.9% 106.4%
Equity securities, cost $ 3,337 $ 3,417 $ 3,236 $ 2,656 $ 2,699 $ 1,584 $ 1,372 $ 1,567 $ 1,464 $ 947
Short-term, amortized cost 1,619 1,452 959 1,692 1,108 1,197 1,626 861 991 1,053
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2016 2016 2015 2015 2015 2016 2016 2015 2015 2015
Fixed income securities, at fair value:
Tax-exempt $ 609 $ 591 $ 585 $ 589 $ 569 $ 5,223 $ 5,059 $ 4,874 $ 4,895 $ 5,010
Taxable 1,598 1,759 1,593 1,911 1,960 52,906 52,232 53,074 53,362 54,920
Equity securities, at fair value 3 3 3 3 3 5,265 5,117 5,082 4,236 4,000
Mortgage loans - - - - - 4,453 4,302 4,338 4,402 4,343
Limited partnership interests 1 4 4 4 4 5,407 5,091 4,874 4,823 4,536
Short-term, at fair value 34 448 302 353 660 2,850 3,526 2,122 3,036 2,821
Other - - - - - 3,590 3,550 3,394 3,588 3,511
Total $ 2,245 $ 2,805 $ 2,487 $ 2,860 $ 3,196 $ 79,694 $ 78,877 $ 77,758 $ 78,342 $ 79,141
Fixed income securities, amortized cost:
Tax-exempt $ 585 $ 569 $ 566 $ 569 $ 551 $ 5,096 $ 4,955 $ 4,788 $ 4,800 $ 4,937
Taxable 1,571 1,737 1,596 1,900 1,953 50,674 50,672 52,413 52,118 53,034
Ratio of fair value to amortized cost 102.4% 101.9% 100.7% 101.3% 101.0% 104.2% 103.0% 101.3% 102.4% 103.4%
Equity securities, cost $ 3 $ 3 $ 3 $ 3 $ 3 $ 4,924 $ 4,792 $ 4,806 $ 4,123 $ 3,649
Short-term, amortized cost 34 448 302 353 660 2,850 3,526 2,122 3,036 2,821
THE ALLSTATE CORPORATION
INVESTMENTS
($ in millions)
PROPERTY-LIABILITY
CORPORATE AND OTHER
ALLSTATE FINANCIAL
CONSOLIDATED
50
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2016 2016 2015 2015 2015 2015
Investment position
Accounting basis
Cost method $ 1,284 $ 1,193 $ 1,154 $ 1,148 $ 1,130 $ 1,137
Equity method ("EMA") (1) 4,123 3,898 3,720 3,675 3,406 3,562
Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699
Cost method-fair value (2) $ 1,511 $ 1,466 $ 1,450 $ 1,506 $ 1,482 $ 1,494
Underlying investment
Private equity $ 3,833 $ 3,494 $ 3,344 $ 3,282 $ 3,012 $ 2,969
Real estate 1,204 1,229 1,166 1,160 1,164 1,366
Other 370 368 364 381 360 364
Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699
Segment
Property-Liability $ 2,842 $ 2,688 $ 2,575 $ 2,558 $ 2,466 $ 2,571
Allstate Financial 2,564 2,399 2,295 2,261 2,066 2,124
Corporate and Other 1 4 4 4 4 4
Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699
Total Income
Accounting basis
Cost method $ 47 $ 39 $ 42 $ 63 $ 75 $ 42
Equity method 79 82 24 104 43 156
Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198
Underlying investment
Private equity $ 114 $ 88 $ 46 $ 162 $ 113 $ 80
Real estate 12 33 20 5 10 123
Other - - - - (5) (5)
Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198
Segment
Property-Liability $ 60 $ 58 $ 29 $ 62 $ 45 $ 126
Allstate Financial 66 63 37 105 73 72
Corporate and Other - - - - - -
Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198
(1)
(2) The fair value of cost method limited partnerships is determined using reported net asset values.
THE ALLSTATE CORPORATION
LIMITED PARTNERSHIP INVESTMENTS
($ in millions)
As of or for the three months ended
As of June 30, 2016, valuations of EMA limited partnerships include approximately $469 million of cumulative pre-tax appreciation that has been recognized in
earnings but has not been distributed to investors.
51
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 $ 122 $ 3,523 103.6 $ 114 $ 3,504 103.4 $ 86 $ 3,922 102.2
Municipal 532 7,818 107.3 442 7,616 106.2 369 7,401 105.2
Corporate 1,566 42,700 103.8 989 41,272 102.5 153 41,827 100.4
Foreign government 61 1,152 105.6 55 1,054 105.5 50 1,033 105.1
Asset-backed securities ("ABS") (11) 1,726 99.4 (27) 2,499 98.9 (32) 2,327 98.6
Residential mortgage-backed securities ("RMBS") 70 818 109.4 68 875 108.4 90 947 110.5
Commercial mortgage-backed securities ("CMBS") 16 368 104.5 20 447 104.7 28 466 106.4
Redeemable preferred stock 3 24 114.3 3 24 114.3 3 25 113.6
Total fixed income securities 2,359 58,129 104.2 1,664 57,291 103.0 747 57,948 101.3
Equity securities 341 5,265 106.9 325 5,117 106.8 276 5,082 105.7
Short-term investments - 2,850 100.0 - 3,526 100.0 - 2,122 100.0
Derivatives 2 71 n/a 4 58 n/a 6 53 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 2,697 1,988 1,025
Amounts recognized for:
Insurance reserves (3) - - -
DAC and DSI (4) (195) (138) (67)
Amounts recognized (195) (138) (67)
Deferred income taxes (878) (650) (338)
Unrealized net capital gains and losses, after-tax $ 1,624 $ 1,200 $ 620
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
ABS (16) 2,711 99.4 (5) 2,076 99.8 8 3,055 100.3
RMBS 98 1,011 110.7 101 1,083 110.3 105 1,154 110.0
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
(1)
(2)
(3)
(4)
THE ALLSTATE CORPORATION
UNREALIZED NET CAPITAL GAINS AND LOSSES ON SECURITY PORTFOLIO BY TYPE
($ in millions)
June 30, 2016 March 31, 2016 December 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.
September 30, 2015 June 30, 2015 March 31, 2015
52
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
NET INVESTMENT INCOME
Fixed income securities $ 520 $ 518 $ 537 $ 546 $ 567 $ 568 $ 1,038 $ 1,135
Equity securities 44 28 33 23 31 23 72 54
Mortgage loans 53 53 63 53 57 55 106 112
Limited partnership interests 126 121 66 167 118 198 247 316
Short-term 3 4 1 4 3 1 7 4
Other 57 51 49 49 49 45 108 94
Subtotal 803 775 749 842 825 890 1,578 1,715
Less: Investment expense (41) (44) (39) (35) (36) (40) (85) (76)
Net investment income $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639
PRE-TAX YIELDS (1)
Fixed income securities 3.7 % 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % 3.7 % 3.9 %
Equity securities 3.7 2.3 2.9 2.4 3.4 2.5 3.0 2.9
Mortgage loans 4.9 4.9 5.8 4.8 5.3 5.2 4.8 5.3
Limited partnership interests 9.6 9.7 5.4 14.4 10.1 17.2 9.6 13.7
Total portfolio 4.1 4.0 3.9 4.4 4.3 4.6 4.1 4.4
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (63) $ (59) $ (118) $ (47) $ (11) $ (19) $ (122) $ (30)
Change in intent write-downs (16) (22) (32) (127) (32) (30) (38) (62)
Net other-than-temporary impairment
losses recognized in earnings (79) (81) (150) (174) (43) (49) (160) (92)
Sales and other 104 (59) (75) 183 146 216 45 362
Valuation and settlements of derivative instruments (1) (9) (25) 24 5 (28) (10) (23)
Total $ 24 $ (149) $ (250) $ 33 $ 108 $ 139 $ (125) $ 247
TOTAL RETURN ON INVESTMENT PORTFOLIO (2) 1.9 % 2.0 % (0.2) % - % (0.6) % 1.7 % 3.9 % 1.2 %
AVERAGE INVESTMENT BALANCES (in billions) (3) $ 76.9 $ 76.8 $ 76.8 $ 76.9 $ 76.8 $ 77.4 $ 76.9 $ 77.2
(1)
(2)
(3)
Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of the current and prior quarter investment
balances. Year-to-date pre-tax yield is calculated as annualized year-to-date investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at
the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and other consolidated investments is net of asset level operating expenses (direct
expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses.
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, cost method limited partnerships, bank loans and agent loans divided by the average fair value balances.
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
NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX)
($ in millions)
Six months endedThree months ended
53
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
NET INVESTMENT INCOME
Fixed income securities:
Tax-exempt $ 23 $ 23 $ 27 $ 24 $ 26 $ 25 $ 46 $ 51
Taxable 198 200 201 197 195 190 398 385
Equity securities 30 20 24 16 23 18 50 41
Mortgage loans 3 3 4 4 3 4 6 7
Limited partnership interests (1) 60 58 29 62 45 126 118 171
Short-term 1 2 - 3 1 1 3 2
Other 23 20 18 20 20 17 43 37
Subtotal 338 326 303 326 313 381 664 694
Less: Investment expense (22) (24) (23) (19) (21) (23) (46) (44)
Net investment income $ 316 $ 302 $ 280 $ 307 $ 292 $ 358 $ 618 $ 650
Net investment income, after-tax $ 215 $ 206 $ 192 $ 209 $ 199 $ 242 $ 421 $ 441
PRE-TAX YIELDS (2)
Fixed income securities:
Tax-exempt 2.1 % 2.1 % 2.6 % 2.3 % 2.3 % 2.4 % 2.1 % 2.4 %
Equivalent yield for tax-exempt 3.1 3.1 3.8 3.4 3.4 3.5 3.1 3.5
Taxable 3.2 3.2 3.2 3.2 3.1 2.9 3.2 3.0
Equity securities 3.6 2.4 3.1 2.5 3.4 2.6 3.0 3.0
Mortgage loans 3.9 4.0 5.4 4.0 4.1 4.5 3.9 4.2
Limited partnership interests 8.6 8.9 4.5 10.1 7.0 19.9 8.7 13.5
Total portfolio 3.5 3.3 3.1 3.5 3.3 4.0 3.4 3.7
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY ASSET TYPE
Fixed income securities:
Tax-exempt $ 4 $ 3 $ (10) $ 2 $ 1 $ 2 $ 7 $ 3
Taxable 20 (47) (75) (42) 13 10 (27) 23
Equity securities 15 (60) (13) (92) 32 46 (45) 78
Limited partnership interests (10) 13 (27) (35) (1) 2 3 1
Derivatives and other (3) (8) (28) 6 4 (32) (11) (28)
Total $ 26 $ (99) $ (153) $ (161) $ 49 $ 28 $ (73) $ 77
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (42) $ (35) $ (84) $ (30) $ (6) $ (12) $ (77) $ (18)
Change in intent write-downs (12) (19) (24) (77) (28) (27) (31) (55)
Net other-than-temporary impairment
losses recognized in earnings (54) (54) (108) (107) (34) (39) (108) (73)
Sales and other 82 (41) (28) (63) 77 99 41 176
Valuation and settlements of derivative instruments (2) (4) (17) 9 6 (32) (6) (26)
Total $ 26 $ (99) $ (153) $ (161) $ 49 $ 28 $ (73) $ 77
AVERAGE INVESTMENT BALANCES (in billions) (3) $ 38.5 $ 38.3 $ 38.2 $ 37.8 $ 37.6 $ 37.9 $ 38.5 $ 37.8
(1)
(2)
(3)
Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of the current and
prior quarter investment balances. Year-to-date pre-tax yield is calculated as annualized year-to-date investment income, generally before investment expense (including dividend income in the case of equity securities)
divided by the average of investment balances at the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and
other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances 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.
As of June 30, 2016, Property-Liability has commitments to invest in additional limited partnership interests totaling $1.49 billion.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX)
($ in millions)
Six months endedThree months ended
54
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
NET INVESTMENT INCOME
Fixed income securities $ 288 $ 284 $ 300 $ 314 $ 338 $ 344 $ 572 $ 682
Equity securities 14 8 9 7 8 5 22 13
Mortgage loans 50 50 59 49 54 51 100 105
Limited partnership interests (1) 66 63 37 105 73 72 129 145
Short-term 1 2 1 1 1 - 3 1
Other 33 30 30 29 28 27 63 55
Subtotal 452 437 436 505 502 499 889 1,001
Less: Investment expense (17) (18) (16) (14) (13) (15) (35) (28)
Net investment income $ 435 $ 419 $ 420 $ 491 $ 489 $ 484 $ 854 $ 973
Net investment income, after-tax $ 282 $ 273 $ 273 $ 319 $ 318 $ 315 $ 555 $ 633
PRE-TAX YIELDS (2)
Fixed income securities 4.7 % 4.6 % 4.8 % 4.9 % 5.1 % 5.2 % 4.6 % 5.2 %
Equity securities 3.9 2.1 2.4 2.1 3.4 2.1 2.9 2.8
Mortgage loans 4.9 4.9 5.8 4.9 5.5 5.2 4.9 5.3
Limited partnership interests 10.7 10.7 6.5 19.4 14.0 13.8 10.7 14.0
Total portfolio 5.0 4.8 4.8 5.6 5.6 5.5 4.9 5.5
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY ASSET TYPE
Fixed income securities $ (1) $ (26) $ (64) $ 261 $ 46 $ 68 $ (27) $ 114
Equity securities (4) (30) (13) (58) 16 32 (34) 48
Mortgage loans 1 - 4 1 1 - 1 1
Limited partnership interests - 13 (14) (20) (2) 4 13 2
Derivatives and other 4 (6) (10) 10 (2) 7 (2) 5
Total $ - $ (49) $ (97) $ 194 $ 59 $ 111 $ (49) $ 170
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (18) $ (24) $ (34) $ (17) $ (5) $ (7) $ (42) $ (12)
Change in intent write-downs (4) (3) (8) (50) (4) (3) (7) (7)
Net other-than-temporary impairment
losses recognized in earnings (22) (27) (42) (67) (9) (10) (49) (19)
Sales and other 21 (17) (47) 246 69 117 4 186
Valuation and settlements of derivative instruments 1 (5) (8) 15 (1) 4 (4) 3
Total $ - $ (49) $ (97) $ 194 $ 59 $ 111 $ (49) $ 170
AVERAGE INVESTMENT BALANCES (in billions) (3) $ 35.9 $ 35.9 $ 36.0 $ 36.1 $ 36.1 $ 36.3 $ 35.9 $ 36.2
(1)
(2)
(3)
As of June 30, 2016, Allstate Financial has commitments to invest in additional limited partnership interests totaling $1.33 billion.
Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment
balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded.
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL
NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX)
($ in millions)
Six months endedThree months ended
Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of the current and
prior quarter investment balances. Year-to-date pre-tax yield is calculated as annualized year-to-date investment income, generally before investment expense (including dividend income in the case of equity securities)
divided by the average of investment balances at the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and
other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized
capital gains and losses.
55
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Consolidated investment portfolio
Interest-bearing (1) $ 68,519 $ 68,163 $ 67,390 $ 68,913 $ 70,243 $ 71,287 $ 68,519 $ 70,243
Equity/owned (2) 11,175 10,714 10,368 9,429 8,898 9,150 11,175 8,898
Total $ 79,694 $ 78,877 $ 77,758 $ 78,342 $ 79,141 $ 80,437 $ 79,694 $ 79,141
Consolidated portfolio total return (3)
Interest-bearing 1.7 % 1.9 % (0.3) % 0.4 % (0.8) % 1.4 % 3.6 % 0.8 %
Equity/owned 0.2 0.2 0.2 (0.3) 0.2 0.4 0.4 0.5
Investment expenses - (0.1) (0.1) (0.1) - (0.1) (0.1) (0.1)
Total 1.9 2.0 (0.2) - (0.6) 1.7 3.9 1.2
Consolidated portfolio total return (3)
Income 1.0 % 0.9 % 0.9 % 1.0 % 1.0 % 1.0 % 1.9 % 2.0 %
Valuation 0.9 1.1 (1.1) (1.0) (1.6) 0.7 2.0 (0.8)
Total 1.9 2.0 (0.2) - (0.6) 1.7 3.9 1.2
Consolidated net investment income
Interest-bearing $ 623 $ 618 $ 643 $ 646 $ 670 $ 664 $ 1,241 $ 1,334
Equity/owned 180 157 106 196 155 226 337 381
Investment expenses (41) (44) (39) (35) (36) (40) (85) (76)
Total $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639
Consolidated Interest-bearing pre-tax yield (4) 3.8 % 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % 3.7 % 3.9 %
Property-Liability net investment income
Interest-bearing excluding prepayment premiums $ 236 $ 241 $ 240 $ 240 $ 233 $ 226 $ 477 $ 459
Prepayment premiums 5 2 5 4 7 7 7 14
Total Interest-bearing 241 243 245 244 240 233 484 473
Equity/owned 97 83 58 82 73 148 180 221
Less: Investment expenses (22) (24) (23) (19) (21) (23) (46) (44)
Total 316 302 280 307 292 358 618 650
Less: prepayment premiums (5) (2) (5) (4) (7) (7) (7) (14)
Total excluding prepayment premiums $ 311 $ 300 $ 275 $ 303 $ 285 $ 351 $ 611 $ 636
Property-Liability interest-bearing pre-tax yield 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 2.9 % 3.0 % 2.9 %
Property-Liability interest-bearing pre-tax yield
excluding prepayment premiums 3.0 % 3.0 % 3.0 % 2.9 % 2.9 % 2.8 % 3.0 % 2.8 %
Allstate Financial net investment income
Interest-bearing excluding prepayment premiums $ 357 $ 361 $ 371 $ 386 $ 408 $ 413 $ 718 $ 821
Prepayment premiums 12 2 17 5 12 8 14 20
Total interest-bearing 369 363 388 391 420 421 732 841
Equity/owned 83 74 48 114 82 78 157 160
Less: Investment expenses (17) (18) (16) (14) (13) (15) (35) (28)
Total 435 419 420 491 489 484 854 973
Less: prepayment premiums (12) (2) (17) (5) (12) (8) (14) (20)
Total excluding prepayment premiums $ 423 $ 417 $ 403 $ 486 $ 477 $ 476 $ 840 $ 953
Allstate Financial interest-bearing pre-tax yield 4.6 % 4.6 % 4.8 % 4.8 % 5.1 % 5.1 % 4.6 % 5.1 %
Allstate Financial interest-bearing pre-tax yield
excluding prepayment premiums 4.5 % 4.5 % 4.6 % 4.7 % 4.9 % 5.0 % 4.5 % 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.
Quarterly pre-tax yield is calculated as annualized quarterly interest-bearing investment income, generally before investment expense divided by the average of the current and prior quarter interest-bearing investment balances. Year-to-date pre-
tax yield is calculated as annualized year-to-date interest-bearing investment income, generally before investment expense divided by the average of interest-bearing investment balances at the beginning of the year and the end of each quarter
during the year. For investments carried at fair value, investment balances exclude unrealized capital gains and losses.
THE ALLSTATE CORPORATION
INVESTMENT RESULTS
($ in millions)
Six months endedThree months ended
56
June 30, 2016 Total
Market-Based
Core (1)
Market-Based
Active (2)
Performance-
Based
Long-Term (3)
Performance-
Based
Opportunistic (4)
Fixed income securities $ 58,129 $ 50,788 $ 7,242 $ 64 $ 35
Equity securities 5,265 4,334 858 52 21
Mortgage loans 4,453 4,453 - - -
Limited partnership interests 5,407 370 - 5,037 -
Short-term investments 2,850 2,264 586 - -
Other 3,590 2,902 157 505 26
Total $ 79,694 $ 65,111 $ 8,843 $ 5,658 $ 82
% of total 82% 11% 7% -
Property-Liability $ 39,689 $ 28,826 $ 7,774 $ 3,034 $ 55
% of Property-Liability 73% 19% 8% -
Allstate Financial $ 37,760 $ 34,040 $ 1,069 $ 2,624 $ 27
% of Allstate Financial 90% 3% 7% -
Corporate & Other $ 2,245 $ 2,245 $ - $ - $ -
% of Corporate & Other 100% - - -
Unrealized net capital gains and losses $ 2,697 $ 2,550 $ 142 $ (1) $ 6
December 31, 2015 Total
Market-Based
Core (1)
Market-Based
Active (2)
Performance-
Based
Long-Term (3)
Performance-
Based
Opportunistic (4)
Fixed income securities $ 57,948 $ 51,175 $ 6,691 $ 47 $ 35
Equity securities 5,082 4,210 764 77 31
Mortgage loans 4,338 4,338 - - -
Limited partnership interests 4,874 364 - 4,510 -
Short-term investments 2,122 1,631 491 - -
Other 3,394 2,783 183 415 13
Total $ 77,758 $ 64,501 $ 8,129 $ 5,049 $ 79
% of total 83% 10% 7% -
Property-Liability $ 38,479 $ 28,525 $ 7,137 $ 2,764 $ 53
% of Property-Liability 74% 19% 7% -
Allstate Financial $ 36,792 $ 33,490 $ 992 $ 2,284 $ 26
% of Allstate Financial 91% 3% 6% -
Corporate & Other $ 2,487 $ 2,486 $ - $ 1 $ -
% of Corporate & Other 100% - - -
(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)
57
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Investment income
Market-Based Core $ 595 $ 581 $ 614 $ 612 $ 640 $ 629 $ 1,176 $ 1,269
Market-Based Active 67 61 59 52 52 50 128 102
Performance-Based Long-Term 138 131 74 176 130 209 269 339
Performance-Based Opportunistic 3 2 2 2 3 2 5 5
Investment income, before expense 803 775 749 842 825 890 1,578 1,715
Investment expense (41) (44) (39) (35) (36) (40) (85) (76)
Net investment income $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639
PBLT Asset level operating expense (1) $ (8) $ (8) $ (4) $ (4) $ (5) $ (6) $ (16) $ (11)
Realized capital gains and losses
Market-Based Core $ 13 $ (91) $ (153) $ 102 $ 63 $ 58 $ (78) $ 121
Market-Based Active 39 (47) (49) (63) 48 73 (8) 121
Performance-Based Long-Term (27) (11) (49) - (5) 8 (38) 3
Performance-Based Opportunistic (1) - 1 (6) 2 - (1) 2
Total $ 24 $ (149) $ (250) $ 33 $ 108 $ 139 $ (125) $ 247
(1) When calculating the pre-tax yields, asset level operating expenses are netted against income for directly held real estate, timber and other consolidated investments.
THE ALLSTATE CORPORATION
INVESTMENT RESULTS BY STRATEGY
($ in millions)
Six months endedThree months ended
58
Total
Market-
Based
Core
Market-
Based
Active
Performance-
Based
Long-Term
Performance-
Based
Opportunistic
Three months ended June 30, 2016
Investment income
Fixed income securities $ 520 $ 461 $ 56 $ 1 $ 2
Equity securities 44 37 7 - -
Mortgage loans 53 53 - - -
Limited partnership interests 126 - - 126 -
Short-term investments 3 2 1 - -
Other 57 42 3 11 1
Investment income, before expense 803 $ 595 $ 67 $ 138 $ 3
Investment expense (41)
Net investment income $ 762
Realized capital gains and losses
Fixed income securities $ 24 $ (11) $ 36 $ - $ (1)
Equity securities 11 13 9 (11) -
Mortgage loans 1 1 - - -
Limited partnership interests (13) 7 - (20) -
Short-term investments - - - - -
Other 1 3 (6) 4 -
Total $ 24 $ 13 $ 39 $ (27) $ (1)
Six months ended June 30, 2016
Investment income
Fixed income securities $ 1,038 $ 922 $ 110 $ 2 $ 4
Equity securities 72 61 11 - -
Mortgage loans 106 106 - - -
Limited partnership interests 247 - - 247 -
Short-term investments 7 5 2 - -
Other 108 82 5 20 1
Investment income, before expense 1,578 $ 1,176 $ 128 $ 269 $ 5
Investment expense (85)
Net investment income $ 1,493
Realized capital gains and losses
Fixed income securities $ (47) $ (68) $ 23 $ - $ (2)
Equity securities (79) (27) (18) (33) (1)
Mortgage loans 1 1 - - -
Limited partnership interests 13 20 - (7) -
Short-term investments - - - - -
Other (13) (4) (13) 2 2
Total $ (125) $ (78) $ (8) $ (38) $ (1)
THE ALLSTATE CORPORATION
INVESTMENT INCOME AND REALIZED CAPITAL GAINS AND LOSSES BY INVESTMENT TYPE AND STRATEGY
($ in millions)
59
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2016 2016 2015 2015 2015 2015 2016 2015
Investment position
Limited partnerships
Private equity (1) $ 3,663 $ 3,324 $ 3,181 $ 3,131 $ 3,012 $ 2,969 $ 3,663 $ 3,012
Real estate (2) 1,204 1,229 1,166 1,160 1,164 1,366 1,204 1,164
Timber & agriculture-related (3) 170 170 163 151 - - 170 -
PBLT - limited partnerships 5,037 4,723 4,510 4,442 4,176 4,335 5,037 4,176
Other (4)
Private equity 97 103 71 93 70 67 97 70
Real estate 358 361 301 288 242 201 358 242
Timber & agriculture-related 166 167 167 167 167 168 166 167
PBLT - other 621 631 539 548 479 436 621 479
Total
Private equity 3,760 3,427 3,252 3,224 3,082 3,036 3,760 3,082
Real estate 1,562 1,590 1,467 1,448 1,406 1,567 1,562 1,406
Timber & agriculture-related 336 337 330 318 167 168 336 167
Total PBLT $ 5,658 $ 5,354 $ 5,049 $ 4,990 $ 4,655 $ 4,771 $ 5,658 $ 4,655
Investment income
Limited partnerships
Private equity $ 113 $ 85 $ 47 $ 162 $ 113 $ 80 $ 198 $ 193
Real estate 12 33 20 5 10 123 45 133
Timber & agriculture-related 1 3 (1) - - - 4 -
PBLT - limited partnerships 126 121 66 167 123 203 247 326
Other
Private equity 1 - - 1 - - 1 -
Real estate 8 8 6 7 5 4 16 9
Timber & agriculture-related 3 2 2 1 2 2 5 4
PBLT - other 12 10 8 9 7 6 22 13
Total
Private equity 114 85 47 163 113 80 199 193
Real estate 20 41 26 12 15 127 61 142
Timber & agriculture-related 4 5 1 1 2 2 9 4
Total PBLT $ 138 $ 131 $ 74 $ 176 $ 130 $ 209 $ 269 $ 339
Asset level operating expense (5) $ (8) $ (8) $ (4) $ (4) $ (5) $ (6) $ (16) $ (11)
Realized capital gains and losses
Limited partnerships
Private equity $ (20) $ 12 $ (49) $ (3) $ (3) $ 9 $ (8) $ 6
Real estate - 1 - (2) - (2) 1 (2)
Timber & agriculture-related - - - - - - - -
PBLT - limited partnerships (20) 13 (49) (5) (3) 7 (7) 4
Other
Private equity (7) (25) 1 6 (1) - (32) (1)
Real estate - 1 (1) (1) (1) - 1 (1)
Timber & agriculture-related - - - - - 1 - 1
PBLT - other (7) (24) - 5 (2) 1 (31) (1)
Total
Private equity (27) (13) (48) 3 (4) 9 (40) 5
Real estate - 2 (1) (3) (1) (2) 2 (3)
Timber & agriculture-related - - - - - 1 - 1
Total PBLT $ (27) $ (11) $ (49) $ - $ (5) $ 8 $ (38) $ 3
Pre-Tax Yield (6) 9.4 % 9.4 % 5.6 % 14.3 % 10.6 % 17.5 % 9.4 % 14.1 %
Internal Rate of Return ("IRR") (7) 10.2 % 10.5 % 10.8 % 11.3 % 11.3 % 11.4 %
(1)
(2)
(3)
(4)
(5)
(6)
(7)
When calculating the pre-tax yields, asset level operating expenses are netted against income for directly held real estate, timber and other consolidated investments.
Quarterly pre-tax yield is calculated as annualized quarterly PBLT investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of the current and
prior quarter PBLT investment balances. Year-to-date pre-tax yield is calculated as annualized year-to-date PBLT investment income, generally before investment expense (including dividend income in the case of equity
securities) divided by the average of PBLT investment balances at the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber
and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital
gains and losses.
We calculate the internal rate of return (“IRR”) for our PBLT investments as an input to assess their performance. The IRR represents the rate of return on the investments considering the amount and timing of all associated cash
flows, which may differ significantly from the recognition of income in the financial statements. Until an investment is liquidated, through final distribution or disposal, the IRR is an interim estimated return. Our IRR calculation
method may differ from those used by other investors. Our PBLT portfolio is diversified by asset type and vintage year. We use IRR as a metric to evaluate the overall strategy’s performance relative to our long-term return
expectations. The IRR calculation includes cash flows paid or received related to PBLT investments during the 10 year period ended as of the reporting date. Fluctuations in the timing and amount of cash invested in or distributed
by the investments could have a significant impact on the IRR.
Includes PBLT - fixed income securities, equity securities and other investments on page 56.
Includes Timber and agriculture-related reflected in Private equity on page 50.
Includes Real estate on page 50.
Includes Private equity on page 50, excluding Timber and agriculture-related.
THE ALLSTATE CORPORATION
PERFORMANCE-BASED LONG-TERM INVESTMENTS ("PBLT")
($ in millions)
As of or for the six months endedAs of or for the three months ended
60
Definitions of Non-GAAP Measures
Operating income is net income applicable to common shareholders, excluding:
- realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in operating income,
- valuation changes on embedded derivatives that are not hedged, after-tax,
- amortization of deferred policy acquisition costs ("DAC") and deferred sales inducements (“DSI”), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives that are not hedged, after-tax,
- amortization of purchased intangible assets, after-tax,
- gain (loss) on disposition of operations, after-tax, and
- adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years.
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 applicable to common shareholders is the GAAP measure that is most directly comparable to operating income. We use operating income as an important measure to evaluate our results of operations. We believe that the measure provides investors with a valuable measure of the
Company's ongoing performance because it reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses, valuation changes on embedded derivatives that are not hedged, amortization of purchased intangible assets, gain
(loss) on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items. Realized capital gains and losses, valuation changes on embedded derivatives that are not hedged and gain (loss) on disposition of operations may vary significantly between periods
and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to the insurance underwriting process. Consistent with our intent to protect results or earn additional income, operating income includes periodic
settlements and accruals on certain derivative instruments that are reported in realized capital gains and losses because they do not qualify for hedge accounting or are not designated as hedges for accounting purposes. These instruments are used for economic hedges and to replicate fixed income
securities, and by including them in operating income, we are appropriately reflecting their trends in our performance and in a manner consistent with the economically hedged investments, product attributes (e.g. net investment income and interest credited to contractholder funds) or replicated
investments. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or
economic trends. Accordingly, operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine operating income is
the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Operating income is used by management along with the other components of net income applicable to common shareholders
to assess our performance. We use adjusted measures of operating income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income applicable to common shareholders, operating income and their components separately and in the aggregate when
reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize operating income results in their evaluation of our and our industry's financial performance and in their investment decisions, recommendations
and communications as it represents a reliable, representative and consistent measurement of the industry and the Company and management's performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses operating
income as the denominator. Operating income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business. A reconciliation of operating income to net income applicable 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 applicable to common shareholders is the most directly comparable GAAP measure. Underwriting income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business. A reconciliation of Property-
Liability underwriting income to net income applicable to common shareholders is provided in the 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".
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".
Operating income return on common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of common shareholders’ equity at the beginning and at the end of the 12-months, after excluding the effect of
unrealized net capital gains and losses. Return on common shareholders' equity is the most directly comparable GAAP measure. We use operating income as the numerator for the same reasons we use operating income, as discussed above. We use average common shareholders' equity
excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily attributable to the Company’s earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly
between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income applicable to
common shareholders and return on common shareholders' equity because it excludes the effect of items that tend to be highly variable from period to period. We believe that this measure is useful to investors and that it provides a valuable tool for investors when considered along with return on
common shareholders' equity because it eliminates the after-tax effects of realized and unrealized net capital gains and losses that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by
management. In addition, it eliminates non-recurring items that are not indicative of our ongoing business or economic trends. A byproduct of excluding the items noted above to determine operating income return on common shareholders' equity from return on common shareholders' equity is the
transparency and understanding of their significance to return on common shareholders' equity variability and profitability while recognizing these or similar items may recur in subsequent periods. We use adjusted measures of operating income return on common shareholders' equity in incentive
compensation. Therefore, we believe it is useful for investors to have operating income return on common shareholders' equity and return on common shareholders' equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and
rating agencies utilize operating income return on common shareholders' equity results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of
the industry and the company and management’s utilization of capital. Operating income return on common shareholders' equity should not be considered a substitute for return on common shareholders' equity and does not reflect the overall profitability of our business. 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".