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 1, 2017
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ____ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
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Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
The Registrant’s press release dated August 1, 2017, announcing its financial results for the second quarter of 2017, and the Registrant’s second quarter 2017 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 1, 2017
99.2 Second quarter 2017 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/ Eric K. Ferren | |
Name: Eric K. Ferren | ||
Title: Senior Vice President, Controller and Chief Accounting Officer | ||
Date: August 1, 2017 | ||
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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 Delivers Strong Second Quarter Operating Performance
Board Approves $2.0 Billion Share Repurchase Program
NORTHBROOK, Ill., August 1, 2017 – The Allstate Corporation (NYSE: ALL) today reported financial results for the second quarter of 2017.
The Allstate Corporation Consolidated Highlights | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
($ in millions, except per share data and ratios) | 2017 | 2016 | % / pts Change | 2017 | 2016 | % / pts Change | ||||||||||
Consolidated revenues | $ | 9,587 | $ | 9,164 | 4.6 | $ | 19,021 | $ | 18,035 | 5.5 | ||||||
Net income applicable to common shareholders | 550 | 242 | 127.3 | 1,216 | 459 | 164.9 | ||||||||||
per diluted common share | 1.49 | 0.64 | 132.8 | 3.29 | 1.21 | 171.9 | ||||||||||
Operating income* | 510 | 235 | 117.0 | 1,118 | 557 | 100.7 | ||||||||||
per diluted common share* | 1.38 | 0.62 | 122.6 | 3.02 | 1.46 | 106.8 | ||||||||||
Return on common shareholders’ equity | ||||||||||||||||
Net income applicable to common shareholders | 13.1 | % | 8.0 | % | 5.1 pts | |||||||||||
Operating income* | 13.5 | % | 10.1 | % | 3.4 pts | |||||||||||
Book value per common share | 53.83 | 50.05 | 7.6 | |||||||||||||
Property-Liability combined ratio | ||||||||||||||||
Recorded | 97.2 | 100.8 | (3.6) pts | 95.4 | 99.6 | (4.2) pts | ||||||||||
Underlying combined ratio* (excludes catastrophes, prior year reserve reestimates and amortization of purchased intangibles) | 85.5 | 88.6 | (3.1) pts | 85.1 | 87.9 | (2.8) pts | ||||||||||
Catastrophe losses | 993 | 961 | 3.3 | 1,774 | 1,788 | (0.8 | ) | |||||||||
* | Measures used in this release that are not based on accounting principles generally accepted in the United States of America (“non-GAAP”) are denoted with an asterisk and defined and reconciled to the most directly comparable GAAP measure in the “Definitions of Non-GAAP Measures” section of this document. |
“Allstate delivered strong financial performance in the second quarter as a result of excellent progress on our five 2017 Operating Priorities,” said Tom Wilson, chairman and chief executive officer of The Allstate Corporation. “Net income applicable to common shareholders was $550 million, $1.49 per share, in the second quarter of 2017 compared to $242 million in the same period last year, reflecting improved auto insurance margins and strong investment results. Operating income* was $510 million, $1.38 per share, for the quarter and the underlying combined ratio* of 85.5 continued to be better than the annual outlook range of 87 to 89(1). The recorded combined ratio was 97.2 and underwriting results were good for auto, homeowners and other personal lines despite $993 million of catastrophe losses. Allstate Financial generated operating income of $153 million in the quarter due to higher investment income in the annuities business. Total return on the investment portfolio of 1.8% in the quarter reflects favorable fixed income and equity market conditions and increased income from the performance-based portfolio.
__________
(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 date.
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“We also advanced our goal to better serve customers and the customer base grew to 75 million policies in force. The strategy to leverage consumer insurance platforms to build a broader consumer focused business also progressed. Operating income return on common shareholders’ equity* was 13.5% for the twelve months ended June 30, 2017, due to strong earnings. Reflecting these positive results, the board approved a new $2 billion share repurchase program. Allstate’s long-term objective is to create prosperity for customers, shareholders, employees, financial specialists and agency owners by delivering excellent operating results while pursuing a broader set of goals. See ‘How Corporations Can Be A Force For Good,’ " concluded Wilson.
Operating Results: Second Quarter 2017
• | Total revenue of $9.6 billion in the second quarter of 2017 increased by 4.6% compared to the prior year quarter. |
◦ | Property-liability insurance premiums increased 2.6% |
◦ | Allstate Financial premiums and contract charges rose 4.8% |
◦ | Net investment income increased 17.7% |
◦ | Realized capital gains were $81 million compared to $24 million in the prior year quarter |
• | Net income applicable to common shareholders was $550 million, or $1.49 per diluted share, in the second quarter of 2017, compared to $242 million, or $0.64 per diluted share, in the second quarter of 2016. Operating income* was $510 million in the second quarter of 2017, compared to $235 million in the second quarter of 2016. |
• | Property-Liability underwriting income of $227 million was $293 million above the prior year quarter, due to increased auto insurance underwriting income reflecting higher average premiums, lower claims frequency and favorable prior year reserve reestimates. This was partially offset by an increased expense ratio which included $52 million of restructuring expenses. The majority of these expenses are related to Allstate brand claims process changes and office closures due to the expansion of virtual auto claim estimating capabilities. |
◦ | The underlying combined ratio* of 85.5 for the second quarter and 85.1 for the first six months of 2017 were significantly lower than the prior year periods, reflecting improvement in the auto underlying combined ratio across all three underwritten brands and strong homeowners underlying margins. Assuming current loss trends continue, we expect to be at or below the lower end of the annual outlook range of 87-89 for the full year. |
Property-Liability Results | |||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||
(% to earned premiums) | 2017 | 2016 | pts Change | 2017 | 2016 | pts Change | |||||||
Recorded Combined Ratio | 97.2 | 100.8 | (3.6 | ) | 95.4 | 99.6 | (4.2 | ) | |||||
Allstate Brand Auto | 95.8 | 101.2 | (5.4 | ) | 93.2 | 100.1 | (6.9 | ) | |||||
Allstate Brand Homeowners | 97.2 | 97.0 | 0.2 | 95.4 | 95.2 | 0.2 | |||||||
Allstate Brand Other Personal Lines | 90.8 | 91.2 | (0.4 | ) | 91.9 | 91.9 | — | ||||||
Esurance | 106.1 | 108.9 | (2.8 | ) | 104.2 | 107.6 | (3.4 | ) | |||||
Encompass | 104.4 | 104.9 | (0.5 | ) | 108.1 | 105.4 | 2.7 | ||||||
Underlying Combined Ratio* | 85.5 | 88.6 | (3.1 | ) | 85.1 | 87.9 | (2.8 | ) | |||||
Allstate Brand Auto | 92.8 | 97.8 | (5.0 | ) | 91.8 | 96.9 | (5.1 | ) | |||||
Allstate Brand Homeowners | 59.8 | 58.6 | 1.2 | 60.5 | 59.0 | 1.5 | |||||||
Allstate Brand Other Personal Lines | 77.1 | 77.3 | (0.2 | ) | 77.9 | 77.7 | 0.2 | ||||||
Esurance | 100.5 | 104.8 | (4.3 | ) | 100.4 | 104.9 | (4.5 | ) | |||||
Encompass | 87.6 | 92.8 | (5.2 | ) | 87.1 | 90.5 | (3.4 | ) | |||||
◦ | Allstate brand auto net written premium grew 3.3% in the second quarter of 2017, reflecting a 5.4% increase in average premium compared to the prior year quarter, which was partially offset by a 2.6% decline in policies in force. Actions taken to improve auto insurance margins continue to impact average premium and policy in force trends. As margins have improved, we expanded the number of states in which we are implementing growth plans, and in the second quarter the rate of decline in policies slowed compared to the first quarter. New issued applications grew 9.8% in the second quarter over the prior year quarter, and the renewal ratio of 87.4 was consistent with the first quarter of 2017. The recorded combined ratio of 95.8 in the second quarter of 2017 was 5.4 points better than the prior year quarter and |
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was favorably impacted by increased premiums earned, lower claim frequency, and favorable prior year reserve reestimates primarily related to injury coverages. The underlying combined ratio* in the second quarter of 2017 was 5.0 points better than the second quarter of 2016.
◦ | Allstate brand homeowners net written premium increased 0.9% in the second quarter of 2017 compared to the prior year quarter, reflecting a 1.8% increase in average premium that was partially offset by a 1.3% decline in policies in force. Homeowners policy growth has been adversely impacted by actions taken to improve auto margins, but new issued applications grew by 1.0% in the second quarter over the prior year quarter, and the renewal ratio of 87.0 was comparable to the first quarter of 2017. The recorded combined ratio of 97.2 in the second quarter of 2017 increased by 0.2 points compared to the prior year quarter and the underlying combined ratio* of 59.8 continued to reflect strong underlying profitability. |
◦ | Allstate brand other personal lines net written premium of $441 million increased 3.0% in the second quarter of 2017 compared to the second quarter 2016. The recorded combined ratio of 90.8 in the second quarter of 2017 improved by 0.4 points compared to the prior year quarter, driven by an improved loss ratio, partially offset by a higher expense ratio. The underlying combined ratio* was 77.1 in the second quarter of 2017, an improvement of 0.2 points compared to the prior year quarter. |
◦ | Esurance net written premium growth of 4.1% compared to the prior year quarter reflects increased average premium in auto and homeowners. Policy growth was 0.3% in the second quarter of 2017 compared to the second quarter of 2016, as an increase in homeowners more than offset a slight decline in auto policies. The recorded combined ratio of 106.1 was 2.8 points better in the second quarter of 2017 compared to the second quarter of 2016, as a lower expense ratio was partially offset by a higher loss ratio. The underlying combined ratio* of 100.5 improved by 4.3 points compared to the prior year quarter. |
◦ | Encompass net written premium declined by 9.5% and policies in force were 14.9% lower in the second quarter of 2017 compared to the prior year quarter, as we exit unprofitable markets and raise prices. The recorded combined ratio of 104.4 in the second quarter of 2017 was 0.5 points below the second quarter of 2016. The underlying combined ratio* of 87.6 improved by 5.2 points compared to the prior year quarter, due to improvement in the underlying loss ratio partially offset by a higher expense ratio. |
◦ | SquareTrade net written premium was $85 million in the second quarter of 2017 and generated an underwriting loss of $22 million. Policies in force were 31.3 million, an increase of 1.4 million policies in this quarter, due to continued growth in the U.S retail channel. Operating income* of $1 million excludes the $23 million ($15 million, after-tax) impact of the amortization of purchased intangible assets related to the acquisition. During the second quarter, Allstate Insurance Company executed a 100% quota share reinsurance agreement with SquareTrade’s largest third-party insurer which should result in higher underwriting and investment income. |
• | Allstate Financial net income was $146 million and operating income was $153 million in the second quarter of 2017. Operating income was $33 million higher than the prior year quarter, largely due to higher investment returns in Allstate Annuities. |
Allstate Financial Results | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
($ in millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||
Net Income | $ | 146 | $ | 116 | 25.9 | $ | 254 | $ | 184 | 38.0 | |||||||
Allstate Life | 60 | 61 | (1.6 | ) | 117 | 118 | (0.8 | ) | |||||||||
Allstate Benefits | 25 | 29 | (13.8 | ) | 47 | 49 | (4.1 | ) | |||||||||
Allstate Annuities | 61 | 26 | 134.6 | 90 | 17 | NM | |||||||||||
Operating Income | $ | 153 | $ | 120 | 27.5 | $ | 263 | $ | 224 | 17.4 | |||||||
Allstate Life | 63 | 64 | (1.6 | ) | 122 | 130 | (6.2 | ) | |||||||||
Allstate Benefits | 25 | 29 | (13.8 | ) | 47 | 52 | (9.6 | ) | |||||||||
Allstate Annuities | 65 | 27 | 140.7 | 94 | 42 | 123.8 | |||||||||||
NM = not meaningful
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◦ | Allstate Life net income was $60 million and operating income was $63 million in the second quarter of 2017. Operating income was $1 million lower than the prior year quarter primarily due to higher contract benefits and expenses, partially offset by higher premiums and net investment income. |
◦ | Allstate Benefits net income and operating income were both $25 million in the second quarter of 2017. Operating income was $4 million lower than the prior year quarter primarily due to higher contract benefits and higher expenses related to growth, partially offset by higher premiums. |
◦ | Allstate Annuities net income was $61 million and operating income was $65 million in the second quarter of 2017. Operating income was $38 million higher than the prior year quarter, primarily due to higher performance-based net investment income including private equity value appreciation. |
• | Allstate Investments generated net investment income of $897 million, which was 17.7% above the prior year quarter, reflecting higher performance-based results and stable income from the market-based portfolios. |
Allstate Investment Results | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
($ in millions, except ratios) | 2017 | 2016 | % / pts Change | 2017 | 2016 | % / pts Change | |||||||||||
Net investment income | $ | 897 | $ | 762 | 17.7 | $ | 1,645 | $ | 1,493 | 10.2 | |||||||
Realized capital gains and losses | 81 | 24 | 237.5 | 215 | (125 | ) | 272.0 | ||||||||||
Change in unrealized net capital gains, pre-tax | 448 | 709 | (36.8 | ) | 779 | 1,672 | (53.4 | ) | |||||||||
Total return on investment portfolio | 1.8 | % | 1.9 | % | (0.1 | ) | 3.4 | % | 3.9 | % | (0.5 | ) | |||||
◦ | Net investment income increased by $135 million in the second quarter of 2017 compared to the prior year quarter, due to a $130 million increase in performance-based income, including private equity ($97 million) and real estate ($33 million) investments. |
◦ | Net realized capital gains were $81 million in the second quarter of 2017, compared to $24 million in the prior year quarter, and primarily comprised net gains on sales of $139 million, partially offset by write-downs of $50 million. |
◦ | Change in unrealized net capital gains of $448 million in the second quarter of 2017 were primarily due to a decrease in market yields resulting from tighter credit spreads and lower long-term risk-free interest rates and favorable equity market performance. |
◦ | Total return on the investment portfolio was 1.8% for the second quarter of 2017, which included a strong contribution from net investment income and increased fixed income and equity valuations. The trailing twelve months total return was 4.0%. |
Proactive Capital Management
“Allstate continued to provide strong returns to our shareholders during the first half of 2017 through a combination of $257 million in common stock dividends and repurchasing $646 million of outstanding shares. A new $2 billion share repurchase program, approved today, will begin following the completion of our current program and is expected to conclude by February 2019,” said Steve Shebik, chief financial officer. “In addition, with the objective of providing more transparency into the performance of our business, we are planning to adopt a new segment reporting structure effective in the fourth quarter 2017. The new reporting structure will change from our current four segments to seven segments that will include a separate segment for service businesses, broken out from traditional property and casualty, and Allstate Financial will transition to individual segments for Life, Benefits and Annuities.”
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Visit www.allstateinvestors.com to view additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be held at 9 a.m. ET on Wednesday, August 2.
The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer, protecting people from life’s uncertainties with 75 million proprietary policies. Allstate offers a broad array of protection products through multiple brands and diverse distribution channels, including auto, home, life and other insurance offered through its Allstate, Esurance, Encompass and Answer Financial brands. The company provides additional protection products and services through Allstate Benefits, Allstate Roadside Services, Allstate Dealer Services, Arity and SquareTrade. Allstate is widely known from the slogan “You’re In Good Hands With Allstate®.” Allstate agencies are in virtually every local community in America. The Allstate Foundation, Allstate, its employees and agency owners have a proud history of caring for local communities.
Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.
Forward-Looking Statements
This news release contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.
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THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
($ in millions, except per share data) | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Revenues | |||||||||||||||
Property-liability insurance premiums | $ | 8,018 | $ | 7,814 | $ | 15,977 | $ | 15,537 | |||||||
Life and annuity premiums and contract charges | 591 | 564 | 1,184 | 1,130 | |||||||||||
Net investment income | 897 | 762 | 1,645 | 1,493 | |||||||||||
Realized capital gains and losses: | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (47 | ) | (77 | ) | (109 | ) | (168 | ) | |||||||
OTTI losses reclassified to (from) other comprehensive income | (3 | ) | (2 | ) | — | 8 | |||||||||
Net OTTI losses recognized in earnings | (50 | ) | (79 | ) | (109 | ) | (160 | ) | |||||||
Sales and other realized capital gains and losses | 131 | 103 | 324 | 35 | |||||||||||
Total realized capital gains and losses | 81 | 24 | 215 | (125 | ) | ||||||||||
9,587 | 9,164 | 19,021 | 18,035 | ||||||||||||
Costs and expenses | |||||||||||||||
Property-liability insurance claims and claims expense | 5,689 | 5,901 | 11,105 | 11,585 | |||||||||||
Life and annuity contract benefits | 486 | 454 | 960 | 909 | |||||||||||
Interest credited to contractholder funds | 175 | 185 | 348 | 375 | |||||||||||
Amortization of deferred policy acquisition costs | 1,176 | 1,126 | 2,345 | 2,255 | |||||||||||
Operating costs and expenses | 1,086 | 1,040 | 2,183 | 2,022 | |||||||||||
Restructuring and related charges | 53 | 11 | 63 | 16 | |||||||||||
Interest expense | 83 | 72 | 168 | 145 | |||||||||||
8,748 | 8,789 | 17,172 | 17,307 | ||||||||||||
Gain on disposition of operations | 12 | 1 | 14 | 3 | |||||||||||
Income from operations before income tax expense | 851 | 376 | 1,863 | 731 | |||||||||||
Income tax expense | 272 | 105 | 589 | 214 | |||||||||||
Net income | 579 | 271 | 1,274 | 517 | |||||||||||
Preferred stock dividends | 29 | 29 | 58 | 58 | |||||||||||
Net income applicable to common shareholders | $ | 550 | $ | 242 | $ | 1,216 | $ | 459 | |||||||
Earnings per common share: | |||||||||||||||
Net income applicable to common shareholders per common share – Basic | $ | 1.51 | $ | 0.65 | $ | 3.34 | $ | 1.22 | |||||||
Weighted average common shares – Basic | 363.6 | 373.6 | 364.6 | 375.8 | |||||||||||
Net income applicable to common shareholders per common share – Diluted | $ | 1.49 | $ | 0.64 | $ | 3.29 | $ | 1.21 | |||||||
Weighted average common shares – Diluted | 369.0 | 378.1 | 370.1 | 380.5 | |||||||||||
Cash dividends declared per common share | $ | 0.37 | $ | 0.33 | $ | 0.74 | $ | 0.66 | |||||||
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THE ALLSTATE CORPORATION | |||||||||||||||
BUSINESS RESULTS | |||||||||||||||
($ in millions, except ratios) | Three months ended | Six months ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Property-Liability | |||||||||||||||
Premiums written | $ | 8,289 | $ | 8,051 | $ | 16,012 | $ | 15,566 | |||||||
Premiums earned | $ | 8,018 | $ | 7,814 | $ | 15,977 | $ | 15,537 | |||||||
Claims and claims expense | (5,689 | ) | (5,901 | ) | (11,105 | ) | (11,585 | ) | |||||||
Amortization of deferred policy acquisition costs | (1,103 | ) | (1,057 | ) | (2,193 | ) | (2,113 | ) | |||||||
Operating costs and expenses | (947 | ) | (912 | ) | (1,883 | ) | (1,765 | ) | |||||||
Restructuring and related charges | (52 | ) | (10 | ) | (62 | ) | (15 | ) | |||||||
Underwriting income (loss) | 227 | (66 | ) | 734 | 59 | ||||||||||
Net investment income | 391 | 316 | 702 | 618 | |||||||||||
Income tax expense on operations | (196 | ) | (70 | ) | (451 | ) | (211 | ) | |||||||
Realized capital gains and losses, after-tax | 56 | 18 | 145 | (46 | ) | ||||||||||
Gain on disposition of operations, after-tax | 6 | — | 6 | — | |||||||||||
Net income applicable to common shareholders | $ | 484 | $ | 198 | $ | 1,136 | $ | 420 | |||||||
Catastrophe losses | $ | 993 | $ | 961 | $ | 1,774 | $ | 1,788 | |||||||
Amortization of purchased intangible assets | $ | 24 | $ | 9 | $ | 49 | $ | 18 | |||||||
Operating ratios: | |||||||||||||||
Claims and claims expense ratio | 71.0 | 75.5 | 69.5 | 74.6 | |||||||||||
Expense ratio | 26.2 | 25.3 | 25.9 | 25.0 | |||||||||||
Combined ratio | 97.2 | 100.8 | 95.4 | 99.6 | |||||||||||
Effect of catastrophe losses on combined ratio | 12.4 | 12.3 | 11.1 | 11.5 | |||||||||||
Effect of prior year reserve reestimates on combined ratio | (1.1 | ) | — | (1.2 | ) | 0.1 | |||||||||
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio | (0.1 | ) | 0.2 | (0.1 | ) | — | |||||||||
Effect of amortization of purchased intangible assets on combined ratio | 0.3 | 0.1 | 0.3 | 0.1 | |||||||||||
Effect of Discontinued Lines and Coverages on combined ratio | 0.1 | — | — | — | |||||||||||
Allstate Financial | |||||||||||||||
Premiums and contract charges | $ | 591 | $ | 564 | $ | 1,184 | $ | 1,130 | |||||||
Net investment income | 496 | 435 | 922 | 854 | |||||||||||
Contract benefits | (486 | ) | (454 | ) | (960 | ) | (909 | ) | |||||||
Interest credited to contractholder funds | (173 | ) | (179 | ) | (346 | ) | (363 | ) | |||||||
Amortization of deferred policy acquisition costs | (69 | ) | (68 | ) | (144 | ) | (139 | ) | |||||||
Operating costs and expenses | (130 | ) | (121 | ) | (265 | ) | (244 | ) | |||||||
Restructuring and related charges | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||
Income tax expense on operations | (75 | ) | (56 | ) | (127 | ) | (104 | ) | |||||||
Operating income | 153 | 120 | 263 | 224 | |||||||||||
Realized capital gains and losses, after-tax | (3 | ) | — | (4 | ) | (32 | ) | ||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | (1 | ) | (4 | ) | (1 | ) | (8 | ) | |||||||
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax | (3 | ) | (1 | ) | (6 | ) | (2 | ) | |||||||
Gain on disposition of operations, after-tax | — | 1 | 2 | 2 | |||||||||||
Net income applicable to common shareholders | $ | 146 | $ | 116 | $ | 254 | $ | 184 | |||||||
Corporate and Other | |||||||||||||||
Net investment income | $ | 10 | $ | 11 | $ | 21 | $ | 21 | |||||||
Operating costs and expenses | (92 | ) | (79 | ) | (185 | ) | (158 | ) | |||||||
Income tax benefit on operations | 31 | 26 | 61 | 51 | |||||||||||
Preferred stock dividends | (29 | ) | (29 | ) | (58 | ) | (58 | ) | |||||||
Operating loss | (80 | ) | (71 | ) | (161 | ) | (144 | ) | |||||||
Realized capital gains and losses, after-tax | — | (1 | ) | — | (1 | ) | |||||||||
Business combination expenses, after-tax | — | — | (13 | ) | — | ||||||||||
Net loss applicable to common shareholders | $ | (80 | ) | $ | (72 | ) | $ | (174 | ) | $ | (145 | ) | |||
Consolidated net income applicable to common shareholders | $ | 550 | $ | 242 | $ | 1,216 | $ | 459 | |||||||
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THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||
($ in millions, except par value data) | June 30, 2017 | December 31, 2016 | |||||
Assets | (unaudited) | ||||||
Investments: | |||||||
Fixed income securities, at fair value (amortized cost $56,901 and $56,576) | $ | 58,656 | $ | 57,839 | |||
Equity securities, at fair value (cost $5,321 and $5,157) | 6,117 | 5,666 | |||||
Mortgage loans | 4,336 | 4,486 | |||||
Limited partnership interests | 6,206 | 5,814 | |||||
Short-term, at fair value (amortized cost $2,175 and $4,288) | 2,175 | 4,288 | |||||
Other | 3,815 | 3,706 | |||||
Total investments | 81,305 | 81,799 | |||||
Cash | 482 | 436 | |||||
Premium installment receivables, net | 5,693 | 5,597 | |||||
Deferred policy acquisition costs | 4,037 | 3,954 | |||||
Reinsurance recoverables, net | 8,722 | 8,745 | |||||
Accrued investment income | 573 | 567 | |||||
Property and equipment, net | 1,072 | 1,065 | |||||
Goodwill | 2,309 | 1,219 | |||||
Other assets | 3,256 | 1,835 | |||||
Separate Accounts | 3,416 | 3,393 | |||||
Total assets | $ | 110,865 | $ | 108,610 | |||
Liabilities | |||||||
Reserve for property-liability insurance claims and claims expense | $ | 25,884 | $ | 25,250 | |||
Reserve for life-contingent contract benefits | 12,234 | 12,239 | |||||
Contractholder funds | 19,832 | 20,260 | |||||
Unearned premiums | 13,024 | 12,583 | |||||
Claim payments outstanding | 939 | 879 | |||||
Deferred income taxes | 1,104 | 487 | |||||
Other liabilities and accrued expenses | 6,583 | 6,599 | |||||
Long-term debt | 6,348 | 6,347 | |||||
Separate Accounts | 3,416 | 3,393 | |||||
Total liabilities | 89,364 | 88,037 | |||||
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, 361 million and 366 million shares outstanding | 9 | 9 | |||||
Additional capital paid-in | 3,269 | 3,303 | |||||
Retained income | 41,622 | 40,678 | |||||
Deferred ESOP expense | (6 | ) | (6 | ) | |||
Treasury stock, at cost (539 million and 534 million shares) | (25,241 | ) | (24,741 | ) | |||
Accumulated other comprehensive income: | |||||||
Unrealized net capital gains and losses: | |||||||
Unrealized net capital gains and losses on fixed income securities with OTTI | 65 | 57 | |||||
Other unrealized net capital gains and losses | 1,590 | 1,091 | |||||
Unrealized adjustment to DAC, DSI and insurance reserves | (129 | ) | (95 | ) | |||
Total unrealized net capital gains and losses | 1,526 | 1,053 | |||||
Unrealized foreign currency translation adjustments | (42 | ) | (50 | ) | |||
Unrecognized pension and other postretirement benefit cost | (1,382 | ) | (1,419 | ) | |||
Total accumulated other comprehensive income (loss) | 102 | (416 | ) | ||||
Total shareholders’ equity | 21,501 | 20,573 | |||||
Total liabilities and shareholders’ equity | $ | 110,865 | $ | 108,610 | |||
8
THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
($ in millions) | Six months ended June 30, | ||||||
2017 | 2016 | ||||||
Cash flows from operating activities | (unaudited) | ||||||
Net income | $ | 1,274 | $ | 517 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and other non-cash items | 238 | 188 | |||||
Realized capital gains and losses | (215 | ) | 125 | ||||
Gain on disposition of operations | (14 | ) | (3 | ) | |||
Interest credited to contractholder funds | 348 | 375 | |||||
Changes in: | |||||||
Policy benefits and other insurance reserves | 228 | 577 | |||||
Unearned premiums | 34 | 62 | |||||
Deferred policy acquisition costs | (65 | ) | (72 | ) | |||
Premium installment receivables, net | (51 | ) | (27 | ) | |||
Reinsurance recoverables, net | 6 | (120 | ) | ||||
Income taxes | (42 | ) | (176 | ) | |||
Other operating assets and liabilities | (393 | ) | (88 | ) | |||
Net cash provided by operating activities | 1,348 | 1,358 | |||||
Cash flows from investing activities | |||||||
Proceeds from sales | |||||||
Fixed income securities | 14,521 | 12,589 | |||||
Equity securities | 3,430 | 2,487 | |||||
Limited partnership interests | 481 | 363 | |||||
Other investments | 118 | 144 | |||||
Investment collections | |||||||
Fixed income securities | 2,063 | 2,138 | |||||
Mortgage loans | 305 | 150 | |||||
Other investments | 337 | 168 | |||||
Investment purchases | |||||||
Fixed income securities | (17,214 | ) | (12,947 | ) | |||
Equity securities | (3,473 | ) | (2,672 | ) | |||
Limited partnership interests | (578 | ) | (703 | ) | |||
Mortgage loans | (148 | ) | (264 | ) | |||
Other investments | (532 | ) | (449 | ) | |||
Change in short-term investments, net | 2,142 | (669 | ) | ||||
Change in other investments, net | 107 | (39 | ) | ||||
Purchases of property and equipment, net | (146 | ) | (120 | ) | |||
Acquisition of operations | (1,356 | ) | — | ||||
Net cash provided by investing activities | 57 | 176 | |||||
Cash flows from financing activities | |||||||
Repayments of long-term debt | — | (16 | ) | ||||
Contractholder fund deposits | 515 | 522 | |||||
Contractholder fund withdrawals | (957 | ) | (1,013 | ) | |||
Dividends paid on common stock | (257 | ) | (240 | ) | |||
Dividends paid on preferred stock | (58 | ) | (58 | ) | |||
Treasury stock purchases | (657 | ) | (904 | ) | |||
Shares reissued under equity incentive plans, net | 108 | 72 | |||||
Excess tax benefits on share-based payment arrangements | — | 20 | |||||
Other | (53 | ) | 34 | ||||
Net cash used in financing activities | (1,359 | ) | (1,583 | ) | |||
Net increase (decrease) in cash | 46 | (49 | ) | ||||
Cash at beginning of period | 436 | 495 | |||||
Cash at end of period | $ | 482 | $ | 446 | |||
9
The following table presents the investment portfolio by strategy as of June 30, 2017.
($ in millions) | Total | Market-Based | Performance-Based | ||||||||
Fixed income securities | $ | 58,656 | $ | 58,588 | $ | 68 | |||||
Equity securities | 6,117 | 6,021 | 96 | ||||||||
Mortgage loans | 4,336 | 4,336 | — | ||||||||
Limited partnership interests | 6,206 | 553 | 5,653 | ||||||||
Short-term investments | 2,175 | 2,175 | — | ||||||||
Other | 3,815 | 3,270 | 545 | ||||||||
Total | $ | 81,305 | $ | 74,943 | $ | 6,362 | |||||
Property-Liability | $ | 43,083 | $ | 39,702 | $ | 3,381 | |||||
Allstate Financial | 36,456 | 33,475 | 2,981 | ||||||||
Corporate & Other | 1,766 | 1,766 | — | ||||||||
Total | $ | 81,305 | $ | 74,943 | $ | 6,362 | |||||
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) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Market-Based: | |||||||||||||||
Property-Liability | $ | 288 | $ | 269 | $ | 560 | $ | 529 | |||||||
Allstate Financial | 374 | 380 | 748 | 750 | |||||||||||
Corporate & Other | 12 | 13 | 25 | 25 | |||||||||||
Total Market-Based | 674 | 662 | 1,333 | 1,304 | |||||||||||
Performance-Based: | |||||||||||||||
Property-Liability | 129 | 69 | 196 | 135 | |||||||||||
Allstate Financial | 142 | 72 | 215 | 139 | |||||||||||
Corporate & Other | — | — | — | — | |||||||||||
Total Performance-Based | 271 | 141 | 411 | 274 | |||||||||||
Investment income, before expense | 945 | 803 | 1,744 | 1,578 | |||||||||||
Investment expense | (48 | ) | (41 | ) | (99 | ) | (85 | ) | |||||||
Net investment income | $ | 897 | $ | 762 | $ | 1,645 | $ | 1,493 | |||||||
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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, |
• | business combination expenses and the 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, business combination expenses and the 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. Business combination expenses are excluded because they are non-recurring in nature and the 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.
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The following tables reconcile net income applicable to common shareholders and operating income. Taxes on adjustments to reconcile net income applicable to common shareholders and operating income generally use a 35% effective tax rate and are reported net with the reconciling adjustment. If the effective tax rate is other than 35%, this is specified in the disclosure.
($ in millions, except per share data) | For the three months ended June 30, | ||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Net income applicable to common shareholders | $ | 484 | $ | 198 | $ | 146 | $ | 116 | $ | 550 | $ | 242 | $ | 1.49 | $ | 0.64 | |||||||||||||||
Realized capital gains and losses, after-tax | (56 | ) | (18 | ) | 3 | — | (53 | ) | (17 | ) | (0.14 | ) | (0.04 | ) | |||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | 1 | 4 | 1 | 4 | — | 0.01 | |||||||||||||||||||||||
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax | — | — | 3 | 1 | 3 | 1 | 0.01 | — | |||||||||||||||||||||||
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax | (1 | ) | — | — | — | (1 | ) | — | — | — | |||||||||||||||||||||
Business combination expenses and the amortization of purchased intangible assets, after-tax | 16 | 6 | — | — | 16 | 6 | 0.04 | 0.01 | |||||||||||||||||||||||
Gain on disposition of operations, after-tax | (6 | ) | — | — | (1 | ) | (6 | ) | (1 | ) | (0.02 | ) | — | ||||||||||||||||||
Operating income* | $ | 437 | $ | 186 | $ | 153 | $ | 120 | $ | 510 | $ | 235 | $ | 1.38 | $ | 0.62 | |||||||||||||||
For the six months ended June 30, | |||||||||||||||||||||||||||||||
Property-Liability | Allstate Financial | Consolidated | Per diluted common share | ||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Net income applicable to common shareholders | $ | 1,136 | $ | 420 | $ | 254 | $ | 184 | $ | 1,216 | $ | 459 | $ | 3.29 | $ | 1.21 | |||||||||||||||
Realized capital gains and losses, after-tax | (145 | ) | 46 | 4 | 32 | (141 | ) | 79 | (0.38 | ) | 0.21 | ||||||||||||||||||||
Valuation changes on embedded derivatives that are not hedged, after-tax | — | — | 1 | 8 | 1 | 8 | — | 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 | — | — | 6 | 2 | 6 | 2 | 0.02 | — | |||||||||||||||||||||||
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax | (1 | ) | (1 | ) | — | — | (1 | ) | (1 | ) | — | — | |||||||||||||||||||
Business combination expenses and the amortization of purchased intangible assets, after-tax | 32 | 12 | — | — | 45 | 12 | 0.11 | 0.03 | |||||||||||||||||||||||
Gain on disposition of operations, after-tax | (6 | ) | — | (2 | ) | (2 | ) | (8 | ) | (2 | ) | (0.02 | ) | (0.01 | ) | ||||||||||||||||
Operating income* | $ | 1,016 | $ | 477 | $ | 263 | $ | 224 | $ | 1,118 | $ | 557 | $ | 3.02 | $ | 1.46 | |||||||||||||||
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, | ||||||
2017 | 2016 | ||||||
Return on common shareholders’ equity | |||||||
Numerator: | |||||||
Net income applicable to common shareholders | $ | 2,518 | $ | 1,540 | |||
Denominator: | |||||||
Beginning common shareholders’ equity (1) | $ | 18,807 | $ | 19,552 | |||
Ending common shareholders’ equity (1) | 19,755 | 18,807 | |||||
Average common shareholders’ equity | $ | 19,281 | $ | 19,180 | |||
Return on common shareholders’ equity | 13.1 | % | 8.0 | % | |||
($ in millions) | For the twelve months ended June 30, | ||||||
2017 | 2016 | ||||||
Operating income return on common shareholders’ equity | |||||||
Numerator: | |||||||
Operating income | $ | 2,399 | $ | 1,792 | |||
Denominator: | |||||||
Beginning common shareholders’ equity | $ | 18,807 | $ | 19,552 | |||
Unrealized net capital gains and losses | 1,624 | 1,419 | |||||
Adjusted beginning common shareholders’ equity | 17,183 | 18,133 | |||||
Ending common shareholders’ equity | 19,755 | 18,807 | |||||
Unrealized net capital gains and losses | 1,526 | 1,624 | |||||
Adjusted ending common shareholders’ equity | 18,229 | 17,183 | |||||
Average adjusted common shareholders’ equity | $ | 17,706 | $ | 17,658 | |||
Operating income return on common shareholders’ equity* | 13.5 | % | 10.1 | % | |||
_____________
(1) Excludes equity related to preferred stock of $1,746 million.
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets (“underlying combined ratio”) is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of catastrophes on the combined ratio, the effect of prior year non-catastrophe reserve reestimates on the combined ratio, and the effect of amortization of purchased intangible assets on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our Property-Liability business that may be obscured by catastrophe losses, prior year reserve reestimates and amortization of purchased intangible assets. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves. Amortization of purchased intangible assets relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide it to facilitate a comparison to our outlook on the underlying combined ratio. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business.
The following tables reconcile the respective combined ratio to the underlying combined ratio.
Property-Liability | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 97.2 | 100.8 | 95.4 | 99.6 | |||||||
Effect of catastrophe losses | (12.4 | ) | (12.3 | ) | (11.1 | ) | (11.5 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 1.0 | 0.2 | 1.1 | (0.1 | ) | ||||||
Effect of amortization of purchased intangible assets | (0.3 | ) | (0.1 | ) | (0.3 | ) | (0.1 | ) | |||
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets (“underlying combined ratio”)* | 85.5 | 88.6 | 85.1 | 87.9 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) | 0.2 | (0.1 | ) | — | |||||
Underwriting margin is calculated as 100% minus the combined ratio.
13
Allstate Brand - Total | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 96.0 | 100.1 | 93.9 | 98.9 | |||||||
Effect of catastrophe losses | (12.7 | ) | (12.9 | ) | (11.2 | ) | (12.1 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 1.1 | 0.3 | 1.3 | — | |||||||
Underlying combined ratio* | 84.4 | 87.5 | 84.0 | 86.8 | |||||||
Effect of prior year catastrophe reserve reestimates | — | 0.3 | — | 0.1 | |||||||
Allstate Brand - Auto Insurance | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 95.8 | 101.2 | 93.2 | 100.1 | |||||||
Effect of catastrophe losses | (4.2 | ) | (4.1 | ) | (2.8 | ) | (3.5 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 1.2 | 0.7 | 1.4 | 0.3 | |||||||
Underlying combined ratio* | 92.8 | 97.8 | 91.8 | 96.9 | |||||||
Effect of prior year catastrophe reserve reestimates | — | (0.1 | ) | (0.1 | ) | — | |||||
Allstate Brand - Homeowners Insurance | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 97.2 | 97.0 | 95.4 | 95.2 | |||||||
Effect of catastrophe losses | (38.4 | ) | (38.3 | ) | (36.2 | ) | (36.2 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 1.0 | (0.1 | ) | 1.3 | — | ||||||
Underlying combined ratio* | 59.8 | 58.6 | 60.5 | 59.0 | |||||||
Effect of prior year catastrophe reserve reestimates | — | 1.0 | — | 0.3 | |||||||
Allstate Brand - Other Personal Lines | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 90.8 | 91.2 | 91.9 | 91.9 | |||||||
Effect of catastrophe losses | (13.9 | ) | (15.6 | ) | (14.2 | ) | (15.8 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 0.2 | 1.7 | 0.2 | 1.6 | |||||||
Underlying combined ratio* | 77.1 | 77.3 | 77.9 | 77.7 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.5 | ) | — | 0.6 | — | ||||||
Encompass Brand - Total | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 104.4 | 104.9 | 108.1 | 105.4 | |||||||
Effect of catastrophe losses | (19.0 | ) | (11.2 | ) | (21.4 | ) | (12.3 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | 2.2 | (0.9 | ) | 0.4 | (2.6 | ) | |||||
Underlying combined ratio* | 87.6 | 92.8 | 87.1 | 90.5 | |||||||
Effect of prior year catastrophe reserve reestimates | (0.7 | ) | (0.6 | ) | — | (0.2 | ) | ||||
Underlying loss ratio is a non-GAAP ratio, which is computed as the difference between three GAAP operating ratios: the loss ratio, the effect of catastrophes on the combined ratio and the effect of prior year non-catastrophe reserve reestimates on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends that may be obscured by catastrophe losses and prior year reserve reestimates. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. The most directly comparable GAAP measure is the loss ratio. The underlying loss ratio should not be considered a substitute for the loss ratio and does not reflect the overall loss ratio of our business.
14
The following table reconciles the Esurance brand combined ratio to the Esurance brand underlying loss ratio and underlying combined ratio.
Esurance Brand - Total | Three months ended June 30, | Six months ended June 30, | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Combined ratio | 106.1 | 108.9 | 104.2 | 107.6 | |||||||
Effect of catastrophe losses | (5.6 | ) | (3.4 | ) | (3.7 | ) | (2.1 | ) | |||
Effect of prior year non-catastrophe reserve reestimates | — | 1.0 | — | 1.0 | |||||||
Effect of amortization of purchased intangible assets | — | (1.7 | ) | (0.1 | ) | (1.6 | ) | ||||
Underlying combined ratio* | 100.5 | 104.8 | 100.4 | 104.9 | |||||||
Expense ratio, excluding the effect of amortization of purchased intangible assets | (25.4 | ) | (30.3 | ) | (26.3 | ) | (31.1 | ) | |||
Underlying loss ratio* | 75.1 | 74.5 | 74.1 | 73.8 | |||||||
Adjusted SquareTrade operating income is a non-GAAP measure, which is computed as net income (loss) applicable to common shareholders, excluding amortization of purchased intangible assets, after-tax, and realized capital gains and losses, after-tax, and adjusted for the after-tax income statement effects of acquisition-related purchase accounting fair value adjustments to unearned premiums, contractual liability insurance policy premium expenses, and commissions paid to retailers. Net income (loss) applicable to shareholders is the GAAP measure that is most directly comparable to adjusted SquareTrade operating income. We use adjusted SquareTrade operating income as an important measure to evaluate SquareTrade’s results of operations. We believe that the measure provides investors with a valuable measure of SquareTrade’s ongoing performance because it reveals trends that may be obscured by the amortization of purchased intangible assets, the acquisition-related purchase accounting fair value adjustments, and the net effects of realized capital gains and losses. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our business results or trends. We adjust for the effects of acquisition-related purchase accounting fair value adjustments because they relate to the acquisition and their effects are not indicative of the underlying business results and trends. Realized capital gains and losses 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 SquareTrade’s operations. Adjusted SquareTrade operating income highlights the results from ongoing operations and the underlying profitability of our business and is used by management along with the other components of net income applicable to common shareholders to assess our performance. We believe it is useful for investors to evaluate net income applicable to common shareholders, adjusted SquareTrade operating income and their components separately and in the aggregate when reviewing and evaluating SquareTrade’s performance. Adjusted SquareTrade operating income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business.
The following table reconciles the SquareTrade net loss applicable to shareholders to the adjusted SquareTrade operating income.
SquareTrade | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss applicable to common shareholders | $ | (14 | ) | $ | — | $ | (37 | ) | $ | — | |||||
Realized capital gains and losses, after-tax | — | — | — | — | |||||||||||
Amortization of purchased intangible assets, after-tax | 15 | — | 30 | — | |||||||||||
Operating income * | 1 | — | (7 | ) | — | ||||||||||
Fair value adjustments, after-tax | 3 | 7 | |||||||||||||
Adjusted SquareTrade operating income * | $ | 4 | $ | — | $ | — | $ | — | |||||||
# # # # #
15
Exhibit 99.2
Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*). 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 2017
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
Segment Results 4,5
Statements of Financial Position 6
Book Value Per Common Share 7
Return on Common Shareholders' Equity 8
Debt to Capital 9
Statements of Cash Flows 10
Analysis of Deferred Policy Acquisition Costs 11,12
Policies in Force and Other Statistics 13
Property-Liability Operations
Property-Liability Results 14
Property-Liability Underwriting Results by Area of Business 15
Property-Liability Premiums Written by Brand 16
Impact of Net Rate Changes Approved on Premiums Written 17
Allstate Brand Profitability Measures 18
Allstate Brand Statistics 19
Allstate Brand Auto Claim Frequency Analysis 20,21
Esurance Brand Profitability Measures and Statistics 22
Encompass Brand Profitability Measures and Statistics 23
SquareTrade Profitabillity Measures 24
Auto Profitability Measures 25
Homeowners Profitability Measures 26
Other Personal Lines Profitability Measures 27
Auto, Homeowners and Other Personal Lines Underlying Combined Ratios by Brand 28
Commercial Lines Profitability Measures 29
Other Business Lines Profitability Measures 30
Allstate Brand Auto and Homeowners Underlying Loss and Expense 31
Homeowners Supplemental Information 32
Catastrophe Losses by Brand 33
Catastrophe Experience 34
Prior Year Reserve Reestimates 35
Asbestos and Environmental Reserves 36
Allstate Financial Operations
Allstate Financial Segment Results 37
Return on Attributed Equity 38
Allstate Financial Premiums and Contract Charges and Other Statistics 39
Allstate Financial Change in Contractholder Funds 40
Allstate Financial Analysis of Net Income 41
Allstate Financial Weighted Average Investment Spreads 42
Allstate Financial Supplemental Product Information 43
Allstate Life, Allstate Benefits and Allstate Annuities Results and Product Information 44,45
Corporate and Other Segment Results 46
Investments
Investments 47
Unrealized Net Capital Gains and Losses on Security Portfolio by Type 48
Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 49
Property-Liability Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 50
Allstate Financial Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 51
Consolidated Investment Position and Results by Strategy 52
Property-Liability Consolidated Investment Position and Results by Strategy 53
Allstate Financial Consolidated Investment Position and Results by Strategy 54
Performance-Based Investments 55
Limited Partnership Interests 56
Definitions of Non-GAAP Measures 57
THE ALLSTATE CORPORATION
Investor Supplement - Second Quarter 2017
Table of Contents
1
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Revenues
Property-liability insurance premiums $ 8,018 $ 7,959 $ 7,901 $ 7,869 $ 7,814 $ 7,723 $ 15,977 $ 15,537
Life and annuity premiums and contract charges 591 593 574 571 564 566 1,184 1,130
Net investment income 897 748 801 748 762 731 1,645 1,493
Realized capital gains and losses:
Total other-than-temporary impairment ("OTTI") losses (47) (62) (72) (73) (77) (91) (109) (168)
OTTI losses reclassified to (from) other comprehensive
income (3) 3 2 - (2) 10 - 8
Net OTTI losses recognized in earnings (50) (59) (70) (73) (79) (81) (109) (160)
Sales and other realized capital gains and losses 131 193 72 106 103 (68) 324 35
Total realized capital gains and losses 81 134 2 33 24 (149) 215 (125)
Total revenues 9,587 9,434 9,278 9,221 9,164 8,871 19,021 18,035
Costs and expenses
Property-liability insurance claims and claims expense 5,689 5,416 5,083 5,553 5,901 5,684 11,105 11,585
Life and annuity contract benefits 486 474 464 484 454 455 960 909
Interest credited to contractholder funds 175 173 168 183 185 190 348 375
Amortization of deferred policy acquisition costs 1,176 1,169 1,157 1,138 1,126 1,129 2,345 2,255
Operating costs and expenses 1,086 1,097 1,063 1,021 1,040 982 2,183 2,022
Restructuring and related charges 53 10 9 5 11 5 63 16
Interest expense 83 85 77 73 72 73 168 145
Total costs and expenses 8,748 8,424 8,021 8,457 8,789 8,518 17,172 17,307
Gain on disposition of operations 12 2 1 1 1 2 14 3
Income from operations before income
tax expense 851 1,012 1,258 765 376 355 1,863 731
Income tax expense 272 317 418 245 105 109 589 214
Net income $ 579 $ 695 $ 840 $ 520 $ 271 $ 246 $ 1,274 $ 517
Preferred stock dividends 29 29 29 29 29 29 58 58
Net income applicable to common shareholders $ 550 $ 666 $ 811 $ 491 $ 242 $ 217 $ 1,216 $ 459
Earnings per common share: (1)
Net income applicable to common shareholders
per common share - Basic $ 1.51 $ 1.82 $ 2.20 $ 1.32 $ 0.65 $ 0.57 $ 3.34 $ 1.22
Weighted average common shares - Basic 363.6 365.7 368.0 371.5 373.6 378.1 364.6 375.8
Net income applicable to common shareholders
per common share - Diluted $ 1.49 $ 1.79 $ 2.18 $ 1.31 $ 0.64 $ 0.57 $ 3.29 $ 1.21
Weighted average common shares - Diluted 369.0 371.3 372.5 375.9 378.1 382.9 370.1 380.5
Cash dividends declared per common share $ 0.37 $ 0.37 $ 0.33 $ 0.33 $ 0.33 $ 0.33 $ 0.74 $ 0.66
(1) In accordance with GAAP, the quarter and year-to-date per share amounts are calculated discretely. Therefore, the sum of each quarter may not equal the year-to-date amount.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six months endedThree months ended
2
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Contribution to income
Net income applicable to common shareholders $ 550 $ 666 $ 811 $ 491 $ 242 $ 217 $ 1,216 $ 459
Realized capital gains and losses, after-tax (53) (88) (1) (22) (17) 96 (141) 79
Valuation changes on embedded derivatives that
are not hedged, after-tax 1 - (6) - 4 4 1 8
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on embedded
derivatives that are not hedged, after-tax 3 3 1 1 1 1 6 2
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax (1) - (2) - - (1) (1) (1)
Business combination expenses and the amortization
of purchased intangible assets, after-tax 16 29 4 5 6 6 45 12
Gain on disposition of operations, after-tax (6) (2) - (1) (1) (1) (8) (2)
Operating income * $ 510 $ 608 $ 807 $ 474 $ 235 $ 322 $ 1,118 $ 557
Income per common share - Diluted
Net income applicable to common shareholders $ 1.49 $ 1.79 $ 2.18 $ 1.31 $ 0.64 $ 0.57 $ 3.29 $ 1.21
Realized capital gains and losses, after-tax (0.14) (0.24) - (0.06) (0.04) 0.25 (0.38) 0.21
Valuation changes on embedded derivatives that
are not hedged, after-tax - - (0.02) - 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 0.01 0.01 - - - - 0.02 -
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax - - - - - - - -
Business combination expenses and the amortization
of purchased intangible assets, after-tax 0.04 0.08 0.01 0.01 0.01 0.01 0.11 0.03
Gain on disposition of operations, after-tax (0.02) - - - - - (0.02) (0.01)
Operating income * $ 1.38 $ 1.64 $ 2.17 $ 1.26 $ 0.62 $ 0.84 $ 3.02 $ 1.46
Weighted average common shares - Diluted 369.0 371.3 372.5 375.9 378.1 382.9 370.1 380.5
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,
2017 2017 2016 2016 2016 2016 2017 2016
Property-Liability
Property-Liability insurance premiums $ 8,018 $ 7,959 $ 7,901 $ 7,869 $ 7,814 $ 7,723 $ 15,977 $ 15,537
Net investment income 391 311 338 310 316 302 702 618
Realized capital gains and losses 85 135 14 53 26 (99) 220 (73)
Total Property-Liability revenues 8,494 8,405 8,253 8,232 8,156 7,926 16,899 16,082
Allstate Financial
Life and annuity premiums and contract charges 591 593 574 571 564 566 1,184 1,130
Net investment income 496 426 453 427 435 419 922 854
Realized capital gains and losses (4) (1) (11) (21) - (49) (5) (49)
Total Allstate Financial revenues 1,083 1,018 1,016 977 999 936 2,101 1,935
Corporate and Other
Net investment income 10 11 10 11 11 10 21 21
Realized capital gains and losses - - (1) 1 (2) (1) - (3)
Total Corporate and Other revenues 10 11 9 12 9 9 21 18
Consolidated revenues $ 9,587 $ 9,434 $ 9,278 $ 9,221 $ 9,164 $ 8,871 $ 19,021 $ 18,035
THE ALLSTATE CORPORATION
REVENUES
($ in millions)
Six months endedThree months ended
4
Discontinued Total
Allstate Lines and Property- Allstate Corporate
Protection Coverages Liability Financial and Other Consolidated
Premiums and contract charges $ 8,018 $ - $ 8,018 $ 591 $ - $ 8,609
Claims and claims expense (5,686) (3) (5,689) - - (5,689)
Contract benefits and interest credited to contractholder funds - - - (661) - (661)
Amortization of deferred policy acquisition costs (1,103) - (1,103) (73) - (1,176)
Operating costs and expenses (945) (2) (947) (130) (9) (1,086)
Restructuring and related charges (52) - (52) (1) - (53)
Interest expense - - - - (83) (83)
Underwriting income (loss) $ 232 $ (5) $ 227
Net investment income 391 496 10 897
Realized capital gains and losses 85 (4) - 81
Gain on disposition of operations 10 2 - 12
Income tax (expense) benefit (229) (74) 31 (272)
Preferred stock dividends - - (29) (29)
Net income applicable to common shareholders $ 484 $ 146 $ (80) $ 550
Realized capital gains and losses, after-tax (56) 3 - (53)
Valuation changes on embedded derivatives that are not hedged, after-tax - 1 - 1
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax - 3 - 3
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax (1) - - (1)
Business combination expenses and the amortization of purchased intangible assets, after-tax 16 - - 16
Gain on disposition of operations, after-tax (6) - - (6)
Operating income (loss) * $ 437 $ 153 (1) $ (80) (1) $ 510
Allstate Esurance Encompass Answer Allstate
brand brand brand SquareTrade Financial Protection
Allstate Protection Products and Services
Premiums and contract charges $ 7,245 $ 429 $ 274 $ 70 $ - $ 8,018
Claims and claims expense (5,112) (346) (199) (29) - (5,686)
Amortization of deferred policy acquisition costs (1,032) (10) (51) (10) - (1,103)
Operating costs and expenses (763) (98) (31) (53) - (945)
Restructuring and related charges (46) (1) (5) - - (52)
Underwriting income (loss) $ 292 $ (26) $ (12) $ (22) $ - $ 232
Discontinued Total
Allstate Lines and Property- Allstate Corporate
Protection Coverages Liability Financial and Other Consolidated
Premiums and contract charges $ 7,814 $ - $ 7,814 $ 564 $ - $ 8,378
Claims and claims expense (5,899) (2) (5,901) - - (5,901)
Contract benefits and interest credited to contractholder funds - - - (639) - (639)
Amortization of deferred policy acquisition costs (1,057) - (1,057) (69) - (1,126)
Operating costs and expenses (912) - (912) (121) (7) (1,040)
Restructuring and related charges (10) - (10) (1) - (11)
Interest expense - - - - (72) (72)
Underwriting income (loss) $ (64) $ (2) $ (66)
Net investment income 316 435 11 762
Realized capital gains and losses 26 - (2) 24
Gain on disposition of operations - 1 - 1
Income tax (expense) benefit (78) (54) 27 (105)
Preferred stock dividends - - (29) (29)
Net income applicable to common shareholders $ 198 $ 116 $ (72) $ 242
Realized capital gains and losses, after-tax (18) - 1 (17)
Valuation changes on embedded derivatives that are not hedged, after-tax - 4 - 4
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
- - - -
Business combination expenses and the amortization of purchased intangible assets, after-tax 6 - - 6
Gain on disposition of operations, after-tax - (1) - (1)
Operating income (loss) * $ 186 $ 120 (1) $ (71) (1) $ 235
Allstate Esurance Encompass Answer Allstate
brand brand brand SquareTrade Financial Protection
Allstate Protection Products and Services
Premiums and contract charges $ 7,095 $ 415 $ 304 $ - $ - $ 7,814
Claims and claims expense (5,349) (319) (231) - - (5,899)
Amortization of deferred policy acquisition costs (990) (10) (57) - - (1,057)
Operating costs and expenses (757) (123) (30) - (2) (912)
Restructuring and related charges (9) - (1) - - (10)
Underwriting income (loss) $ (10) $ (37) $ (15) $ - $ (2) $ (64)
(1) Operating income is the segment measure for Allstate Financial and Corporate and Other and is not a non-GAAP measure.
For the three months ended June 30, 2016
THE ALLSTATE CORPORATION
SEGMENT RESULTS
($ in millions)
For the three months ended June 30, 2017
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax
5
Discontinued Total
Allstate Lines and Property- Allstate Corporate
Protection Coverages Liability Financial and Other Consolidated
Premiums and contract charges $ 15,977 $ - $ 15,977 $ 1,184 $ - $ 17,161
Claims and claims expense (11,100) (5) (11,105) - - (11,105)
Contract benefits and interest credited to contractholder funds - - - (1,308) - (1,308)
Amortization of deferred policy acquisition costs (2,193) - (2,193) (152) - (2,345)
Operating costs and expenses (1,881) (2) (1,883) (265) (35) (2,183)
Restructuring and related charges (62) - (62) (1) - (63)
Interest expense - - - - (168) (168)
Underwriting income (loss) $ 741 $ (7) $ 734
Net investment income 702 922 21 1,645
Realized capital gains and losses 220 (5) - 215
Gain on disposition of operations 10 4 - 14
Income tax (expense) benefit (530) (125) 66 (589)
Preferred stock dividends - - (58) (58)
Net income applicable to common shareholders $ 1,136 $ 254 $ (174) $ 1,216
Realized capital gains and losses, after-tax (145) 4 - (141)
Valuation changes on embedded derivatives that are not hedged, after-tax - 1 - 1
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax - 6 - 6
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax (1) - - (1)
Business combination expenses and the amortization of purchased intangible assets, after-tax 32 - 13 45
Gain on disposition of operations, after-tax (6) (2) - (8)
Operating income (loss) * $ 1,016 $ 263 (1) $ (161) (1) $ 1,118
Allstate Esurance Encompass Answer Allstate
brand brand brand SquareTrade Financial Protection
Allstate Protection Products and Services
Premiums and contract charges $ 14,443 $ 848 $ 557 $ 129 $ - $ 15,977
Claims and claims expense (9,943) (660) (432) (65) - (11,100)
Amortization of deferred policy acquisition costs (2,052) (20) (103) (18) - (2,193)
Operating costs and expenses (1,514) (201) (62) (103) (1) (1,881)
Restructuring and related charges and interest expense (54) (3) (5) - - (62)
Underwriting income (loss) $ 880 $ (36) $ (45) $ (57) $ (1) $ 741
Discontinued Total
Allstate Lines and Property- Allstate Corporate
Protection Coverages Liability Financial and Other Consolidated
Premiums and contract charges $ 15,537 $ - $ 15,537 $ 1,130 $ - $ 16,667
Claims and claims expense (11,582) (3) (11,585) - - (11,585)
Contract benefits and interest credited to contractholder funds - - - (1,284) - (1,284)
Amortization of deferred policy acquisition costs (2,113) - (2,113) (142) - (2,255)
Operating costs and expenses (1,764) (1) (1,765) (244) (13) (2,022)
Restructuring and related charges and interest expense (15) - (15) (1) - (16)
Interest expense - - - - (145) (145)
Underwriting income (loss) $ 63 $ (4) $ 59
Net investment income 618 854 21 1,493
Realized capital gains and losses (73) (49) (3) (125)
Gain on disposition of operations - 3 - 3
Income tax (expense) benefit (184) (83) 53 (214)
Preferred stock dividends - - (58) (58)
Net income applicable to common shareholders $ 420 $ 184 $ (145) $ 459
Realized capital gains and losses, after-tax 46 32 1 79
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
(1) - - (1)
Business combination expenses and the amortization of purchased intangible assets, after-tax 12 - - 12
Gain on disposition of operations, after-tax - (2) - (2)
Operating income (loss) * $ 477 $ 224 (1) $ (144) (1) $ 557
Allstate Esurance Encompass Answer Allstate
brand brand brand SquareTrade Financial Protection
Allstate Protection Products and Services
Premiums and contract charges $ 14,105 $ 819 $ 613 $ - $ - $ 15,537
Claims and claims expense (10,499) (613) (470) - - (11,582)
Amortization of deferred policy acquisition costs (1,979) (20) (114) - - (2,113)
Operating costs and expenses (1,452) (248) (61) - (3) (1,764)
Restructuring and related charges and interest expense (14) - (1) - - (15)
Underwriting income (loss) $ 161 $ (62) $ (33) $ - $ (3) $ 63
(1)
THE ALLSTATE CORPORATION
SEGMENT RESULTS
($ in millions)
For the six months ended June 30, 2017
Operating income is the segment measure for Allstate Financial and Corporate and Other and is not a non-GAAP measure.
For the six months ended June 30, 2016
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax
6
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2017 2017 2016 2016 2016 2017 2017 2016 2016 2016
Assets Liabilities
Investments Reserve for property-liability insurance claims and
Fixed income securities, at fair value claims expense $ 25,884 $ 25,628 $ 25,250 $ 25,450 $ 24,904
(amortized cost $56,901, $57,194, Reserve for life-contingent contract benefits 12,234 12,223 12,239 12,228 12,215
$56,576, $57,775 and $55,770) $ 58,656 $ 58,636 $ 57,839 $ 60,306 $ 58,129 Contractholder funds 19,832 20,051 20,260 20,583 20,845
Equity securities, at fair value Unearned premiums 13,024 12,705 12,583 12,772 12,300
(cost $5,321, $5,026, $5,157, Claim payments outstanding 939 845 879 934 946
$4,800 and $4,924) 6,117 5,685 5,666 5,288 5,265 Deferred income taxes 1,104 833 487 935 782
Mortgage loans 4,336 4,349 4,486 4,396 4,453 Other liabilities and accrued expenses 6,583 7,018 6,599 6,122 6,192
Limited partnership interests 6,206 5,982 5,814 5,588 5,407 Long-term debt 6,348 6,346 6,347 5,110 5,109
Short-term, at fair value Separate Accounts 3,416 3,436 3,393 3,469 3,438
(amortized cost $2,175, $2,753, $4,288, Total liabilities 89,364 89,085 88,037 87,603 86,731
$1,863 and $2,850) 2,175 2,753 4,288 1,863 2,850
Other 3,815 3,738 3,706 3,663 3,590 Equity
Total investments 81,305 81,143 81,799 81,104 79,694 Preferred stock and additional capital paid-in,
72.2 thousand shares outstanding 1,746 1,746 1,746 1,746 1,746
Common stock, 361 million, 365 million, 366 million,
368 million and 371 million shares outstanding (2) 9 9 9 9 9
Additional capital paid-in 3,269 3,285 3,303 3,237 3,203
Retained income 41,622 41,208 40,678 39,990 39,623
Deferred ESOP expense (6) (6) (6) (13) (13)
Treasury stock, at cost (539 million, 535 million, 534 million,
532 million and 529 million shares) (25,241) (24,887) (24,741) (24,537) (24,310)
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 65 59 57 56 49
Cash 482 442 436 389 446 Other unrealized net capital gains and losses 1,590 1,304 1,091 1,902 1,702
Premium installment receivables, net 5,693 5,649 5,597 5,799 5,593 Unrealized adjustment to DAC, DSI
Deferred policy acquisition costs 4,037 3,988 3,954 3,886 3,819 and insurance reserves (129) (107) (95) (141) (127)
Reinsurance recoverables, net (1) 8,722 8,723 8,745 8,922 8,650 Total unrealized net capital gains and losses 1,526 1,256 1,053 1,817 1,624
Accrued investment income 573 577 567 567 564 Unrealized foreign currency translation
Property and equipment, net 1,072 1,067 1,065 1,013 1,011 adjustments (42) (53) (50) (48) (41)
Goodwill 2,309 2,295 1,219 1,219 1,219 Unrecognized pension and other
Other assets 3,256 2,923 1,835 2,169 2,850 postretirement benefit cost (1,382) (1,400) (1,419) (1,267) (1,288)
Separate Accounts 3,416 3,436 3,393 3,469 3,438 Total accumulated other comprehensive income (loss) 102 (197) (416) 502 295
Total shareholders' equity 21,501 21,158 20,573 20,934 20,553
Total assets $ 110,865 $ 110,243 $ 108,610 $ 108,537 $ 107,284 Total liabilities and shareholders' equity $ 110,865 $ 110,243 $ 108,610 $ 108,537 $ 107,284
(1)
(2)
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in millions)
Reinsurance recoverables of unpaid losses related to Property-Liability were $6.21 billion, $6.18 billion, $6.18 billion, $6.35 billion and $6.03 billion as of June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.
Common shares outstanding were 361,280,366; 365,015,746; 365,771,746; 368,126,127 and 371,181,913 as of June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.
7
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Book value per common share
Numerator:
Common shareholders' equity (1) $ 19,755 $ 19,412 $ 18,827 $ 19,188 $ 18,807 $ 18,594
Denominator:
Common shares outstanding and dilutive potential
common shares outstanding 367.0 370.4 370.8 372.7 375.8 380.3
Book value per common share $ 53.83 $ 52.41 $ 50.77 $ 51.48 $ 50.05 $ 48.89
Book value per common share, excluding the
impact of unrealized net capital gains
and losses on fixed income securities
Numerator:
Common shareholders' equity $ 19,755 $ 19,412 $ 18,827 $ 19,188 $ 18,807 $ 18,594
Unrealized net capital gains and losses on
fixed income securities 1,013 831 727 1,506 1,407 993
Adjusted common shareholders' equity $ 18,742 $ 18,581 $ 18,100 $ 17,682 $ 17,400 $ 17,601
Denominator:
Common shares outstanding and dilutive potential
common shares outstanding 367.0 370.4 370.8 372.7 375.8 380.3
Book value per common share, excluding the
impact of unrealized net capital gains
and losses on fixed income securities * $ 51.07 $ 50.16 $ 48.81 $ 47.44 $ 46.30 $ 46.28
(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.
8
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Return on Common Shareholders' Equity
Numerator:
Net income applicable to common shareholders (1) $ 2,518 $ 2,210 $ 1,761 $ 1,410 $ 1,540 $ 1,624
Denominator:
Beginning common shareholders' equity $ 18,807 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433
Ending common shareholders' equity 19,755 19,412 18,827 19,188 18,807 18,594
Average common shareholders' equity (2) $ 19,281 $ 19,003 $ 18,553 $ 18,973 $ 19,180 $ 19,514
Return on common shareholders' equity 13.1 % 11.6 % 9.5 % 7.4 % 8.0 % 8.3 %
Operating Income Return on Common Shareholders' Equity
Numerator:
Operating income * (1) $ 2,399 $ 2,124 $ 1,838 $ 1,656 $ 1,792 $ 1,819
Denominator:
Beginning 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 beginning common shareholders' equity 17,183 17,394 17,659 17,879 18,133 18,296
Ending common shareholders' equity 19,755 19,412 18,827 19,188 18,807 18,594
Unrealized net capital gains and losses 1,526 1,256 1,053 1,817 1,624 1,200
Adjusted ending common shareholders' equity 18,229 18,156 17,774 17,371 17,183 17,394
Average adjusted common shareholders' equity (2) $ 17,706 $ 17,775 $ 17,717 $ 17,625 $ 17,658 $ 17,845
Operating income return on common shareholders' equity * 13.5 % 11.9 % 10.4 % 9.4 % 10.1 % 10.2 %
(1)
(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
Net income applicable to common shareholders and operating income reflect a trailing twelve-month period.
9
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Debt
Short-term debt $ - $ - $ - $ - $ - $ -
Long-term debt 6,348 6,346 6,347 5,110 5,109 5,108
Total debt $ 6,348 $ 6,346 $ 6,347 $ 5,110 $ 5,109 $ 5,108
Capital resources
Debt $ 6,348 $ 6,346 $ 6,347 $ 5,110 $ 5,109 $ 5,108
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 3,269 3,285 3,303 3,237 3,203 3,237
Retained income 41,622 41,208 40,678 39,990 39,623 39,505
Deferred ESOP expense (6) (6) (6) (13) (13) (13)
Treasury stock (25,241) (24,887) (24,741) (24,537) (24,310) (23,994)
Unrealized net capital gains and losses 1,526 1,256 1,053 1,817 1,624 1,200
Unrealized foreign currency translation
adjustments (42) (53) (50) (48) (41) (46)
Unrecognized pension and other
postretirement benefit cost (1,382) (1,400) (1,419) (1,267) (1,288) (1,304)
Total shareholders' equity 21,501 21,158 20,573 20,934 20,553 20,340
Total capital resources $ 27,849 $ 27,504 $ 26,920 $ 26,044 $ 25,662 $ 25,448
Ratio of debt to shareholders' equity 29.5 % 30.0 % 30.9 % 24.4 % 24.9 % 25.1 %
Ratio of debt to capital resources 22.8 % 23.1 % 23.6 % 19.6 % 19.9 % 20.1 %
THE ALLSTATE CORPORATION
DEBT TO CAPITAL
($ in millions)
10
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 579 $ 695 $ 840 $ 520 $ 271 $ 246 $ 1,274 $ 517
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
other non-cash items 119 119 97 97 97 91 238 188
Realized capital gains and losses (81) (134) (2) (33) (24) 149 (215) 125
Gain on disposition of operations (12) (2) (1) (1) (1) (2) (14) (3)
Interest credited to contractholder funds 175 173 168 183 185 190 348 375
Changes in:
Policy benefits and other insurance reserves 45 183 (347) 401 118 459 228 577
Unearned premiums 282 (248) (178) 478 267 (205) 34 62
Deferred policy acquisition costs (79) 14 (6) (87) (65) (7) (65) (72)
Premium installment receivables, net (32) (19) 194 (209) (38) 11 (51) (27)
Reinsurance recoverables, net (5) 11 156 (300) (80) (40) 6 (120)
Income taxes (326) 284 387 206 (150) (26) (42) (176)
Other operating assets and liabilities (174) (219) (57) 129 64 (152) (393) (88)
Net cash provided by operating activities 491 857 1,251 1,384 644 714 1,348 1,358
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales
Fixed income securities 7,438 7,083 5,929 6,543 6,373 6,216 14,521 12,589
Equity securities 829 2,601 1,477 1,582 823 1,664 3,430 2,487
Limited partnership interests 271 210 247 271 183 180 481 363
Mortgage loans - - - - (7) 7 - -
Other investments 94 24 56 62 57 87 118 144
Investment collections
Fixed income securities 1,034 1,029 1,103 1,292 1,189 949 2,063 2,138
Mortgage loans 82 223 98 253 71 79 305 150
Other investments 163 174 140 113 125 43 337 168
Investment purchases
Fixed income securities (8,414) (8,800) (5,708) (9,335) (7,546) (5,401) (17,214) (12,947)
Equity securities (1,090) (2,383) (1,837) (1,441) (939) (1,733) (3,473) (2,672)
Limited partnership interests (310) (268) (322) (425) (433) (270) (578) (703)
Mortgage loans (62) (86) (186) (196) (220) (44) (148) (264)
Other investments (313) (219) (211) (225) (196) (253) (532) (449)
Change in short-term investments, net 570 1,572 (2,540) 763 688 (1,357) 2,142 (669)
Change in other investments, net 117 (10) 9 (21) (20) (19) 107 (39)
Purchases of property and equipment, net (72) (74) (123) (70) (68) (52) (146) (120)
Acquisition of operations - (1,356) - - - - (1,356) -
Net cash provided by (used in) investing activities 337 (280) (1,868) (834) 80 96 57 176
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt - - 1,236 - - - - -
Repayments of long-term debt - - (1) - - (16) - (16)
Contractholder fund deposits 258 257 264 263 261 261 515 522
Contractholder fund withdrawals (474) (483) (550) (524) (521) (492) (957) (1,013)
Dividends paid on common stock (135) (122) (122) (124) (125) (115) (257) (240)
Dividends paid on preferred stock (29) (29) (29) (29) (29) (29) (58) (58)
Treasury stock purchases (393) (264) (183) (250) (448) (456) (657) (904)
Shares reissued under equity incentive plans, net 41 67 41 51 42 30 108 72
Excess tax benefits on share-based payment arrangements - - 7 5 8 12 - 20
Other (56) 3 1 1 3 31 (53) 34
Net cash (used in) provided by financing activities (788) (571) 664 (607) (809) (774) (1,359) (1,583)
NET INCREASE (DECREASE) IN CASH 40 6 47 (57) (85) 36 46 (49)
CASH AT BEGINNING OF PERIOD 442 436 389 446 531 495 436 495
CASH AT END OF PERIOD $ 482 $ 442 $ 436 $ 389 $ 446 $ 531 $ 482 $ 446
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Six months endedThree months ended
11
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, 2017 deferred adjustments (1)(2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2017
Property-Liability $ 2,247 $ 1,184 $ (1,103) $ - $ - $ - $ 2,328
Allstate Financial:
Traditional life and
accident and health 825 52 (36) - - - 841
Interest-sensitive life 877 21 (31) (4) - (32) 831
Fixed annuity 39 - (2) - - - 37
Subtotal 1,741 73 (69) (4) - (32) 1,709
Consolidated $ 3,988 $ 1,257 $ (1,172) $ (4) $ - $ (32) $ 4,037
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 that are not hedged assumptions 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
(1)
(2) Included as a component of amortization of DAC on the Consolidated Statements of Operations.
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, 2017
Change in Deferred Policy Acquisition Costs
For the three months ended June 30, 2016
12
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, 2016 deferred adjustments (1)(2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2017 and losses and losses and losses
Property-Liability $ 2,188 $ 2,333 (3) $ (2,193) $ - $ - $ - $ 2,328 $ 2,328 $ - $ 2,328
Allstate Financial:
Traditional life and
accident and health 821 101 (81) - - - 841 841 - 841
Interest-sensitive life 905 43 (60) (8) - (49) 831 1,020 (189) 831
Fixed annuity 40 - (3) - - - 37 37 - 37
Subtotal 1,766 144 (144) (8) - (49) 1,709 1,898 (189) 1,709
Consolidated $ 3,954 $ 2,477 $ (2,337) $ (8) $ - $ (49) $ 4,037 $ 4,226 $ (189) $ 4,037
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
(1)
(2)
(3)
Included as a component of amortization of DAC on the Consolidated Statements of Operations.
Includes $70 million recorded in connection with the SquareTrade acquisition on January 3, 2017.
For the six months ended June 30, 2017 Acquisition Costs as of June 30, 2017
THE ALLSTATE CORPORATION
ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS
($ in millions)
Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy
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
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.
13
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Policies in Force statistics (in thousands)
Allstate Protection (1)
Allstate brand
Auto 19,548 19,565 19,742 19,852 20,061 20,145
Homeowners 6,075 6,090 6,120 6,131 6,158 6,176
Landlord 703 710 716 720 726 732
Renter 1,564 1,563 1,568 1,557 1,554 1,556
Condominium 662 663 666 665 667 667
Other 1,270 1,264 1,264 1,260 1,256 1,253
Other personal lines 4,199 4,200 4,214 4,202 4,203 4,208
Commercial lines 262 272 285 296 308 318
Allstate Roadside Services 724 743 768 797 824 856
Allstate Dealer Services 4,139 4,150 4,142 4,125 4,059 3,987
Other business lines 4,863 4,893 4,910 4,922 4,883 4,843
Total 34,947 35,020 35,271 35,403 35,613 35,690
Esurance brand
Auto 1,388 1,400 1,391 1,395 1,409 1,428
Homeowners 69 63 58 52 44 37
Other personal lines 47 48 47 47 47 46
Total 1,504 1,511 1,496 1,494 1,500 1,511
Encompass brand
Auto 571 595 622 649 676 701
Homeowners 273 284 295 305 318 329
Other personal lines 91 94 98 101 105 108
Total 935 973 1,015 1,055 1,099 1,138
SquareTrade (2) 31,258 29,907 - - - -
Allstate Protection Policies in Force 68,644 67,411 37,782 37,952 38,212 38,339
Allstate Financial (3)
Allstate Life 2,020 2,017 2,023 2,019 2,022 2,021
Allstate Benefits 4,064 3,992 3,755 3,733 3,752 3,726
Allstate Annuities 240 246 251 256 261 267
Allstate Financial Policies in Force 6,324 6,255 6,029 6,008 6,035 6,014
Total Policies in Force 74,968 73,666 43,811 43,960 44,247 44,353
Agency Data (4)
Total Allstate agencies (5) 12,200 12,200 12,200 12,200 12,200 12,100
Licensed sales professionals (6) 24,000 23,600 23,800 23,600 23,800 24,000
Allstate independent agencies (7) 2,300 2,200 2,200 2,200 2,000 2,100
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Total Allstate agencies represents exclusive Allstate agencies and financial representatives in the United States and Canada.
Employees of Allstate agencies who are licensed to sell Allstate products.
Includes 509 and 488 engaged Allstate independent agencies (“AIAs”) as of June 30, 2017 and December 31, 2016, respectively. Engaged AIAs, as currently determined, include those that
achieve a minimum number of new policies written.
THE ALLSTATE CORPORATION
POLICIES IN FORCE AND OTHER STATISTICS
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.
• Non-proprietary products offered by Ivantage (insurance agency) and Answer Financial (independent insurance agency) are not included.
• Allstate Roadside Services represents memberships in force and do not include their wholesale partners as the customer relationship is managed by the wholesale partner.
• Allstate Dealer Services represents service contracts and other products sold in conjunction with auto lending and vehicle sales transactions and do not include their third party administrators
(“TPAs”) as the customer relationship is managed by the TPAs.
• SquareTrade represents active consumer product protection plans.
SquareTrade had PIF of 28.5, 25.8, 24.4 and 23.0 million at December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively. These numbers are prior to the
acquisition of SquareTrade on January 3, 2017, so they are not included in the periods above.
Rounded to the nearest hundred.
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.
14
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Premiums written $ 8,289 $ 7,723 $ 7,723 $ 8,311 $ 8,051 $ 7,515 $ 16,012 $ 15,566
(Increase) decrease in unearned premiums (301) 234 189 (472) (264) 166 (67) (98)
Other 30 2 (11) 30 27 42 32 69
Premiums earned 8,018 7,959 7,901 7,869 7,814 7,723 15,977 15,537
Claims and claims expense (5,689) (5,416) (5,083) (5,553) (5,901) (5,684) (11,105) (11,585)
Amortization of deferred policy acquisition costs (1,103) (1,090) (1,086) (1,068) (1,057) (1,056) (2,193) (2,113)
Operating costs and expenses (947) (936) (927) (888) (912) (853) (1,883) (1,765)
Restructuring and related charges (52) (10) (9) (5) (10) (5) (62) (15)
Underwriting income (loss) 227 507 796 355 (66) 125 734 59
Net investment income 391 311 338 310 316 302 702 618
Income tax expense on operations (196) (255) (383) (218) (70) (141) (451) (211)
Realized capital gains and losses, after-tax 56 89 10 36 18 (64) 145 (46)
Gain on disposition of operations, after-tax 6 - - - - - 6 -
Net income applicable to common shareholders $ 484 $ 652 $ 761 $ 483 $ 198 $ 222 $ 1,136 $ 420
Catastrophe losses $ 993 $ 781 $ 303 $ 481 $ 961 $ 827 $ 1,774 $ 1,788
Amortization of purchased intangible assets $ 24 $ 25 $ 5 $ 9 $ 9 $ 9 $ 49 $ 18
Operating ratios
Claims and claims expense ("loss") ratio 71.0 68.0 64.3 70.6 75.5 73.6 69.5 74.6
Expense ratio 26.2 25.6 25.6 24.9 25.3 24.8 25.9 25.0
Combined ratio 97.2 93.6 89.9 95.5 100.8 98.4 95.4 99.6
Loss ratio 71.0 68.0 64.3 70.6 75.5 73.6 69.5 74.6
Less: effect of catastrophe losses 12.4 9.8 3.8 6.1 12.3 10.7 11.1 11.5
effect of prior year non-catastrophe reserve reestimates (1.0) (1.3) (1.6) 1.3 (0.2) 0.4 (1.1) 0.1
Underlying loss ratio * 59.6 59.5 62.1 63.2 63.4 62.5 59.5 63.0
Expense ratio 26.2 25.6 25.6 24.9 25.3 24.8 25.9 25.0
Less: effect of amortization of purchased intangible assets 0.3 0.3 - 0.1 0.1 0.1 0.3 0.1
Expense ratio, excluding the effect of amortization of purchased
intangible assets 25.9 25.3 25.6 24.8 25.2 24.7 25.6 24.9
Reconciliation of combined ratio to underlying combined ratio
Combined ratio 97.2 93.6 89.9 95.5 100.8 98.4 95.4 99.6
Effect of catastrophe losses (12.4) (9.8) (3.8) (6.1) (12.3) (10.7) (11.1) (11.5)
Effect of prior year non-catastrophe reserve reestimates 1.0 1.3 1.6 (1.3) 0.2 (0.4) 1.1 (0.1)
Effect of amortization of purchased intangible assets (0.3) (0.3) - (0.1) (0.1) (0.1) (0.3) (0.1)
Underlying combined ratio * 85.5 84.8 87.7 88.0 88.6 87.2 85.1 87.9
Effect of restructuring and related charges on combined ratio 0.6 0.1 0.1 0.1 0.1 0.1 0.4 0.1
Effect of Discontinued Lines and Coverages on combined ratio 0.1 - - 1.3 - - - -
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY RESULTS
($ in millions)
Six months endedThree months ended
15
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Property-Liability Underwriting Summary
Allstate Protection $ 232 $ 509 $ 799 $ 455 $ (64) $ 127 $ 741 $ 63
Discontinued Lines and Coverages (5) (2) (3) (100) (2) (2) (7) (4)
Underwriting income (loss) $ 227 $ 507 $ 796 $ 355 $ (66) $ 125 $ 734 $ 59
Allstate Protection Underwriting Summary
Premiums written $ 8,289 $ 7,723 $ 7,722 $ 8,309 $ 8,051 $ 7,515 $ 16,012 $ 15,566
Premiums earned $ 8,018 $ 7,959 $ 7,901 $ 7,869 $ 7,814 $ 7,723 $ 15,977 $ 15,537
Claims and claims expense (5,686) (5,414) (5,080) (5,454) (5,899) (5,683) (11,100) (11,582)
Amortization of deferred policy acquisition costs (1,103) (1,090) (1,086) (1,068) (1,057) (1,056) (2,193) (2,113)
Operating costs and expenses (945) (936) (927) (887) (912) (852) (1,881) (1,764)
Restructuring and related charges (52) (10) (9) (5) (10) (5) (62) (15)
Underwriting income (loss) $ 232 $ 509 $ 799 $ 455 $ (64) $ 127 $ 741 $ 63
Catastrophe losses $ 993 $ 781 $ 303 $ 481 $ 961 $ 827 $ 1,774 $ 1,788
Operating ratios
Loss ratio 70.9 68.0 64.3 69.3 75.5 73.6 69.5 74.6
Expense ratio 26.2 25.6 25.6 24.9 25.3 24.8 25.9 25.0
Combined ratio 97.1 93.6 89.9 94.2 100.8 98.4 95.4 99.6
Effect of catastrophe losses on combined ratio 12.4 9.8 3.8 6.1 12.3 10.7 11.1 11.5
Effect of restructuring and related charges
on combined ratio 0.6 0.1 0.1 0.1 0.1 0.1 0.4 0.1
Effect of amortization of purchased intangible
assets on combined ratio 0.3 0.3 - 0.1 0.1 0.1 0.3 0.1
Discontinued Lines and Coverages
Underwriting Summary
Premiums written $ - $ - $ 1 $ 2 $ - $ - $ - $ -
Premiums earned $ - $ - $ - $ - $ - $ - $ - $ -
Claims and claims expense (3) (2) (3) (99) (2) (1) (5) (3)
Operating costs and expenses (2) - - (1) - (1) (2) (1)
Underwriting loss $ (5) $ (2) $ (3) $ (100) $ (2) $ (2) $ (7) $ (4)
Effect of Discontinued Lines and Coverages
on the Property-Liability combined ratio 0.1 - - 1.3 - 0.1 - -
Allstate Protection Underwriting Income (Loss) by Brand
Allstate brand $ 292 $ 588 $ 793 $ 493 $ (10) $ 171 $ 880 $ 161
Esurance brand (26) (10) (21) (41) (37) (25) (36) (62)
Encompass brand (12) (33) 29 5 (15) (18) (45) (33)
SquareTrade (22) (35) - - - - (57) -
Answer Financial - (1) (2) (2) (2) (1) (1) (3)
Underwriting income (loss) $ 232 $ 509 $ 799 $ 455 $ (64) $ 127 $ 741 $ 63
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY UNDERWRITING RESULTS BY AREA OF BUSINESS
($ in millions)
Six months endedThree months ended
16
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Allstate brand (1)
Auto $ 4,925 $ 4,882 $ 4,756 $ 4,940 $ 4,767 $ 4,746 $ 9,807 $ 9,513
Homeowners 1,847 1,403 1,638 1,869 1,831 1,392 3,250 3,223
Landlord 130 120 133 141 133 122 250 255
Renter 75 67 68 84 75 67 142 142
Condominium 68 55 63 70 67 53 123 120
Other 168 126 129 152 153 111 294 264
Other personal lines 441 368 393 447 428 353 809 781
Commercial lines 124 123 115 123 135 126 247 261
Other business lines 174 173 158 185 183 183 347 366
7,511 6,949 7,060 7,564 7,344 6,800 14,460 14,144
Esurance brand
Auto 386 439 382 428 376 439 825 815
Homeowners 20 16 15 16 14 11 36 25
Other personal lines 2 2 2 2 2 2 4 4
408 457 399 446 392 452 865 844
Encompass brand
Auto 148 125 138 153 162 138 273 300
Homeowners 112 91 103 121 126 104 203 230
Other personal lines 25 20 22 25 27 21 45 48
285 236 263 299 315 263 521 578
SquareTrade 85 81 - - - - 166 -
Allstate Protection 8,289 7,723 7,722 8,309 8,051 7,515 16,012 15,566
Discontinued Lines and Coverages (2) - - 1 2 - - - -
Property-Liability $ 8,289 $ 7,723 $ 7,723 $ 8,311 $ 8,051 $ 7,515 $ 16,012 $ 15,566
Allstate Protection
Auto $ 5,459 $ 5,446 $ 5,276 $ 5,521 $ 5,305 $ 5,323 $ 10,905 $ 10,628
Homeowners 1,979 1,510 1,756 2,006 1,971 1,507 3,489 3,478
Other personal lines 468 390 417 474 457 376 858 833
Commercial lines 124 123 115 123 135 126 247 261
Other business lines 174 173 158 185 183 183 347 366
SquareTrade 85 81 - - - - 166 -
$ 8,289 $ 7,723 $ 7,722 $ 8,309 $ 8,051 $ 7,515 $ 16,012 $ 15,566
Non-Proprietary Premiums
Ivantage (3) $ 1,584 $ 1,566 1,544 1,531 1,528 1,504 $ 3,150 3,032
Answer Financial (4) 148 153 140 158 150 151 301 301
(1) Canada premiums included in Allstate brand
Auto $ 228 $ 171 $ 182 $ 220 $ 234 $ 164 $ 399 $ 398
Homeowners 65 44 52 64 64 41 109 105
Other personal lines 16 12 13 16 16 10 28 26
$ 309 $ 227 $ 247 $ 300 $ 314 $ 215 $ 536 $ 529
(2)
(3)
(4)
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 and six months ended June 30, 2017 were $27.0 million and $50.3 million, respectively.
Represents non-proprietary premiums written for the period. Commissions earned for the three and six months ended June 30, 2017 were $17.9 million and $36.0 million, respectively.
Primarily represents retrospective reinsurance premium recognized when billed.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY BRAND
($ in millions)
Six months endedThree months ended
17
Number of Location Number of Location Number of Location
locations (7) Total brand (%) (8) specific (%) (9) locations Total brand (%) specific (%) locations Total brand (%) specific (%)
Allstate brand
Auto (2)(3)(4) 23 0.7 3.2 18 1.7 (10) 5.3 (10) 23 1.3 5.6
Homeowners (5)(6) 3 0.1 2.0 14 1.0 4.2 12 0.5 4.7
Esurance brand
Auto 12 1.7 5.6 7 0.7 5.3 13 2.2 6.2
Homeowners - - - - - - 1 (0.5) (10.0)
Encompass brand
Auto 11 2.3 7.5 5 1.4 7.2 8 3.2 9.9
Homeowners 9 2.8 8.9 3 0.2 3.4 6 0.6 3.3
Number of Location Number of Location Number of Location
locations Total brand (%) specific (%) locations Total brand (%) specific (%) locations Total brand (%) specific (%)
Allstate brand
Auto (2)(3)(4) 25 1.0 7.1 35 3.2 6.2 25 1.7 7.3
Homeowners (5)(6) 10 0.2 4.6 11 0.8 4.9 15 (0.4) (2.3)
Esurance brand
Auto 9 0.4 2.3 15 1.3 5.6 6 0.3 2.7
Homeowners N/A N/A N/A N/A N/A N/A N/A N/A N/A
Encompass brand
Auto 9 1.6 8.8 10 4.1 9.5 4 1.6 14.3
Homeowners 5 1.4 9.2 6 1.7 8.1 5 1.4 11.6
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
IMPACT OF NET RATE CHANGES APPROVED ON PREMIUMS WRITTEN
Three months ended
Impacts of Allstate brand auto effective rate changes as a percentage of total brand prior year-end premiums written were 1.8%, 1.1%, 1.1%, 1.5%, 3.4% and 1.4% for the three months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, June
30, 2016 and March 31, 2016, respectively. Rate changes are included in the effective calculations in the period the rate change is effective for renewal contracts.
Three months ended Three months ended
March 31, 2017June 30, 2017 (1)
June 30, 2016 March 31, 2016
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 Allstate brand, Esurance brand and Encompass brand for the three month period ending June 30, 2017 are estimated to total $197 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 a location.
Includes a rate increase in California in first quarter 2017. Excluding California, Allstate brand auto total brand and location specific rate changes were 1.1% and 4.7% for the three months ended March 31, 2017, respectively.
December 31, 2016
September 30, 2016
Three months ended Three months ended Three months ended
Represents the impact in the 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 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.
Impacts of Allstate brand homeowners effective rate changes as a percentage of total brand prior year-end premiums written were 0.1%, 0.9%, 0.6%, 0.6%, 0.5% and 0.7% for the three months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30,
2016, June 30, 2016, and March 31, 2016, respectively.
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 2 Canadian provinces. Esurance brand homeowners operates in 31 states and 2 Canadian provinces. Starting
in second quarter 2017, Encompass brand auto and homeowners operates in 39 states and the District of Columbia.
Allstate brand auto rate changes were 4.7%, 7.2%, 7.2%, 7.8% and 8.4% for the trailing twelve months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.
Allstate brand auto rate changes were cumulatively $2.75 billion or 15.0% in 2017, 2016 and 2015.
Allstate brand homeowner rate changes were cumulatively $340 million or 5.0% in 2017, 2016 and 2015.
18
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written $ 7,511 $ 6,949 $ 7,060 $ 7,564 $ 7,344 $ 6,800 $ 14,460 $ 14,144
Net premiums earned
Auto $ 4,883 $ 4,839 $ 4,826 $ 4,793 $ 4,745 $ 4,667 $ 9,722 $ 9,412
Homeowners 1,691 1,688 1,691 1,683 1,684 1,678 3,379 3,362
Other personal lines 411 405 403 399 397 393 816 790
Commercial lines 118 125 123 127 127 129 243 256
Other business lines 142 141 145 150 142 143 283 285
Total 7,245 7,198 7,188 7,152 7,095 7,010 14,443 14,105
Incurred losses
Auto $ 3,441 $ 3,224 $ 3,416 $ 3,610 $ 3,634 $ 3,519 $ 6,665 $ 7,153
Homeowners 1,273 1,194 765 893 1,260 1,190 2,467 2,450
Other personal lines 258 265 234 236 256 261 523 517
Commercial lines 86 96 109 112 135 119 182 254
Other business lines 54 52 60 69 64 61 106 125
Total 5,112 4,831 4,584 4,920 5,349 5,150 9,943 10,499
Expenses
Auto $ 1,236 $ 1,161 $ 1,181 $ 1,134 $ 1,168 $ 1,103 $ 2,397 $ 2,271
Homeowners 371 387 396 384 373 377 758 750
Other personal lines 115 112 117 113 106 103 227 209
Commercial lines 34 33 34 34 35 38 67 73
Other business lines 85 86 83 74 74 68 171 142
Total 1,841 1,779 1,811 1,739 1,756 1,689 3,620 3,445
Underwriting income (loss)
Auto $ 206 $ 454 $ 229 $ 49 $ (57) $ 45 $ 660 $ (12)
Homeowners 47 107 530 406 51 111 154 162
Other personal lines 38 28 52 50 35 29 66 64
Commercial lines (2) (4) (20) (19) (43) (28) (6) (71)
Other business lines 3 3 2 7 4 14 6 18
Total 292 588 793 493 (10) 171 880 161
Loss ratio 70.6 67.1 63.8 68.8 75.4 73.5 68.8 74.5
Expense ratio 25.4 24.7 25.2 24.3 24.7 24.1 25.1 24.4
Combined ratio 96.0 91.8 89.0 93.1 100.1 97.6 93.9 98.9
Loss ratio 70.6 67.1 63.8 68.8 75.4 73.5 68.8 74.5
Less: effect of catastrophe losses 12.7 9.8 4.0 6.2 12.9 11.2 11.2 12.1
effect of prior year non-catastrophe reserve reestimates (1.1) (1.5) (1.5) - (0.3) 0.3 (1.3) -
Underlying loss ratio * 59.0 58.8 61.3 62.6 62.8 62.0 58.9 62.4
Expense ratio 25.4 24.7 25.2 24.3 24.7 24.1 25.1 24.4
Less: effect of amortization of purchased intangible assets - - - - - - - -
Expense ratio, excluding the effect of amortization of purchased
intangible assets 25.4 24.7 25.2 24.3 24.7 24.1 25.1 24.4
Reconciliation of combined ratio to underlying combined ratio
Combined ratio 96.0 91.8 89.0 93.1 100.1 97.6 93.9 98.9
Effect of catastrophe losses (12.7) (9.8) (4.0) (6.2) (12.9) (11.2) (11.2) (12.1)
Effect of prior year non-catastrophe reserve reestimates 1.1 1.5 1.5 - 0.3 (0.3) 1.3 -
Effect of amortization of purchased intangible assets - - - - - - - -
Underlying combined ratio * 84.4 83.5 86.5 86.9 87.5 86.1 84.0 86.8
Effect of prior year reserve reestimates on combined ratio (1.1) (1.5) (1.6) - - 0.2 (1.3) 0.1
Effect of advertising expenses on combined ratio 1.8 2.0 2.4 2.2 2.2 1.5 1.9 1.9
THE ALLSTATE CORPORATION
ALLSTATE BRAND PROFITABILITY MEASURES
($ in millions)
Six months endedThree months ended
19
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
New Issued Applications (in thousands) (2)
Auto (3) 639 610 562 584 582 584 1,249 1,166
Homeowners (4) 195 163 167 188 193 164 358 357
Average Premium - Gross Written ($) (5)
Auto 544 538 537 532 516 507 541 511
Homeowners 1,192 1,187 1,181 1,181 1,171 1,174 1,190 1,173
Average Premium - Net Earned ($) (6)
Auto 499 492 487 479 471 461 496 466
Homeowners 1,106 1,106 1,105 1,099 1,090 1,082 1,106 1,086
Renewal Ratio (%) (7)
Auto (8) 87.4 87.4 87.4 87.5 88.0 88.0 87.4 88.0
Homeowners (9) 87.0 87.1 87.5 87.9 87.8 88.1 87.0 88.0
Auto Claim Frequency (10)
(% change year-over-year)
Bodily Injury Gross (4.7) (6.0) (2.0) 0.3 2.8 1.1 (5.4) 2.0
Bodily Injury Paid (11) (23.7) (20.5) (19.2) (19.6) 1.5 5.9 (22.1) 3.6
Property Damage Gross (5.2) (3.9) 1.2 3.9 5.6 2.1 (4.6) 3.8
Property Damage Paid (12) (3.4) (3.2) (1.2) 0.1 (0.1) 2.4 (3.3) 1.1
Auto Paid Claim Severity (13)
(% change year-over-year)
Bodily injury (11) 28.3 25.1 18.8 12.4 (2.3) (5.5) 26.6 (3.9)
Property damage 1.6 4.8 1.9 1.9 5.3 7.5 3.2 6.3
Homeowners Excluding Catastrophe Losses
(% change year-over-year)
Gross Claim frequency (10) 6.0 7.6 2.2 5.2 (12.5) (7.7) 6.8 (10.2)
Paid Claim frequency (10) 7.1 2.3 (0.5) 0.7 (14.3) (2.0) 4.7 (8.6)
Paid Claim severity (0.2) 4.1 1.8 (0.5) 4.7 (2.7) 1.9 1.4
(1)
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(5)
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(8)
(9)
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(11)
(12)
(13)
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 (currently 10) 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.
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.
33 states, including 6 of our 10 largest states, experienced increases in new issued applications in the second quarter of 2017 compared to the same period of 2016. 36 states, including 6 of our 10 largest states,
experienced increases in new issued applications in the first six months of 2017 compared to the same period of 2016.
Of our largest 10 states, 6 experienced increases in new issued applications in both the second quarter and first six months of 2017 compared to the same periods of 2016.
THE ALLSTATE CORPORATION
ALLSTATE BRAND STATISTICS (1)
Six months endedThree months ended
Paid claim frequency 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. Gross claim frequency 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. Gross claim frequency includes all actual notice counts,
regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). Frequency statistics exclude counts associated with catastrophe events. 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 prior year paid or gross claim frequency.
Decreases in bodily injury paid claim frequency and the related increase in severity reflect payment mix and claim closure patterns that were impacted by changes in bodily injury claim processes in the second half
of 2016 related to enhanced documentation of injuries and related medical treatments. Paid claim severity was impacted by a reduced number of claims opened and a change in the mix of paid claims toward a
higher proportion of larger severity payments and increases in medical inflationary trends that were offset by improvements in loss cost management.
2 of our largest 10 states experienced increases in the renewal ratio in both the second quarter and first six months of 2017 compared to the same periods of 2016.
Of our largest 10 states, 1 experienced an increase in the renewal ratio in both the second quarter and first six months of 2017 compared to the same periods of 2016.
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 percent change in paid claim severity is calculated as the amount of
increase or decrease in paid claim severity in the current period compared to the same period in the prior year; divided by the prior year paid claims severity.
42 states experienced a year over year decrease in property damage paid claim frequency in second quarter 2017 when compared to second quarter 2016.
20
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 -2.9% 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% 0.3% -2.0% -6.0% -4.7%
% Change in paid claim frequency (3) -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% -19.6% -19.2% -20.5% -23.7%
(1)
(2)
(3)
Frequency statistics exclude counts associated with catastrophe events.
Paid claim frequency 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. Gross claim frequency 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. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their
ultimate disposition (closed with a payment or closed without payment). Frequency statistics exclude counts associated with catastrophe events. 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 prior year paid or gross claim frequency.
Decreases in bodily injury paid claim frequency and the related increase in severity as depicted on page 19 reflect payment mix and claim closure patterns that were impacted by changes in bodily injury claim processes in the second half of
2016 related to enhanced documentation of injuries and related medical treatments. Paid claim severity was impacted by a reduced number of claims opened and a change in the mix of paid claims toward a higher proportion of larger severity
payments and increases in medical inflationary trends that were offset by improvements in loss cost management.
THE ALLSTATE CORPORATION
ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1)
BODILY INJURY % CHANGE IN GROSS AND PAID CLAIM FREQUENCY RATE
20172012 2013 2014 2015 2016
-28.0%
-24.0%
-20.0%
-16.0%
-12.0%
-8.0%
-4.0%
0.0%
4.0%
8.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2012 2013 2014 2015 2016 2017
%
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Rates of change in auto bodily injury frequency
% change in gross claim frequency % change in paid claim frequency
21
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) -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% 3.9% 1.2% -3.9% -5.2%
% Change in paid claim frequency -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% 0.1% -1.2% -3.2% -3.4%
(1)
(2)
(3)
Frequency statistics exclude counts associated with catastrophe events.
Paid claim frequency 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. Gross claim frequency 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. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment
or closed without payment). Frequency statistics exclude counts associated with catastrophe events. 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 prior year paid or gross claim frequency.
With the increase in auto frequency experienced in recent quarters, claim handling processes were modified to more completely identify instances of liability at first notice of loss. Changes in property damage claim opening practices can impact gross claim
frequency comparisons to prior year. This resulted in an increase in the number of counted claims as well as an increase in claims closed without payment, as in many instances, we were ultimately not required to provide indemnification.
THE ALLSTATE CORPORATION
ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1)
PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY
20172012 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
2012 2013 2014 2015 2016 2017
%
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Rates of change in auto property damage frequency
% change in gross claim frequency % change in paid claim frequency
22
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written $ 408 $ 457 $ 399 $ 446 $ 392 $ 452 $ 865 $ 844
Net premiums earned
Auto $ 411 $ 403 $ 408 $ 405 $ 403 $ 394 $ 814 $ 797
Homeowners 16 14 13 11 10 8 30 18
Other personal lines 2 2 2 2 2 2 4 4
Total 429 419 423 418 415 404 848 819
Incurred losses
Auto $ 324 $ 300 $ 310 $ 313 $ 308 $ 289 $ 624 $ 597
Homeowners 21 13 8 11 10 4 34 14
Other personal lines 1 1 1 2 1 1 2 2
Total 346 314 319 326 319 294 660 613
Expenses
Auto $ 100 $ 107 $ 114 $ 111 $ 107 $ 123 $ 207 $ 230
Homeowners 8 8 10 22 25 11 16 36
Other personal lines 1 - 1 - 1 1 1 2
Total 109 115 125 133 133 135 224 268
Underwriting income (loss)
Auto (1) $ (13) $ (4) $ (16) $ (19) $ (12) $ (18) $ (17) $ (30)
Homeowners (13) (7) (5) (22) (25) (7) (20) (32)
Other personal lines - 1 - - - - 1 -
Total (26) (10) (21) (41) (37) (25) (36) (62)
Loss ratio 80.7 74.9 75.4 78.0 76.9 72.8 77.8 74.9
Expense ratio 25.4 27.5 29.6 31.8 32.0 33.4 26.4 32.7
Combined ratio 106.1 102.4 105.0 109.8 108.9 106.2 104.2 107.6
Loss ratio 80.7 74.9 75.4 78.0 76.9 72.8 77.8 74.9
Less: effect of catastrophe losses 5.6 1.9 1.2 3.3 3.4 0.7 3.7 2.1
effect of prior year non-catastrophe reserve reestimates - - (2.1) (1.0) (1.0) (1.0) - (1.0)
Underlying loss ratio * 75.1 73.0 76.3 75.7 74.5 73.1 74.1 73.8
Expense ratio 25.4 27.5 29.6 31.8 32.0 33.4 26.4 32.7
Less: effect of amortization of purchased intangible assets - 0.3 0.9 1.5 1.7 1.5 0.1 1.6
Expense ratio, excluding the effect of amortization of purchased
intangible assets 25.4 27.2 28.7 30.3 30.3 31.9 26.3 31.1
Reconciliation of combined ratio to underlying combined ratio
Combined ratio (1)(2) 106.1 102.4 105.0 109.8 108.9 106.2 104.2 107.6
Effect of catastrophe losses (5.6) (1.9) (1.2) (3.3) (3.4) (0.7) (3.7) (2.1)
Effect of prior year non-catastrophe reserve reestimates - - 2.1 1.0 1.0 1.0 - 1.0
Effect of amortization of purchased intangible assets - (0.3) (0.9) (1.5) (1.7) (1.5) (0.1) (1.6)
Underlying combined ratio * (2) 100.5 100.2 105.0 106.0 104.8 105.0 100.4 104.9
Effect of prior year reserve reestimates on combined ratio (0.2) - (2.1) (1.0) (1.0) (1.0) (0.1) (1.0)
Effect of advertising expenses on combined ratio (2) 8.6 8.6 9.2 11.7 12.2 11.6 8.6 12.0
Policies in Force (in thousands)
Auto 1,388 1,400 1,391 1,395 1,409 1,428 1,388 1,409
Homeowners 69 63 58 52 44 37 69 44
Other personal lines 47 48 47 47 47 46 47 47
1,504 1,511 1,496 1,494 1,500 1,511 1,504 1,500
New Issued Applications (in thousands)
Auto 120 143 137 151 141 168 263 309
Homeowners 9 8 9 10 11 7 17 18
Other personal lines 7 8 8 9 8 10 15 18
136 159 154 170 160 185 295 345
Average Premium - Gross Written ($)
Auto 564 571 555 546 538 547 568 543
Homeowners 910 919 861 872 855 891 915 870
Renewal Ratio (%)
Auto 81.9 80.4 79.3 78.9 80.0 79.6 81.1 79.8
Homeowners (3) 86.1 83.5 82.9 83.1 83.9 81.6 85.1 83.0
(1)
(2)
(3) Esurance’s renewal ratios exclude the impact of risk related cancellations. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection
the condition is unsatisfactory, causing the renewal ratio to appear lower.
Auto underwriting income includes an underwriting loss related to Esurance expansion into Canada of $2 million or 0.5 points on the combined ratio and underlying combined ratio in both the second quarter of 2017 and 2016.
Advertising expenses for US Auto and Homeowners were $35 million and $2 million in second quarter 2017 compared to $34 million and $16 million in second quarter 2016, respectively. The effect of Esurance brand US Auto and
Homeowners advertising expenses on the Esurance combined ratio and underlying combined ratio was 8.2 points and 0.5 points in second quarter 2017 compared to 8.2 points and 3.9 points in second quarter 2016, respectively. Our
expense ratio was impacted due to reductions in homeowners marketing spending.
THE ALLSTATE CORPORATION
ESURANCE PROFITABILITY MEASURES AND STATISTICS
($ in millions)
Six months endedThree months ended
23
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written $ 285 $ 236 $ 263 $ 299 $ 315 $ 263 $ 521 $ 578
Net premiums earned
Auto $ 143 $ 146 $ 151 $ 155 $ 158 $ 159 $ 289 $ 317
Homeowners 108 113 115 119 121 124 221 245
Other personal lines 23 24 24 25 25 26 47 51
Total 274 283 290 299 304 309 557 613
Incurred losses
Auto $ 105 $ 104 $ 104 $ 117 $ 130 $ 123 $ 209 $ 253
Homeowners 84 108 60 74 85 85 192 170
Other personal lines 10 21 13 17 16 31 31 47
Total 199 233 177 208 231 239 432 470
Expenses
Auto $ 46 $ 43 $ 44 $ 44 $ 45 $ 45 $ 89 $ 90
Homeowners 34 33 33 34 36 36 67 72
Other personal lines 7 7 7 8 7 7 14 14
Total 87 83 84 86 88 88 170 176
Underwriting income (loss)
Auto $ (8) $ (1) $ 3 $ (6) $ (17) $ (9) $ (9) $ (26)
Homeowners (10) (28) 22 11 - 3 (38) 3
Other personal lines 6 (4) 4 - 2 (12) 2 (10)
Total (12) (33) 29 5 (15) (18) (45) (33)
Loss ratio 72.6 82.4 61.0 69.6 76.0 77.3 77.6 76.7
Expense ratio 31.8 29.3 29.0 28.7 28.9 28.5 30.5 28.7
Combined ratio 104.4 111.7 90.0 98.3 104.9 105.8 108.1 105.4
Loss ratio 72.6 82.4 61.0 69.6 76.0 77.3 77.6 76.7
Less: effect of catastrophe losses 19.0 23.7 3.1 9.0 11.2 13.3 21.4 12.3
effect of prior year non-catastrophe reserve reestimates (2.2) 1.4 (3.8) - 0.9 4.2 (0.4) 2.6
Underlying loss ratio * 55.8 57.3 61.7 60.6 63.9 59.8 56.6 61.8
Expense ratio 31.8 29.3 29.0 28.7 28.9 28.5 30.5 28.7
Less: effect of amortization of purchased intangible assets - - - - - - - -
Expense ratio, excluding the effect of amortization of purchased
intangible assets 31.8 29.3 29.0 28.7 28.9 28.5 30.5 28.7
Reconciliation of combined ratio to underlying combined ratio
Combined ratio 104.4 111.7 90.0 98.3 104.9 105.8 108.1 105.4
Effect of catastrophe losses (19.0) (23.7) (3.1) (9.0) (11.2) (13.3) (21.4) (12.3)
Effect of prior year non-catastrophe reserve reestimates 2.2 (1.4) 3.8 - (0.9) (4.2) 0.4 (2.6)
Underlying combined ratio * 87.6 86.6 90.7 89.3 92.8 88.3 87.1 90.5
Effect of prior year reserve reestimates on combined ratio (2.9) 2.1 (3.8) 0.3 0.3 4.5 (0.4) 2.4
Effect of advertising expenses on combined ratio - - 0.3 - 0.3 - - 0.2
Policies in Force (in thousands)
Auto 571 595 622 649 676 701 571 676
Homeowners 273 284 295 305 318 329 273 318
Other personal lines 91 94 98 101 105 108 91 105
935 973 1,015 1,055 1,099 1,138 935 1,099
New Issued Applications (in thousands)
Auto 13 12 11 13 15 15 25 30
Homeowners 8 7 7 9 9 9 15 18
Average Premium - Gross Written ($)
Auto 1,065 1,057 1,043 1,022 988 981 1,062 985
Homeowners 1,667 1,659 1,650 1,659 1,629 1,618 1,664 1,624
Renewal Ratio (%)
Auto 74.2 73.1 73.1 73.1 75.5 76.1 73.7 75.8
Homeowners 78.7 78.2 78.3 77.9 79.9 81.5 78.5 80.6
THE ALLSTATE CORPORATION
ENCOMPASS BRAND PROFITABILITY MEASURES AND STATISTICS
($ in millions)
Six months endedThree months ended
24
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written $ 85 $ 81 $ - $ - $ - $ - $ 166 $ -
Net premiums earned $ 70 $ 59 $ - $ - $ - $ - $ 129 $ -
Claims and claims expense $ (29) (2) $ (36) $ - $ - $ - $ - $ (65) $ -
Amortization of deferred policy acquisition costs $ (10) $ (8) $ - $ - $ - $ - $ (18) $ -
Other costs and expenses (30) (27) - - - - (57) -
Amortization of purchased intangible assets (23) (23) - - - - (46) -
Expenses (63) (58) - - - - (121) -
Underwriting loss $ (22) $ (35) $ - $ - $ - $ - $ (57) $ -
Net investment income - - - - - - - -
Realized capital gains and losses - - - - - - - -
Income tax benefit 8 12 - - - - 20 -
Net loss applicable to common shareholders $ (14) $ (23) $ - $ - $ - $ - $ (37) $ -
Realized capital gains and losses, after-tax - - - - - - - -
Amortization of purchased intangible assets, after-tax 15 15 - - - - 30 -
Operating income * $ 1 $ (8) $ - $ - $ - $ - $ (7) $ -
Fair value adjustments, after-tax (3) 3 4 - - - - 7 -
Adjusted SquareTrade operating income * $ 4 $ (4) $ - $ - $ - $ - $ - $ -
Policies in Force (in thousands) (4) 31,258 29,907 - - - - 31,258 -
(1)
(2)
(3)
(4)
SquareTrade was acquired on January 3, 2017 and therefore is only included for the quarters and year-to-date periods of 2017.
Includes a $6 million favorable adjustment for loss experience.
In connection with the acquisition, purchase accounting adjustments were made to recognize the acquired assets and liabilities at their fair value. The Company recorded unearned premiums of $373 million, which was reduced by
$48 million, and the Company recorded contractual liability insurance policy premium expenses (reported in other assets) of $201 million and commissions paid to retailers (reported in deferred policy acquisition costs) of $70
million, which were reduced $15 million, respectively. Unearned premiums, contractual liability insurance policy premium expenses, and commissions paid to retailers recorded as of the acquisition date are earned over the life of
the in force contracts or approximately three years. The purchase accounting adjustments had the following impact:
• For the three months ended March 31, 2017, net premiums earned, incurred losses and expenses were lower by $8 million, $1.4 million and $0.6 million, pre-tax, respectively.
• For the three months ended June 30, 2017, net premiums earned, incurred losses and expenses were lower by $6 million, $1.4 million and $0.6 million, pre-tax, respectively.
• For the six months ended June 30, 2017, net premiums earned, incurred losses and expenses were lower by $14 million, $2.8 million and $1.2 million, pre-tax, respectively.
SquareTrade had PIF of 28.5, 25.8, 24.4 and 23.0 million at December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively. These numbers are prior to the acquisition of SquareTrade on January 3,
2017, so they are not reflected in the periods above.
THE ALLSTATE CORPORATION
SQUARETRADE PROFITABILITY MEASURES (1)
Three months ended Six months ended
25
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written
Allstate brand $ 4,925 $ 4,882 $ 4,756 $ 4,940 $ 4,767 $ 4,746 $ 9,807 $ 9,513
Esurance brand 386 439 382 428 376 439 825 815
Encompass brand 148 125 138 153 162 138 273 300
5,459 5,446 5,276 5,521 5,305 5,323 10,905 10,628
Net premiums earned
Allstate brand $ 4,883 $ 4,839 $ 4,826 $ 4,793 $ 4,745 $ 4,667 $ 9,722 $ 9,412
Esurance brand 411 403 408 405 403 394 814 797
Encompass brand 143 146 151 155 158 159 289 317
5,437 5,388 5,385 5,353 5,306 5,220 10,825 10,526
Incurred losses
Allstate brand $ 3,441 $ 3,224 $ 3,416 $ 3,610 $ 3,634 $ 3,519 $ 6,665 $ 7,153
Esurance brand 324 300 310 313 308 289 624 597
Encompass brand 105 104 104 117 130 123 209 253
3,870 3,628 3,830 4,040 4,072 3,931 7,498 8,003
Expenses
Allstate brand $ 1,236 $ 1,161 $ 1,181 $ 1,134 $ 1,168 $ 1,103 $ 2,397 $ 2,271
Esurance brand 100 107 114 111 107 123 207 230
Encompass brand 46 43 44 44 45 45 89 90
1,382 1,311 1,339 1,289 1,320 1,271 2,693 2,591
Underwriting income (loss)
Allstate brand $ 206 $ 454 $ 229 $ 49 $ (57) $ 45 $ 660 $ (12)
Esurance brand (13) (4) (16) (19) (12) (18) (17) (30)
Encompass brand (8) (1) 3 (6) (17) (9) (9) (26)
185 449 216 24 (86) 18 634 (68)
Loss ratio
Allstate brand 70.5 66.6 70.8 75.3 76.6 75.4 68.5 76.0
Esurance brand 78.9 74.4 76.0 77.3 76.4 73.4 76.7 74.9
Encompass brand 73.4 71.2 68.9 75.5 82.3 77.4 72.3 79.8
Allstate Protection 71.2 67.4 71.1 75.5 76.7 75.3 69.2 76.0
Expense ratio
Allstate brand 25.3 24.0 24.5 23.7 24.6 23.6 24.7 24.1
Esurance brand 24.3 26.6 27.9 27.4 26.6 31.2 25.4 28.9
Encompass brand 32.2 29.5 29.1 28.4 28.5 28.3 30.8 28.4
Allstate Protection 25.4 24.3 24.9 24.1 24.9 24.4 24.9 24.6
Combined ratio
Allstate brand 95.8 90.6 95.3 99.0 101.2 99.0 93.2 100.1
Esurance brand 103.2 101.0 103.9 104.7 103.0 104.6 102.1 103.8
Encompass brand 105.6 100.7 98.0 103.9 110.8 105.7 103.1 108.2
Allstate Protection 96.6 91.7 96.0 99.6 101.6 99.7 94.1 100.6
Effect of catastrophe losses on combined ratio
Allstate brand 4.2 1.3 1.2 3.1 4.1 2.9 2.8 3.5
Esurance brand 3.6 1.0 1.0 2.2 2.2 0.5 2.4 1.4
Encompass brand 4.9 2.8 - 3.3 1.9 1.3 3.8 1.6
Allstate Protection 4.2 1.4 1.2 3.1 3.9 2.7 2.8 3.3
Effect of prior year reserve reestimates on combined ratio
Allstate brand (1.2) (1.8) (2.0) (0.1) (0.8) 0.1 (1.5) (0.3)
Esurance brand 0.3 - (2.2) (1.0) (1.0) (1.0) 0.1 (1.0)
Encompass brand (0.7) - (3.3) (1.3) 3.2 1.3 (0.3) 2.2
Allstate Protection (1.1) (1.6) (2.1) (0.2) (0.7) 0.1 (1.4) (0.3)
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand - (0.2) - (0.1) (0.1) (0.1) (0.1) -
Esurance brand - - - - - - - -
Encompass brand (0.7) - (0.6) - (0.6) - (0.3) (0.3)
Allstate Protection - (0.1) - (0.1) (0.1) (0.1) (0.1) -
Effect of amortization of purchased intangible assets on
combined ratio
Esurance brand - 0.2 0.9 1.5 1.8 1.5 0.1 1.6
Allstate Protection - - - 0.1 0.1 0.1 - 0.1
THE ALLSTATE CORPORATION
AUTO PROFITABILITY MEASURES
Six months endedThree months ended
26
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written
Allstate brand $ 1,847 $ 1,403 $ 1,638 $ 1,869 $ 1,831 $ 1,392 $ 3,250 $ 3,223
Esurance brand 20 16 15 16 14 11 36 25
Encompass brand 112 91 103 121 126 104 203 230
1,979 1,510 1,756 2,006 1,971 1,507 3,489 3,478
Net premiums earned
Allstate brand $ 1,691 $ 1,688 $ 1,691 $ 1,683 $ 1,684 $ 1,678 $ 3,379 $ 3,362
Esurance brand 16 14 13 11 10 8 30 18
Encompass brand 108 113 115 119 121 124 221 245
1,815 1,815 1,819 1,813 1,815 1,810 3,630 3,625
Incurred losses
Allstate brand $ 1,273 $ 1,194 $ 765 $ 893 $ 1,260 $ 1,190 $ 2,467 $ 2,450
Esurance brand 21 13 8 11 10 4 34 14
Encompass brand 84 108 60 74 85 85 192 170
1,378 1,315 833 978 1,355 1,279 2,693 2,634
Expenses
Allstate brand $ 371 $ 387 $ 396 $ 384 $ 373 $ 377 $ 758 $ 750
Esurance brand 8 8 10 22 25 11 16 36
Encompass brand 34 33 33 34 36 36 67 72
413 428 439 440 434 424 841 858
Underwriting income (loss)
Allstate brand $ 47 $ 107 $ 530 $ 406 $ 51 $ 111 $ 154 $ 162
Esurance brand (13) (7) (5) (22) (25) (7) (20) (32)
Encompass brand (10) (28) 22 11 - 3 (38) 3
24 72 547 395 26 107 96 133
Loss ratio
Allstate brand 75.3 70.8 45.3 53.1 74.8 70.9 73.0 72.9
Esurance brand 131.3 92.9 61.6 100.0 100.0 50.0 113.4 77.8
Encompass brand 77.8 95.6 52.2 62.2 70.2 68.6 86.9 69.4
Allstate Protection 75.9 72.4 45.8 53.9 74.7 70.7 74.2 72.6
Expense ratio
Allstate brand 21.9 22.9 23.4 22.8 22.2 22.5 22.4 22.3
Esurance brand 50.0 57.1 76.9 200.0 250.0 137.5 53.3 200.0
Encompass brand 31.5 29.2 28.7 28.6 29.8 29.0 30.3 29.4
Allstate Protection 22.8 23.6 24.1 24.3 23.9 23.4 23.2 23.7
Combined ratio
Allstate brand 97.2 93.7 68.7 75.9 97.0 93.4 95.4 95.2
Esurance brand 181.3 150.0 138.5 300.0 350.0 187.5 166.7 277.8
Encompass brand 109.3 124.8 80.9 90.8 100.0 97.6 117.2 98.8
Allstate Protection 98.7 96.0 69.9 78.2 98.6 94.1 97.4 96.3
Effect of catastrophe losses on combined ratio
Allstate brand 38.4 34.1 10.8 15.4 38.3 34.2 36.2 36.2
Esurance brand 56.3 28.6 7.7 45.5 50.0 12.5 43.4 33.4
Encompass brand 38.9 54.0 7.8 17.6 24.0 30.7 46.6 27.4
Allstate Protection 38.6 35.2 10.6 15.7 37.4 33.9 37.0 35.6
Effect of prior year reserve reestimates on combined ratio
Allstate brand (1.0) (1.6) (1.7) (0.3) 1.1 (0.5) (1.3) 0.3
Esurance brand (6.3) - - - - - (3.3) -
Encompass brand (1.9) 2.7 (2.6) 1.7 - 0.8 0.5 0.4
Allstate Protection (1.1) (1.3) (1.8) (0.2) 1.0 (0.4) (1.2) 0.3
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand - 0.1 (0.5) 0.3 1.0 (0.3) - 0.3
Esurance brand (6.3) - - - - - (3.3) -
Encompass brand (1.9) 1.8 - 0.8 (0.8) 1.6 - 0.4
Allstate Protection (0.2) 0.2 (0.5) 0.3 0.8 (0.2) - 0.3
THE ALLSTATE CORPORATION
HOMEOWNERS PROFITABILITY MEASURES
Six months endedThree months ended
27
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written
Allstate brand $ 441 $ 368 $ 393 $ 447 $ 428 $ 353 $ 809 $ 781
Esurance brand 2 2 2 2 2 2 4 4
Encompass brand 25 20 22 25 27 21 45 48
468 390 417 474 457 376 858 833
Net premiums earned
Allstate brand $ 411 $ 405 $ 403 $ 399 $ 397 $ 393 $ 816 $ 790
Esurance brand 2 2 2 2 2 2 4 4
Encompass brand 23 24 24 25 25 26 47 51
436 431 429 426 424 421 867 845
Incurred losses
Allstate brand $ 258 $ 265 $ 234 $ 236 $ 256 $ 261 $ 523 $ 517
Esurance brand 1 1 1 2 1 1 2 2
Encompass brand 10 21 13 17 16 31 31 47
269 287 248 255 273 293 556 566
Expenses
Allstate brand $ 115 $ 112 $ 117 $ 113 $ 106 $ 103 $ 227 $ 209
Esurance brand 1 - 1 - 1 1 1 2
Encompass brand 7 7 7 8 7 7 14 14
123 119 125 121 114 111 242 225
Underwriting income (loss)
Allstate brand $ 38 $ 28 $ 52 $ 50 $ 35 $ 29 $ 66 $ 64
Esurance brand - 1 - - - - 1 -
Encompass brand 6 (4) 4 - 2 (12) 2 (10)
44 25 56 50 37 17 69 54
Loss ratio
Allstate brand 62.8 65.4 58.1 59.2 64.5 66.4 64.1 65.4
Esurance brand 50.0 50.0 50.0 100.0 50.0 50.0 50.0 50.0
Encompass brand 43.5 87.5 54.1 68.0 64.0 119.3 65.9 92.2
Allstate Protection 61.7 66.6 57.8 59.9 64.4 69.6 64.1 67.0
Expense ratio
Allstate brand 28.0 27.7 29.0 28.3 26.7 26.2 27.8 26.5
Esurance brand 50.0 - 50.0 - 50.0 50.0 25.0 50.0
Encompass brand 30.4 29.2 29.2 32.0 28.0 26.9 29.8 27.4
Allstate Protection 28.2 27.6 29.1 28.4 26.9 26.4 27.9 26.6
Combined ratio
Allstate brand 90.8 93.1 87.1 87.5 91.2 92.6 91.9 91.9
Esurance brand 100.0 50.0 100.0 100.0 100.0 100.0 75.0 100.0
Encompass brand 73.9 116.7 83.3 100.0 92.0 146.2 95.7 119.6
Allstate Protection 89.9 94.2 86.9 88.3 91.3 96.0 92.0 93.6
Effect of catastrophe losses on combined ratio
Allstate brand 13.9 14.6 9.7 6.0 15.6 16.0 14.2 15.8
Esurance brand - - - - - - - -
Encompass brand 13.0 8.3 - 4.0 8.0 3.8 10.6 5.9
Allstate Protection 13.8 14.1 9.1 5.9 15.1 15.2 13.9 15.1
Effect of prior year reserve reestimates on combined ratio
Allstate brand (0.7) 1.5 0.5 (0.8) (1.7) (1.5) 0.4 (1.6)
Esurance brand (50.0) - - - - - (25.0) -
Encompass brand (21.7) 12.6 (12.5) 4.0 (16.0) 42.3 (4.3) 13.7
Allstate Protection (2.1) 2.1 (0.3) (0.5) (2.6) 1.2 - (0.7)
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio
Allstate brand (0.5) 1.8 (0.2) (0.3) - - 0.6 -
Esurance brand - - - - - - - -
Encompass brand 4.4 - 4.2 - - (3.9) 2.1 (2.0)
Allstate Protection (0.2) 1.6 - (0.3) - (0.3) 0.7 (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
28
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Auto
Allstate brand combined ratio 95.8 90.6 95.3 99.0 101.2 99.0 93.2 100.1
Effect of catastrophe losses (4.2) (1.3) (1.2) (3.1) (4.1) (2.9) (2.8) (3.5)
Effect of prior year non-catastrophe reserve reestimates 1.2 1.6 2.0 - 0.7 (0.2) 1.4 0.3
Allstate brand underlying combined ratio * 92.8 90.9 96.1 95.9 97.8 95.9 91.8 96.9
Esurance brand combined ratio 103.2 101.0 103.9 104.7 103.0 104.6 102.1 103.8
Effect of catastrophe losses (3.6) (1.0) (1.0) (2.2) (2.2) (0.5) (2.4) (1.4)
Effect of prior year non-catastrophe reserve reestimates (0.3) - 2.2 1.0 1.0 1.0 (0.1) 1.0
Effect of amortization of purchased intangible assets - (0.2) (0.9) (1.5) (1.8) (1.5) (0.1) (1.6)
Esurance brand underlying combined ratio * 99.3 99.8 104.2 102.0 100.0 103.6 99.5 101.8
Encompass brand combined ratio 105.6 100.7 98.0 103.9 110.8 105.7 103.1 108.2
Effect of catastrophe losses (4.9) (2.8) - (3.3) (1.9) (1.3) (3.8) (1.6)
Effect of prior year non-catastrophe reserve reestimates - - 2.7 1.3 (3.8) (1.3) - (2.5)
Encompass brand underlying combined ratio * 100.7 97.9 100.7 101.9 105.1 103.1 99.3 104.1
Homeowners
Allstate brand combined ratio 97.2 93.7 68.7 75.9 97.0 93.4 95.4 95.2
Effect of catastrophe losses (38.4) (34.1) (10.8) (15.4) (38.3) (34.2) (36.2) (36.2)
Effect of prior year non-catastrophe reserve reestimates 1.0 1.7 1.2 0.6 (0.1) 0.2 1.3 -
Allstate brand underlying combined ratio * 59.8 61.3 59.1 61.1 58.6 59.4 60.5 59.0
Esurance brand combined ratio 181.3 150.0 138.5 300.0 350.0 187.5 166.7 277.8
Effect of catastrophe losses (56.3) (28.6) (7.7) (45.5) (50.0) (12.5) (43.4) (33.4)
Effect of prior year non-catastrophe reserve reestimates - - - - - - - -
Esurance brand underlying combined ratio * 125.0 121.4 130.8 254.5 300.0 175.0 123.3 244.4
Encompass brand combined ratio 109.3 124.8 80.9 90.8 100.0 97.6 117.2 98.8
Effect of catastrophe losses (38.9) (54.0) (7.8) (17.6) (24.0) (30.7) (46.6) (27.4)
Effect of prior year non-catastrophe reserve reestimates - (0.9) 2.6 (0.9) (0.8) 0.8 (0.5) -
Encompass brand underlying combined ratio * 70.4 69.9 75.7 72.3 75.2 67.7 70.1 71.4
Other Personal Lines
Allstate brand combined ratio 90.8 93.1 87.1 87.5 91.2 92.6 91.9 91.9
Effect of catastrophe losses (13.9) (14.6) (9.7) (6.0) (15.6) (16.0) (14.2) (15.8)
Effect of prior year non-catastrophe reserve reestimates 0.2 0.3 (0.7) 0.5 1.7 1.5 0.2 1.6
Allstate brand underlying combined ratio * 77.1 78.8 76.7 82.0 77.3 78.1 77.9 77.7
Esurance brand combined ratio 100.0 50.0 100.0 100.0 100.0 100.0 75.0 100.0
Effect of catastrophe losses - - - - - - - -
Effect of prior year non-catastrophe reserve reestimates 50.0 - - - - - 25.0 -
Esurance brand underlying combined ratio * 150.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0
Encompass brand combined ratio 73.9 116.7 83.3 100.0 92.0 146.2 95.7 119.6
Effect of catastrophe losses (13.0) (8.3) - (4.0) (8.0) (3.8) (10.6) (5.9)
Effect of prior year non-catastrophe reserve reestimates 26.1 (12.6) 16.7 (4.0) 16.0 (46.2) 6.4 (15.7)
Encompass brand underlying combined ratio * 87.0 95.8 100.0 92.0 100.0 96.2 91.5 98.0
THE ALLSTATE CORPORATION
AUTO, HOMEOWNERS AND OTHER PERSONAL LINES UNDERLYING COMBINED RATIOS BY BRAND
Six months endedThree months ended
29
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Net premiums written $ 124 $ 123 $ 115 $ 123 $ 135 $ 126 $ 247 $ 261
Net premiums earned $ 118 $ 125 $ 123 $ 127 $ 127 $ 129 $ 243 $ 256
Incurred losses $ 86 $ 96 $ 109 $ 112 $ 135 $ 119 $ 182 $ 254
Expenses $ 34 $ 33 $ 34 $ 34 $ 35 $ 38 $ 67 $ 73
Underwriting loss $ (2) $ (4) $ (20) $ (19) $ (43) $ (28) $ (6) $ (71)
Loss ratio 72.9 76.8 88.6 88.2 106.3 92.2 74.9 99.2
Expense ratio 28.8 26.4 27.7 26.8 27.6 29.5 27.6 28.5
Combined ratio 101.7 103.2 116.3 115.0 133.9 121.7 102.5 127.7
Effect of catastrophe losses on combined ratio 1.7 5.6 5.7 5.5 9.5 7.0 3.7 8.2
Effect of prior year reserve reestimates on combined ratio (1.7) 1.6 4.9 10.3 18.1 15.5 - 16.8
Effect of catastrophe losses included in prior year
reserve reestimates on combined ratio (0.9) 0.8 0.8 - 0.8 2.4 - 1.6
(1) Commercial lines are all Allstate brand products.
THE ALLSTATE CORPORATION
COMMERCIAL LINES PROFITABILITY MEASURES (1)
Six months endedThree months ended
30
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
($ in millions) 2017 2017 2016 2016 2016 2016 2017 2016
Other Business Lines
Net premiums written $ 174 $ 173 $ 158 $ 185 $ 183 $ 183 $ 347 $ 366
Net premiums earned $ 142 $ 141 $ 145 $ 150 $ 142 $ 143 $ 283 $ 285
Incurred losses (54) (52) (60) (69) (64) (61) (106) (125)
Expenses (85) (86) (83) (74) (74) (68) (171) (142)
Underwriting (loss) income (2) $ 3 $ 3 $ 2 $ 7 $ 4 $ 14 $ 6 $ 18
Operating ratios
Loss ratio 38.0 36.9 41.4 46.0 45.1 42.7 37.5 43.9
Expense ratio 59.9 61.0 57.2 49.3 52.1 47.5 60.4 49.8
Combined ratio 97.9 97.9 98.6 95.3 97.2 90.2 97.9 93.7
Effect of catastrophe losses on combined ratio - - 0.7 - - - - -
Effect of prior year reserve reestimates on combined ratio - - 0.7 2.0 - - - -
Effect of amortization of purchased intangible assets - 0.7 0.6 0.6 0.7 0.7 0.4 0.7
Allstate Roadside Services
Net premiums written $ 66 $ 69 $ 67 $ 79 $ 77 $ 77 $ 135 $ 154
Net premiums earned $ 67 $ 68 $ 74 $ 81 $ 78 $ 77 $ 135 $ 155
Incurred losses (33) (31) (38) (48) (42) (40) (64) (82)
Expenses (42) (42) (42) (43) (38) (37) (84) (75)
Underwriting (loss) income $ (8) $ (5) $ (6) $ (10) $ (2) $ - $ (13) $ (2)
Operating ratios
Loss ratio 49.2 45.6 51.3 59.2 53.9 51.9 47.4 52.9
Expense ratio 62.7 61.8 56.8 53.1 48.7 48.1 62.2 48.4
Combined ratio 111.9 107.4 108.1 112.3 102.6 100.0 109.6 101.3
Allstate Dealer Services
Net premiums written $ 108 $ 104 $ 91 $ 106 $ 106 $ 106 $ 212 $ 212
Net premiums earned $ 75 $ 73 $ 71 $ 69 $ 64 $ 66 $ 148 $ 130
Incurred losses (21) (21) (22) (21) (22) (21) (42) (43)
Expenses (55) (55) (52) (48) (49) (43) (110) (92)
Underwriting (loss) income $ (1) $ (3) $ (3) $ - $ (7) $ 2 $ (4) $ (5)
Operating ratios
Loss ratio 28.0 28.8 31.0 30.4 34.4 31.8 28.4 33.0
Expense ratio 73.3 75.3 73.2 69.6 76.5 65.2 74.3 70.8
Combined ratio 101.3 104.1 104.2 100.0 110.9 97.0 102.7 103.8
(1)
(2)
Other business lines primarily include Allstate Roadside Services, Allstate Dealer Services, Arity and Ivantage.
Includes Ivantage underwriting gain of $12 million, $11 million, $11 million, $17 million, $13 million and $12 million in the three months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016,
June 30, 2016, and March 31, 2016, respectively.
THE ALLSTATE CORPORATION
OTHER BUSINESS LINES PROFITABILITY MEASURES (1)
Six months endedThree months ended
31
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Auto
Annualized average premium (1) $ 999 $ 989 $ 978 $ 966 $ 946 $ 927
Underlying combined ratio * 92.8 90.9 96.1 95.9 97.8 95.9
Average underlying loss (incurred pure premium)
and expense * $ 927 $ 899 $ 940 $ 926 $ 925 $ 889
Homeowners
Annualized average premium $ 1,117 $ 1,112 $ 1,109 $ 1,102 $ 1,098 $ 1,091
Underlying combined ratio * 59.8 61.3 59.1 61.1 58.6 59.4
Average underlying loss (incurred pure premium)
and expense * $ 668 $ 682 $ 655 $ 673 $ 643 $ 648
(1)
THE ALLSTATE CORPORATION
Calculated by annualizing net earned premium reported in the quarter divided by policies in force at quarter end.
ALLSTATE BRAND AUTO AND HOMEOWNERS UNDERLYING LOSS AND EXPENSE
Three months ended
32
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 $ 33 64.7% $ 5 9.8%
Other hurricane exposure locations 1,967 1,409 71.6% 727 37.0%
Total hurricane exposure locations (2) 2,018 1,442 71.5% 732 36.3% 11 4.1%
Other catastrophe exposure locations (4) 1,612 1,251 77.6% 609 37.8% 13 4.3%
Total $ 3,630 $ 2,693 74.2% $ 1,341 37.0% 70 24 4.2%
(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 a coastal location that have the
potential to have significant hurricane losses. The catastrophe losses for these states also 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, 2017
33
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Allstate brand
Auto $ 208 $ 65 $ 59 $ 150 $ 195 $ 137 $ 273 $ 332
Homeowners 650 575 183 259 644 574 1,225 1,218
Other personal lines 57 59 39 24 62 63 116 125
Commercial lines 2 7 7 7 12 9 9 21
Other business lines - - 1 - - - - -
Total 917 706 289 440 913 783 1,623 1,696
Esurance brand
Auto 15 4 4 9 9 2 19 11
Homeowners 9 4 1 5 5 1 13 6
Other personal lines - - - - - - - -
Total 24 8 5 14 14 3 32 17
Encompass brand
Auto 7 4 - 5 3 2 11 5
Homeowners 42 61 9 21 29 38 103 67
Other personal lines 3 2 - 1 2 1 5 3
Total 52 67 9 27 34 41 119 75
Allstate Protection $ 993 $ 781 $ 303 $ 481 $ 961 $ 827 $ 1,774 $ 1,788
Allstate Protection
Auto $ 230 $ 73 $ 63 $ 164 $ 207 $ 141 $ 303 $ 348
Homeowners 701 640 193 285 678 613 1,341 1,291
Other personal lines 60 61 39 25 64 64 121 128
Commercial lines 2 7 7 7 12 9 9 21
Other business lines - - 1 - - - - -
$ 993 $ 781 $ 303 $ 481 $ 961 $ 827 $ 1,774 $ 1,788
THE ALLSTATE CORPORATION
CATASTROPHE LOSSES BY BRAND
($ in millions)
Six months endedThree months ended
34
Average
Number Claims and Combined catastrophe
Size of catastrophe of events claims expense ratio impact loss per event
Greater than $250 million - - % $ - - % - -
$101 million to $250 million 1 2.4 209 21.1 2.6 209
$50 million to $100 million 2 4.8 144 14.5 1.8 72
Less than $50 million 39 92.8 619 62.3 7.7 16
Total 42 100.0 % 972 97.9 12.1 23
Prior year reserve reestimates (7) (0.7) (0.1)
Prior quarter reserve reestimates 28 2.8 0.4
Total catastrophe losses $ 993 100.0 % 12.4
Average
Number Claims and Combined catastrophe
Size of catastrophe of events claims expense ratio impact loss per event
Greater than $250 million - - % $ - - % - -
$101 million to $250 million 3 4.3 568 32.0 3.6 189
$50 million to $100 million 4 5.7 289 16.3 1.8 72
Less than $50 million 63 90.0 920 51.9 5.8 15
Total 70 100.0 % 1,777 100.2 11.2 25
Prior year reserve reestimates (3) (0.2) (0.1)
Total catastrophe losses $ 1,774 100.0 % 11.1
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
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 6.1 3.8 8.2 31,307 2,572 2,419 7.7
2017 9.8 12.4 15,977 1,774 1,767 11.1
Average 7.1 13.9 8.6 5.0 8.6 7.8
($ in millions)
THE ALLSTATE CORPORATION
CATASTROPHE EXPERIENCE
CATASTROPHE BY SIZE OF EVENT
combined ratio
Three months ended June 30, 2017
EFFECT OF CATASTROPHE LOSSES ON THE COMBINED RATIO
Excludes the effect of
catastrophe losses relating to
earthquakes and hurricanes
Effect of all catastrophe losses on the Property-Liability
Six months ended June 30, 2017
35
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Prior Year Reserve Reestimates (1)
Auto $ (61) $ (86) $ (114) $ (10) $ (36) $ 5 $ (147) $ (31)
Homeowners (20) (24) (32) (4) 19 (7) (44) 12
Other personal lines (9) 9 (1) (2) (11) 5 - (6)
Commercial lines (2) 2 6 13 23 20 - 43
Other business lines - - 1 3 - - - -
Allstate Protection (92) (99) (140) - (5) 23 (191) 18
Discontinued Lines and Coverages 3 2 3 99 2 1 5 3
Property-Liability $ (89) $ (97) $ (137) $ 99 $ (3) $ 24 $ (186) $ 21
Allstate brand $ (83) $ (105) $ (120) $ 3 $ (2) $ 13 $ (188) $ 11
Esurance brand (1) - (9) (4) (4) (4) (1) (8)
Encompass brand (8) 6 (11) 1 1 14 (2) 15
Allstate Protection $ (92) $ (99) $ (140) $ - $ (5) $ 23 $ (191) $ 18
Catastrophe Losses included in Prior
Year Reserve Reestimates
Allstate brand $ (4) $ 2 $ (7) $ 2 $ 15 $ (4) $ (2) $ 11
Esurance brand (1) - - - - - (1) -
Encompass brand (2) 2 - 1 (2) 1 - (1)
Allstate Protection $ (7) $ 4 $ (7) $ 3 $ 13 $ (3) $ (3) $ 10
Effect of Prior Year Reserve
Reestimates on Combined Ratio (1)(2)
Auto (0.8) (1.0) (1.4) (0.1) (0.5) - (0.9) (0.2)
Homeowners (0.3) (0.3) (0.4) (0.1) 0.3 (0.1) (0.3) 0.1
Other personal lines (0.1) 0.1 - - (0.1) - - (0.1)
Commercial lines - - 0.1 0.2 0.3 0.3 - 0.3
Other business lines - - - - - - - -
Allstate Protection (1.2) (1.2) (1.7) - - 0.2 (1.2) 0.1
Discontinued Lines and Coverages 0.1 - - 1.3 - 0.1 - -
Property-Liability (1.1) (1.2) (1.7) 1.3 - 0.3 (1.2) 0.1
Allstate brand (1.1) (1.3) (1.5) - - 0.1 (1.2) 0.1
Esurance brand - - (0.1) - - (0.1) - (0.1)
Encompass brand (0.1) 0.1 (0.1) - - 0.2 - 0.1
Allstate Protection (1.2) (1.2) (1.7) - - 0.2 (1.2) 0.1
(1)
(2) 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.
Three months ended
36
June 30, March 31,
2017 2017 2016 2015 2014 2013 2012
(net of reinsurance)
Asbestos claims (1)
Beginning reserves $ 891 $ 912 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078
Incurred claims and claims expense - - 67 39 87 74 26
Claims and claims expense paid (24) (21) (115) (93) (90) (83) (78)
Ending reserves $ 867 $ 891 $ 912 $ 960 $ 1,014 $ 1,017 $ 1,026
Claims and claims expense paid
as a percent of ending reserves 2.8% 2.4% 12.6% 9.7% 8.9% 8.2% 7.6%
Environmental claims (1)
Beginning reserves $ 178 $ 179 $ 179 $ 203 $ 208 $ 193 $ 185
Incurred claims and claims expense - - 23 1 15 30 22
Claims and claims expense paid (12) (1) (23) (25) (20) (15) (14)
Ending reserves $ 166 $ 178 $ 179 $ 179 $ 203 $ 208 $ 193
Claims and claims expense paid
as a percent of ending reserves 7.2% 0.6% 12.8% 14.0% 9.9% 7.2% 7.3%
(1) The 3-year survival ratio for the combined environmental and asbestos claims was 8.3, 8.9, 10.4, 12.2, 14.4 and 14.3 for the annualized six-months of 2017 and year-end 2016,
2015, 2014, 2013 and 2012, respectively, and is calculated by taking the ending reserves divided by net payments made during the year.
THE ALLSTATE CORPORATION
ASBESTOS AND ENVIRONMENTAL RESERVES
($ in millions)
Twelve months ended December 31,Three months ended
37
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Premiums $ 381 $ 381 $ 364 $ 361 $ 353 $ 354 $ 762 $ 707
Contract charges 210 212 210 210 211 212 422 423
Net investment income 496 426 453 427 435 419 922 854
Contract benefits (486) (474) (464) (484) (454) (455) (960) (909)
Interest credited to contractholder funds (173) (173) (177) (183) (179) (184) (346) (363)
Amortization of deferred policy acquisition costs (69) (75) (70) (68) (68) (71) (144) (139)
Operating costs and expenses (130) (135) (127) (126) (121) (123) (265) (244)
Restructuring and related charges (1) - - - (1) - (1) (1)
Income tax expense on operations (75) (52) (59) (43) (56) (48) (127) (104)
Operating income 153 110 130 94 120 104 263 224
Realized capital gains and losses, after-tax (3) (1) (8) (14) - (32) (4) (32)
Valuation changes on embedded derivatives that are not
hedged, after-tax (1) - 6 - (4) (4) (1) (8)
DAC and DSI amortization relating to realized capital
gains and losses and valuation changes on embedded
derivatives that are not hedged, after-tax (3) (3) (1) (1) (1) (1) (6) (2)
Gain on disposition of operations, after-tax - 2 - 1 1 1 2 2
Net income applicable to common shareholders $ 146 $ 108 $ 127 $ 80 $ 116 $ 68 $ 254 $ 184
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL SEGMENT RESULTS
($ in millions)
Three months ended Six months ended
38
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Return on Attributed Equity
Numerator:
Net income applicable to common shareholders (1) $ 461 $ 431 $ 391 $ 303 $ 485 $ 548
Denominator:
Beginning attributed equity (2) $ 8,055 $ 7,680 $ 7,350 $ 7,475 $ 7,621 $ 7,920
Ending attributed equity 7,851 7,778 7,904 8,205 8,055 7,680
Average attributed equity (3) $ 7,953 $ 7,729 $ 7,627 $ 7,840 $ 7,838 $ 7,800
Return on attributed equity 5.8 % 5.6 % 5.1 % 3.9 % 6.2 % 7.0 %
Operating Income Return on Adjusted Attributed Equity *
Numerator:
Operating income (1) $ 487 $ 454 $ 448 $ 416 $ 460 $ 479
Denominator:
Beginning 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 beginning attributed equity 6,978 6,856 6,794 6,753 6,591 6,421
Ending attributed equity 7,851 7,778 7,904 8,205 8,055 7,680
Unrealized net capital gains and losses 916 790 721 1,150 1,077 824
Adjusted ending attributed equity 6,935 6,988 7,183 7,055 6,978 6,856
Average adjusted attributed equity (3) $ 6,957 $ 6,922 $ 6,989 $ 6,904 $ 6,785 $ 6,639
Operating income return on attributed equity * 7.0 % 6.6 % 6.4 % 6.0 % 6.8 % 7.2 %
(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, which includes
Allstate Assurance Company and Allstate Heritage Life Insurance Company.
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)
Twelve months ended
Net income applicable to common shareholders and operating income reflect a trailing twelve-month period.
39
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
PREMIUMS AND CONTRACT CHARGES -
BY PRODUCT
Underwritten Products
Traditional life insurance premiums $ 148 $ 149 $ 151 $ 145 $ 139 $ 138 $ 297 $ 277
Accident and health insurance premiums 233 232 213 216 214 216 465 430
Interest-sensitive life insurance contract charges 207 209 206 206 208 209 416 417
588 590 570 567 561 563 1,178 1,124
Annuities
Fixed annuity contract charges 3 3 4 4 3 3 6 6
Total $ 591 $ 593 $ 574 $ 571 $ 564 $ 566 $ 1,184 $ 1,130
PREMIUMS AND CONTRACT CHARGES -
BY DISTRIBUTION CHANNEL
Allstate agencies $ 316 $ 315 $ 312 $ 308 $ 306 $ 305 $ 631 $ 611
Workplace enrolling agents 250 250 236 238 232 233 500 465
Other (1) 25 28 26 25 26 28 53 54
Total $ 591 $ 593 $ 574 $ 571 $ 564 $ 566 $ 1,184 $ 1,130
PROPRIETARY LIFE INSURANCE POLICIES SOLD
BY ALLSTATE AGENCIES (2)(3) 31,447 25,970 38,614 27,481 29,839 25,458 57,417 55,297
ALLSTATE BENEFITS NEW BUSINESS
WRITTEN PREMIUMS (4) $ 73 $ 107 $ 177 $ 69 $ 70 $ 82 $ 180 $ 152
INSURANCE POLICIES AND ANNUITIES IN FORCE
BY PRODUCT (in thousands)
Underwritten Products
Life insurance 2,483 2,476 2,478 2,477 2,480 2,469 2,483 2,480
Accident and health insurance 3,601 3,533 3,300 3,275 3,294 3,278 3,601 3,294
Total 6,084 6,009 5,778 5,752 5,774 5,747 6,084 5,774
Annuities
Deferred annuities 148 152 156 160 163 168 148 163
Immediate annuities 92 94 95 96 98 99 92 98
Total 240 246 251 256 261 267 240 261
Total 6,324 6,255 6,029 6,008 6,035 6,014 6,324 6,035
INSURANCE POLICIES AND ANNUITIES IN FORCE
BY SOURCE OF BUSINESS (in thousands)
Allstate Agencies (5) 1,929 1,925 1,928 1,924 1,924 1,922 1,929 1,924
Allstate Benefits 4,064 3,992 3,755 3,733 3,752 3,726 4,064 3,752
Other (6) 331 338 346 351 359 366 331 359
Total 6,324 6,255 6,029 6,008 6,035 6,014 6,324 6,035
(1)
(2)
(3)
(4)
(5)
(6) Primarily business sold by banks/broker-dealers, independent master brokerage agencies and specialized structured settlement brokers.
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND CONTRACT CHARGES AND OTHER STATISTICS
($ in millions)
Three months ended Six months ended
Primarily represents independent master brokerage agencies.
Policies sold reduced by lapses within twelve months of sale.
Allstate exclusive agencies and exclusive financial specialists also sell non-proprietary retirement and investment products, including mutual funds, fixed and variable annuities, disability insurance, and long-term care
insurance to provide a broad suite of protection and retirement products. As of June 30, 2017, Allstate agencies had approximately $15.2 billion of nonproprietary mutual funds and fixed and variable annuity account
balances under management. New and additional deposits into these non-proprietary products were $997 million in the six months ended June 30, 2017.
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.
Excludes Allstate Benefits products sold through Allstate Agencies, which are included in the Allstate Benefits line.
40
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Contractholders funds, beginning balance $ 20,051 $ 20,260 $ 20,583 $ 20,845 $ 21,092 $ 21,295 $ 20,260 $ 21,295
Deposits
Interest-sensitive life insurance 278 283 273 283 280 286 561 566
Fixed annuities 6 11 13 8 11 10 17 21
Total deposits 284 294 286 291 291 296 578 587
Interest credited 172 173 168 181 184 189 345 373
Benefits, withdrawals, maturities and other adjustments
Benefits (230) (233) (231) (258) (225) (252) (463) (477)
Surrenders and partial withdrawals (248) (253) (237) (271) (300) (245) (501) (545)
Maturities of and interest payments on institutional products - - (86) - - - - -
Contract charges (206) (206) (209) (208) (206) (206) (412) (412)
Net transfers from separate accounts 2 2 1 2 1 1 4 2
Other adjustments 7 14 (15) 1 8 14 21 22
Total benefits, withdrawals, maturities and other adjustments (675) (676) (777) (734) (722) (688) (1,351) (1,410)
Contractholder funds, ending balance $ 19,832 $ 20,051 $ 20,260 $ 20,583 $ 20,845 $ 21,092 $ 19,832 $ 20,845
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL CHANGE IN CONTRACTHOLDER FUNDS
($ in millions)
Three months ended Six months ended
41
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Benefit spread
Premiums $ 381 $ 381 $ 364 $ 361 $ 353 $ 354 $ 762 $ 707
Cost of insurance contract charges (1) 139 141 139 136 140 141 280 281
Contract benefits excluding the implied interest
on immediate annuities with life contingencies (2) (360) (348) (336) (358) (325) (327) (708) (652)
Total benefit spread 160 174 167 139 168 168 334 336
Investment spread
Net investment income 496 426 453 427 435 419 922 854
Implied interest on immediate annuities with
life contingencies (2) (126) (126) (128) (126) (129) (128) (252) (257)
Interest credited to contractholder funds (175) (173) (168) (183) (185) (190) (348) (375)
Total investment spread 195 127 157 118 121 101 322 222
Surrender charges and contract maintenance
expense fees (1) 71 71 71 74 71 71 142 142
Realized capital gains and losses (4) (1) (11) (21) - (49) (5) (49)
Amortization of deferred policy acquisition costs (73) (79) (71) (70) (69) (73) (152) (142)
Operating costs and expenses (130) (135) (127) (126) (121) (123) (265) (244)
Restructuring and related charges (1) - - - (1) - (1) (1)
Gain on disposition of operations 2 2 1 1 1 2 4 3
Income tax expense (74) (51) (60) (35) (54) (29) (125) (83)
Net income applicable to common shareholders $ 146 $ 108 $ 127 $ 80 $ 116 $ 68 $ 254 $ 184
Benefit spread by product group
Life insurance $ 83 $ 76 $ 78 $ 64 $ 85 $ 80 $ 159 $ 165
Accident and health insurance 106 113 105 103 108 105 219 213
Annuities (29) (15) (16) (28) (25) (17) (44) (42)
Total benefit spread $ 160 $ 174 $ 167 $ 139 $ 168 $ 168 $ 334 $ 336
Investment spread by product group
Life insurance $ 34 $ 32 $ 33 $ 30 $ 29 $ 34 $ 66 $ 63
Accident and health insurance 4 4 4 4 4 4 8 8
Annuities and institutional products 94 28 51 25 35 17 122 52
Net investment income on investments supporting capital 64 63 60 59 59 52 127 111
Investment spread before valuation changes on
embedded derivatives that are not hedged 196 127 148 118 127 107 323 234
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged (1) - 9 - (6) (6) (1) (12)
Total investment spread $ 195 $ 127 $ 157 $ 118 $ 121 $ 101 $ 322 $ 222
(1) Reconciliation of contract charges
Cost of insurance contract charges $ 139 $ 141 $ 139 $ 136 $ 140 $ 141 $ 280 $ 281
Surrender charges and contract maintenance
expense fees 71 71 71 74 71 71 142 142
Total contract charges $ 210 $ 212 $ 210 $ 210 $ 211 $ 212 $ 422 $ 423
(2) Reconciliation of contract benefits
Contract benefits excluding the implied interest
on immediate annuities with life contingencies $ (360) $ (348) $ (336) $ (358) $ (325) $ (327) $ (708) $ (652)
Implied interest on immediate annuities with
life contingencies (126) (126) (128) (126) (129) (128) (252) (257)
Total contract benefits $ (486) $ (474) $ (464) $ (484) $ (454) $ (455) $ (960) $ (909)
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL ANALYSIS OF NET INCOME
($ in millions)
Three months ended Six months ended
42
Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average
investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads
Interest-sensitive life insurance 5.1 % 3.8 % 1.3 % 4.8 % 3.9 % 0.9 %
Deferred fixed annuities and
institutional products 4.2 2.8 1.4 4.2 2.8 1.4
Immediate fixed annuities with and
without life contingencies 8.9 6.0 2.9 6.5 5.8 0.7
Investments supporting capital,
traditional life and other products 3.9 n/a n/a 3.9 n/a n/a
Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average
investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads
Interest-sensitive life insurance 5.0 % 3.8 % 1.2 % 4.9 % 3.9 % 1.0 %
Deferred fixed annuities and
institutional products 4.3 2.8 1.5 4.1 2.8 1.3
Immediate fixed annuities with and
without life contingencies 7.6 5.9 1.7 6.3 5.9 0.4
Investments supporting capital,
traditional life and other products 3.9 n/a n/a 3.8 n/a n/a
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL WEIGHTED AVERAGE INVESTMENT SPREADS
Three months ended June 30, 2017 Three months ended June 30, 2016
Six months ended June 30, 2017 Six months ended June 30, 2016
43
Twelve months ended
June 30, 2017
Attributed equity
Reserves and excluding unrealized June March Dec. Sept. June March
Contractholder funds capital gains/losses (3)(4) Operating income (5) 2017 2017 2016 2016 2016 2016
Underwritten products
Life insurance $ 11,076 $ 2,118 $ 251 10.7 % 10.4 % 9.9 % 10.1 % 10.8 % 11.1 %
Accident and health insurance 888 708 83 12.2 12.8 13.2 12.8 12.4 12.2
Subtotal 11,964 2,826 334 11.1 11.0 10.6 10.6 11.1 11.3
Immediate Annuities:
Sub-standard structured settlements and group
pension terminations (1) 5,034 2,164 7 0.3 (0.8) (0.8) (1.7) (0.9) (0.2)
Standard structured settlements and SPIA (2) 6,337 1,347 82 6.4 4.9 4.3 2.2 4.1 4.9
Subtotal (6) 11,371 3,511 89 2.6 1.5 1.2 (0.1) 1.1 2.0
Deferred Annuities 8,731 598 64 10.2 10.3 9.7 9.6 10.0 10.4
Institutional products - - -
Subtotal 20,102 4,109 153 3.8 2.9 2.7 1.8 2.9 3.7
Total Allstate Financial $ 32,066 $ 6,935 $ 487 7.0 6.6 6.4 6.0 6.8 7.2
Life Accident and Annuities and Allstate
insurance health insurance institutional products Financial
Operating income $ 130 $ 39 $ 94 $ 263
Realized capital gains and losses, after-tax 1 - (5) (4)
Valuation changes on embedded derivatives that are not
hedged, after-tax - - (1) (1)
DAC and DSI amortization relating to realized
capital gains and losses and valuation changes on
embedded derivatives that are not hedged, after-tax (6) - - (6)
Gain on disposition of operations, after-tax - - 2 2
Net income applicable to common shareholders $ 125 $ 39 $ 90 $ 254
(1)
(2)
(3)
(4)
(5)
(6)
Product line operating income includes allocation of income on investments supporting capital. Operating income reflects a trailing twelve-month period.
Of the total immediate annuities, $8,579 million are reported in reserve for life-contingent contract benefits and $2,792 million are reported in contractholder funds.
Annuities and institutional products:
Six months ended June 30, 2017
Structured settlement annuities for annuitants with severe injuries or other health impairments which significantly reduced their life expectancy at the time the annuity was issued and group annuity contracts issued to sponsors of terminated pension plans.
Life-contingent structured settlement annuities for annuitants with standard life expectancy, period certain structured settlements and single premium immediate annuities with and without life contingencies.
Total Allstate Financial attributed equity is the sum of equity for Allstate Life Insurance Company and the applicable equity for Allstate Financial Insurance Holdings Corporation, excluding unrealized capital gains and losses.
Attributed equity is allocated to each product line based on statutory capital adjusted for GAAP reporting differences and the amount of capital held in Allstate Financial may vary from economic capital. The calculation of statutory capital by product incorporates internal factors for invested asset
risk, insurance risk (mortality and morbidity), interest rate risk and business risk. Due to the unavailability of final statutory financial statements at the time we release our GAAP financial results, the allocation is derived from prior quarter statutory capital. Statutory capital is adjusted for
appropriate GAAP accounting differences. Changes in internal capital factors, investment portfolio mix and risk as well as changes in GAAP and statutory reporting differences will result in changes to the allocation of attributed equity to products.
Twelve months ended
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL SUPPLEMENTAL PRODUCT INFORMATION
($ in millions)
As of June 30, 2017 Operating income return on attributed equity * (%)
44
Allstate Allstate
Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial
Life Benefits Annuities Segment Life Benefits Annuities Segment
$ 140 $ 241 $ - $ 381 $ 131 $ 222 $ - $ 353
179 28 3 210 179 29 3 211
123 19 354 496 118 18 299 435
(187) (143) (156) (486) (177) (121) (156) (454)
(71) (9) (93) (173) (71) (10) (98) (179)
Amortization of deferred policy acquisition costs (35) (33) (1) (69) (32) (35) (1) (68)
(58) (64) (8) (130) (54) (60) (7) (121)
- - (1) (1) (1) - - (1)
(28) (14) (33) (75) (29) (14) (13) (56)
63 25 65 153 64 29 27 120
- - (3) (3) (2) - 2 -
- - (1) (1) - - (4) (4)
(3) - - (3) (1) - - (1)
Gain on disposition of operations, after-tax - - - - - - 1 1
$ 60 $ 25 $ 61 $ 146 $ 61 $ 29 $ 26 $ 116
Premiums and Contract Charges - by Product
Underwritten Products
$ 139 $ 9 $ - $ 148 $ 130 $ 9 $ - $ 139
1 232 - 233 1 213 - 214
179 28 - 207 179 29 - 208
319 269 - 588 310 251 - 561
- - 3 3 - - 3 3
$ 319 $ 269 $ 3 $ 591 $ 310 $ 251 $ 3 $ 564
Life Insurance $ 78 $ 5 $ - $ 83 $ 78 $ 7 $ - $ 85
Accident and health insurance (2) 108 - 106 (2) 110 - 108
Annuities - - (29) (29) - - (25) (25)
$ 76 $ 113 $ (29) $ 160 $ 76 $ 117 $ (25) $ 168
Life insurance $ 32 $ 2 $ - $ 34 $ 26 $ 3 $ - $ 29
Accident and health insurance - 4 - 4 2 2 - 4
Annuities and institutional products - - 94 94 - - 35 35
Net investment income on investments supporting capital 20 4 40 64 19 3 37 59
derivatives that are not hedged 52 10 134 196 47 8 72 127
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged - - (1) (1) - - (6) (6)
Total investment spread $ 52 $ 10 $ 133 $ 195 $ 47 $ 8 $ 66 $ 121
Investment Spread by Product Group
Investment spread before valuation changes on embedded
Fixed annuity contract charges
Total 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 applicable to common shareholders
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
Restructuring and related charges
Income tax expense on operations
Operating income
Realized capital gains and losses, after-tax
Premiums
THE ALLSTATE CORPORATION
ALLSTATE LIFE, ALLSTATE BENEFITS AND ALLSTATE ANNUITIES RESULTS AND PRODUCT INFORMATION
($ in millions)
For the three months ended June 30, 2017 For the three months ended June 30, 2016
45
Allstate Allstate
Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial
Life Benefits Annuities Segment Life Benefits Annuities Segment
$ 280 $ 482 $ - $ 762 $ 261 $ 446 $ - $ 707
360 56 6 422 361 56 6 423
243 36 643 922 238 36 580 854
(382) (279) (299) (960) (357) (249) (303) (909)
(140) (18) (188) (346) (141) (19) (203) (363)
Amortization of deferred policy acquisition costs (67) (74) (3) (144) (63) (73) (3) (139)
(117) (131) (17) (265) (110) (119) (15) (244)
- - (1) (1) (1) - - (1)
(55) (25) (47) (127) (58) (26) (20) (104)
122 47 94 263 130 52 42 224
1 - (5) (4) (10) (3) (19) (32)
- - (1) (1) - - (8) (8)
(6) - - (6) (2) - - (2)
Gain on disposition of operations, after-tax - - 2 2 - - 2 2
$ 117 $ 47 $ 90 $ 254 $ 118 $ 49 $ 17 $ 184
Premiums and Contract Charges - by Product
Underwritten Products
$ 279 $ 18 $ - $ 297 $ 260 $ 17 $ - $ 277
1 464 - 465 1 429 - 430
360 56 - 416 361 56 - 417
640 538 - 1,178 622 502 - 1,124
- - 6 6 - - 6 6
$ 640 $ 538 $ 6 $ 1,184 $ 622 $ 502 $ 6 $ 1,130
Life Insurance $ 149 $ 10 $ - $ 159 $ 153 $ 12 $ - $ 165
Accident and health insurance (4) 223 - 219 (2) 215 - 213
Annuities - - (44) (44) - - (42) (42)
$ 145 $ 233 $ (44) $ 334 $ 151 $ 227 $ (42) $ 336
Life insurance $ 61 $ 5 $ - $ 66 $ 58 $ 5 $ - $ 63
Accident and health insurance 2 6 - 8 3 5 - 8
Annuities and institutional products - - 122 122 - - 52 52
Net investment income on investments supporting capital 40 7 80 127 36 7 68 111
derivatives that are not hedged 103 18 202 323 97 17 120 234
Valuation changes on derivatives embedded in equity-
indexed annuity contracts that are not hedged - - (1) (1) - - (12) (12)
Total investment spread $ 103 $ 18 $ 201 $ 322 $ 97 $ 17 $ 108 $ 222
Investment Spread by Product Group
Investment spread before valuation changes on embedded
Fixed annuity contract charges
Total 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 applicable to common shareholders
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
Restructuring and related charges
Income tax expense on operations
Operating income
Realized capital gains and losses, after-tax
Premiums
THE ALLSTATE CORPORATION
ALLSTATE LIFE, ALLSTATE BENEFITS AND ALLSTATE ANNUITIES RESULTS AND PRODUCT INFORMATION
($ in millions)
For the six months ended June 30, 2017 For the six months ended June 30, 2016
46
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Net investment income $ 10 $ 11 $ 10 $ 11 $ 11 $ 10 $ 21 $ 21
Operating costs and expenses (9) (8) (9) (7) (7) (6) (17) (13)
Interest expense (83) (85) (77) (73) (72) (73) (168) (145)
Income tax benefit on operations 31 30 29 26 26 25 61 51
Preferred stock dividends (29) (29) (29) (29) (29) (29) (58) (58)
Operating loss (80) (81) (76) (72) (71) (73) (161) (144)
Realized capital gains and losses, after-tax - - (1) - (1) - - (1)
Business combination expenses, after-tax (1) - (13) - - - - (13) -
Net loss applicable to common shareholders $ (80) $ (94) $ (77) $ (72) $ (72) $ (73) $ (174) $ (145)
(1) Relates to SquareTrade acquisition on January 3, 2017.
THE ALLSTATE CORPORATION
CORPORATE AND OTHER SEGMENT RESULTS
($ in millions)
Three months ended Six months ended
47
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2017 2017 2016 2016 2016 2017 2017 2016 2016 2016
Fixed income securities, at fair value:
Tax-exempt $ 4,974 $ 4,623 $ 4,447 $ 4,798 $ 4,612 $ - $ - $ - $ 1 $ 2
Taxable 26,908 26,754 25,855 26,968 25,139 25,065 25,072 25,578 26,225 26,169
Equity securities, at fair value (1) 4,410 4,012 4,074 3,604 3,632 1,699 1,670 1,589 1,681 1,630
Mortgage loans 297 279 280 270 313 4,039 4,070 4,206 4,126 4,140
Limited partnership interests (2) 3,266 3,122 3,042 2,913 2,842 2,940 2,860 2,771 2,674 2,564
Short-term, at fair value 1,560 1,592 3,405 917 1,619 566 818 609 733 1,197
Other 1,668 1,618 1,619 1,587 1,532 2,147 2,120 2,087 2,076 2,058
Total $ 43,083 $ 42,000 $ 42,722 $ 41,057 $ 39,689 $ 36,456 $ 36,610 $ 36,840 $ 37,516 $ 37,760
Fixed income securities, amortized cost:
Tax-exempt $ 4,949 $ 4,635 $ 4,498 $ 4,726 $ 4,509 $ - $ 1 $ - $ 1 $ 2
Taxable 26,585 26,529 25,706 26,447 24,746 23,678 23,860 24,424 24,330 24,357
Ratio of fair value to amortized cost 101.1% 100.7% 100.3% 101.9% 101.7% 105.9% 105.1% 104.7% 107.8% 107.4%
Equity securities, cost $ 3,839 $ 3,526 $ 3,671 $ 3,212 $ 3,337 $ 1,474 $ 1,497 $ 1,483 $ 1,585 $ 1,584
Short-term, amortized cost 1,560 1,592 3,405 917 1,619 566 818 609 733 1,197
June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
2017 2017 2016 2016 2016 2017 2017 2016 2016 2016
Fixed income securities, at fair value:
Tax-exempt $ 546 $ 541 $ 535 $ 600 $ 609 $ 5,520 $ 5,164 $ 4,982 $ 5,399 $ 5,223
Taxable 1,163 1,646 1,424 1,714 1,598 53,136 53,472 52,857 54,907 52,906
Equity securities, at fair value 8 3 3 3 3 6,117 5,685 5,666 5,288 5,265
Mortgage loans - - - - - 4,336 4,349 4,486 4,396 4,453
Limited partnership interests - - 1 1 1 6,206 5,982 5,814 5,588 5,407
Short-term, at fair value 49 343 274 213 34 2,175 2,753 4,288 1,863 2,850
Other - - - - - 3,815 3,738 3,706 3,663 3,590
Total $ 1,766 $ 2,533 $ 2,237 $ 2,531 $ 2,245 $ 81,305 $ 81,143 $ 81,799 $ 81,104 $ 79,694
Fixed income securities, amortized cost:
Tax-exempt $ 533 $ 529 $ 527 $ 580 $ 585 $ 5,482 $ 5,165 $ 5,025 $ 5,307 $ 5,096
Taxable 1,156 1,640 1,421 1,691 1,571 51,419 52,029 51,551 52,468 50,674
Ratio of fair value to amortized cost 101.2% 100.8% 100.6% 101.9% 102.4% 103.1% 102.5% 102.2% 104.4% 104.2%
Equity securities, cost $ 8 $ 3 $ 3 $ 3 $ 3 $ 5,321 $ 5,026 $ 5,157 $ 4,800 $ 4,924
Short-term, amortized cost 49 343 274 213 34 2,175 2,753 4,288 1,863 2,850
(1)
(2)
Equity securities may include investments in exchange traded and mutual funds whose underlying investments are fixed income securities.
As of June 30, 2017, we have commitments to invest in additional limited partnership interests totaling $1.66 billion, $1.41 billion and $3.07 billion for Property-Liability, Allstate Financial, and in Total, respectively.
THE ALLSTATE CORPORATION
INVESTMENTS
($ in millions)
PROPERTY-LIABILITY ALLSTATE FINANCIAL
CORPORATE AND OTHER CONSOLIDATED
48
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 $ 63 $ 3,426 101.9 $ 66 $ 4,395 101.5 $ 65 $ 3,637 101.8
Municipal 312 7,855 104.1 258 7,507 103.6 217 7,333 103.0
Corporate 1,244 44,251 102.9 992 43,535 102.3 859 43,601 102.0
Foreign government 28 1,047 102.7 32 1,027 103.2 32 1,075 103.1
Asset-backed securities ("ABS") 6 1,243 100.5 3 1,265 100.2 2 1,171 100.2
Residential mortgage-backed securities ("RMBS") 92 641 116.8 83 672 114.1 77 728 111.8
Commercial mortgage-backed securities ("CMBS") 7 170 104.3 5 211 102.4 8 270 103.1
Redeemable preferred stock 3 23 115.0 3 24 114.3 3 24 114.3
Total fixed income securities 1,755 58,656 103.1 1,442 58,636 102.5 1,263 57,839 102.2
Equity securities 796 6,117 115.0 659 5,685 113.1 509 5,666 109.9
Short-term investments - 2,175 100.0 - 2,753 100.0 - 4,288 100.0
Derivatives (1) 108 n/a - 108 n/a 2 111 n/a
EMA limited partnership interests (2) (1) n/a n/a - n/a n/a (4) n/a n/a
Unrealized net capital gains and losses, pre-tax 2,549 2,101 1,770
Amounts recognized for:
Insurance reserves (3) - - -
DAC and DSI (4) (198) (165) (146)
Amounts recognized (198) (165) (146)
Deferred income taxes (825) (680) (571)
Unrealized net capital gains and losses, after-tax $ 1,526 $ 1,256 $ 1,053
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 $ 105 $ 4,304 102.5 $ 122 $ 3,523 103.6 $ 114 $ 3,504 103.4
Municipal 470 7,902 106.3 532 7,818 107.3 442 7,616 106.2
Corporate 1,804 44,474 104.2 1,566 42,700 103.8 989 41,272 102.5
Foreign government 59 1,119 105.6 61 1,152 105.6 55 1,054 105.5
ABS (3) 1,390 99.8 (11) 1,726 99.4 (27) 2,499 98.9
RMBS 82 778 111.8 70 818 109.4 68 875 108.4
CMBS 11 315 103.6 16 368 104.5 20 447 104.7
Redeemable preferred stock 3 24 114.3 3 24 114.3 3 24 114.3
Total fixed income securities 2,531 60,306 104.4 2,359 58,129 104.2 1,664 57,291 103.0
Equity securities 488 5,288 110.2 341 5,265 106.9 325 5,117 106.8
Short-term investments - 1,863 100.0 - 2,850 100.0 - 3,526 100.0
Derivatives 1 85 n/a 2 71 n/a 4 58 n/a
EMA limited partnership interests (2) (5) n/a n/a (5) n/a n/a (5) n/a n/a
Unrealized net capital gains and losses, pre-tax 3,015 2,697 1,988
Amounts recognized for:
Insurance reserves (3) - - -
DAC and DSI (4) (216) (195) (138)
Amounts recognized (216) (195) (138)
Deferred income taxes (982) (878) (650)
Unrealized net capital gains and losses, after-tax $ 1,817 $ 1,624 $ 1,200
(1)
(2)
(3)
(4) 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 interests represent the Company's share of EMA limited partnerships' other comprehensive income. Fair value and amortized cost are not applicable.
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, if any, primarily relates to structured settlement
annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.
September 30, 2016 June 30, 2016 March 31, 2016
THE ALLSTATE CORPORATION
UNREALIZED NET CAPITAL GAINS AND LOSSES ON SECURITY PORTFOLIO BY TYPE
($ in millions)
June 30, 2017 March 31, 2017 December 31, 2016
49
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
NET INVESTMENT INCOME
Fixed income securities $ 527 $ 518 $ 514 $ 508 $ 520 $ 518 $ 1,045 $ 1,038
Equity securities 49 44 34 31 44 28 93 72
Mortgage loans 50 55 55 56 53 53 105 106
Limited partnership interests ("LP") 253 120 178 136 126 121 373 247
Short-term 6 6 5 4 3 4 12 7
Other 60 56 59 55 57 51 116 108
Investment income, before expense 945 799 845 790 803 775 1,744 1,578
Less: Investment expense (48) (51) (44) (42) (41) (44) (99) (85)
Net investment income $ 897 $ 748 $ 801 $ 748 $ 762 $ 731 $ 1,645 $ 1,493
Interest-bearing investments (1) $ 631 $ 625 $ 622 $ 613 $ 623 $ 618 $ 1,256 $ 1,241
Equity securities 49 44 34 31 44 28 93 72
LP and other alternative investments (2) 265 130 189 146 136 129 395 265
Investment income, before expense $ 945 $ 799 $ 845 $ 790 $ 803 $ 775 $ 1,744 $ 1,578
PRE-TAX YIELDS (3)
Fixed income securities 3.7 % 3.6 % 3.6 % 3.6 % 3.7 % 3.7 % 3.7 % 3.7 %
Equity securities 3.8 3.5 2.7 2.5 3.7 2.3 3.6 3.0
Mortgage loans 4.6 4.9 5.0 5.0 4.9 4.9 4.8 4.8
Limited partnership interests 16.6 8.1 12.5 9.9 9.6 9.7 12.4 9.6
Total portfolio 4.7 4.0 4.2 4.0 4.1 4.0 4.4 4.1
Interest-bearing investments 3.8 3.7 3.7 3.7 3.8 3.7 3.7 3.7
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (28) $ (43) $ (49) $ (63) $ (63) $ (59) $ (71) $ (122)
Change in intent write-downs (22) (16) (21) (10) (16) (22) (38) (38)
Net other-than-temporary impairment
losses recognized in earnings (50) (59) (70) (73) (79) (81) (109) (160)
Sales and other 139 208 47 121 104 (59) 347 45
Valuation and settlements of derivative instruments (8) (15) 25 (15) (1) (9) (23) (10)
Total $ 81 $ 134 $ 2 $ 33 $ 24 $ (149) $ 215 $ (125)
TOTAL RETURN ON INVESTMENT PORTFOLIO (4)
Income 1.1 % 0.9 % 1.0 % 0.9 % 1.0 % 0.9 % 2.0 % 1.9 %
Valuation 0.7 0.7 (1.7) 0.4 0.9 1.1 1.4 2.0
Total 1.8 % 1.6 % (0.7) % 1.3 % 1.9 % 2.0 % 3.4 % 3.9 %
AVERAGE INVESTMENT BALANCES (in billions) (5) $ 78.9 $ 79.5 $ 79.1 $ 77.5 $ 76.9 $ 76.8 $ 79.3 $ 76.9
(1)
(2)
(3)
(4)
(5)
Comprise fixed income securities, mortgage loans, short-term investments, and other investments including bank and agent loans and derivatives.
Comprise limited partnership interests and other alternative investments, including real estate, timber and agriculture-related investments classified as other investments.
Quarterly pre-tax yield is calculated as annualized quarterly investment income, before investment expense 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, before investment expense 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 investee level expenses (depreciation and asset level operating expenses 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)
Three months ended Six months ended
50
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
NET INVESTMENT INCOME
Fixed income securities:
Tax-exempt $ 23 $ 22 $ 23 $ 23 $ 23 $ 23 $ 45 $ 46
Taxable 210 204 200 192 198 200 414 398
Equity securities 33 29 24 21 30 20 62 50
Mortgage loans 2 3 3 3 3 3 5 6
Limited partnership interests 118 55 82 69 60 58 173 118
Short-term 4 4 3 3 1 2 8 3
Other 27 22 24 22 23 20 49 43
Investment income, before expense 417 339 359 333 338 326 756 664
Less: Investment expense (26) (28) (21) (23) (22) (24) (54) (46)
Net investment income $ 391 $ 311 $ 338 $ 310 $ 316 $ 302 $ 702 $ 618
Net investment income, after-tax $ 264 $ 212 $ 231 $ 211 $ 215 $ 206 $ 476 $ 421
Interest-bearing investments $ 259 $ 249 $ 246 $ 238 $ 241 $ 243 $ 508 $ 484
Equity securities 33 29 24 21 30 20 62 50
LP and other alternative investments 125 61 89 74 67 63 186 130
Investment income, before expense $ 417 $ 339 $ 359 $ 333 $ 338 $ 326 $ 756 $ 664
PRE-TAX YIELDS
Fixed income securities:
Tax-exempt 1.9 % 1.9 % 2.0 % 2.0 % 2.1 % 2.1 % 1.9 % 2.1 %
Equivalent yield for tax-exempt 2.8 2.8 2.9 2.9 3.1 3.1 2.8 3.1
Taxable 3.1 3.1 3.1 3.0 3.2 3.2 3.1 3.2
Equity securities 3.6 3.3 2.8 2.6 3.6 2.4 3.4 3.0
Mortgage loans 3.7 3.8 3.9 3.7 3.9 4.0 3.7 3.9
Limited partnership interests 14.8 7.1 11.0 9.6 8.6 8.9 11.0 8.7
Total portfolio 3.9 3.2 3.4 3.3 3.5 3.3 3.6 3.4
Interest-bearing investments 3.0 2.9 2.9 2.9 3.0 3.0 2.9 3.0
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY ASSET TYPE
Fixed income securities:
Tax-exempt $ (2) $ (2) $ (9) $ 8 $ 4 $ 3 $ (4) $ 7
Taxable 40 14 (17) 9 20 (47) 54 (27)
Equity securities 23 106 49 42 15 (60) 129 (45)
Limited partnership interests 21 27 (29) 13 (10) 13 48 3
Derivatives and other 3 (10) 20 (19) (3) (8) (7) (11)
Total $ 85 $ 135 $ 14 $ 53 $ 26 $ (99) $ 220 $ (73)
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (16) $ (22) $ (27) $ (26) $ (42) $ (35) $ (38) $ (77)
Change in intent write-downs (21) (13) (17) (8) (12) (19) (34) (31)
Net other-than-temporary impairment
losses recognized in earnings (37) (35) (44) (34) (54) (54) (72) (108)
Sales and other 126 180 43 101 82 (41) 306 41
Valuation and settlements of derivative instruments (4) (10) 15 (14) (2) (4) (14) (6)
Total $ 85 $ 135 $ 14 $ 53 $ 26 $ (99) $ 220 $ (73)
AVERAGE INVESTMENT BALANCES (in billions) $ 41.7 $ 41.8 $ 41.1 $ 39.5 $ 38.5 $ 38.3 $ 41.9 $ 38.5
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX)
($ in millions)
Three months ended Six months ended
51
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
NET INVESTMENT INCOME
Fixed income securities $ 283 $ 281 $ 280 $ 282 $ 288 $ 284 $ 564 $ 572
Equity securities 16 15 10 10 14 8 31 22
Mortgage loans 48 52 52 53 50 50 100 100
Limited partnership interests 135 65 96 67 66 63 200 129
Short-term 2 1 2 1 1 2 3 3
Other 32 33 34 32 33 30 65 63
Investment income, before expense 516 447 474 445 452 437 963 889
Less: Investment expense (20) (21) (21) (18) (17) (18) (41) (35)
Net investment income $ 496 $ 426 $ 453 $ 427 $ 435 $ 419 $ 922 $ 854
Net investment income, after-tax $ 322 $ 277 $ 294 $ 278 $ 282 $ 273 $ 599 $ 555
Interest-bearing investments $ 360 $ 363 $ 364 $ 363 $ 369 $ 363 $ 723 $ 732
Equity securities 16 15 10 10 14 8 31 22
LP and other alternative investments 140 69 100 72 69 66 209 135
Investment income, before expense $ 516 $ 447 $ 474 $ 445 $ 452 $ 437 $ 963 $ 889
PRE-TAX YIELDS
Fixed income securities 4.8 % 4.7 % 4.6 % 4.6 % 4.7 % 4.6 % 4.7 % 4.6 %
Equity securities 4.2 4.0 2.6 2.5 3.9 2.1 4.1 2.9
Mortgage loans 4.7 5.0 5.0 5.1 4.9 4.9 4.9 4.9
Limited partnership interests 18.6 9.3 14.1 10.2 10.7 10.7 14.0 10.7
Total portfolio 5.8 5.0 5.3 4.9 5.0 4.8 5.4 4.9
Interest-bearing investments 4.7 4.7 4.7 4.6 4.6 4.6 4.7 4.6
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY ASSET TYPE
Fixed income securities $ (6) $ (7) $ (16) $ (19) $ (1) $ (26) $ (13) $ (27)
Equity securities (4) - 8 3 (4) (30) (4) (34)
Mortgage loans - - (1) - 1 - - 1
Limited partnership interests 10 13 (17) (1) - 13 23 13
Derivatives and other (4) (7) 15 (4) 4 (6) (11) (2)
Total $ (4) $ (1) $ (11) $ (21) $ - $ (49) $ (5) $ (49)
REALIZED CAPITAL GAINS AND LOSSES
(PRE-TAX) BY TRANSACTION TYPE
Impairment write-downs $ (12) $ (21) $ (22) $ (37) $ (18) $ (24) $ (33) $ (42)
Change in intent write-downs (1) (3) (4) (2) (4) (3) (4) (7)
Net other-than-temporary impairment
losses recognized in earnings (13) (24) (26) (39) (22) (27) (37) (49)
Sales and other 13 28 5 19 21 (17) 41 4
Valuation and settlements of derivative instruments (4) (5) 10 (1) 1 (5) (9) (4)
Total $ (4) $ (1) $ (11) $ (21) $ - $ (49) $ (5) $ (49)
AVERAGE INVESTMENT BALANCES (in billions) $ 35.0 $ 35.4 $ 35.6 $ 35.7 $ 35.9 $ 35.9 $ 35.2 $ 35.9
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL
NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX)
($ in millions)
Three months ended Six months ended
52
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
MARKET-BASED ("MB") (1)
Investment Position
Interest-bearing investments $ 68,331 $ 68,836 $ 69,688 $ 69,579 $ 68,357 $ 68,001 $ 68,331 $ 68,357
Equity securities 6,021 5,578 5,567 5,194 5,192 5,032 6,021 5,192
LP and other alternative investments (2) 591 555 535 481 405 403 591 405
Total $ 74,943 $ 74,969 $ 75,790 $ 75,254 $ 73,954 $ 73,436 $ 74,943 $ 73,954
Investment income
Interest-bearing investments $ 629 $ 624 $ 622 $ 611 $ 618 $ 614 $ 1,253 $ 1,232
Equity securities 45 35 34 31 44 28 80 72
LP and other alternative investments - - (1) 1 - - - -
Investment income, before expense 674 659 655 643 662 642 1,333 1,304
Investee level expenses (3) (2) (1) (1) (1) (1) (1) (3) (2)
Income for yield calculation $ 672 $ 658 $ 654 $ 642 $ 661 $ 641 $ 1,330 $ 1,302
Market-based pre-tax yield 3.7 % 3.6 % 3.6 % 3.6 % 3.7 % 3.6 % 3.6 % 3.7 %
Interest-bearing investments pre-tax yield 3.8 3.7 3.7 3.7 3.7 3.7 3.7 3.7
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (19) $ (36) $ (26) $ (37) $ (50) $ (31) $ (55) $ (81)
Change in intent write-downs (22) (16) (21) (10) (16) (21) (38) (37)
Net other-than-temporary impairment
losses recognized in earnings (41) (52) (47) (47) (66) (52) (93) (118)
Sales and other 129 208 43 118 123 (80) 337 43
Valuation and settlements of derivative instruments (1) (10) 13 (13) (5) (6) (11) (11)
Total $ 87 $ 146 $ 9 $ 58 $ 52 $ (138) $ 233 $ (86)
PERFORMANCE-BASED ("PB") (4)
Investment Position
Interest-bearing investments $ 129 $ 108 $ 113 $ 130 $ 162 $ 162 $ 129 $ 162
Equity securities 96 107 99 94 73 85 96 73
LP and other alternative investments 6,137 5,959 5,797 5,626 5,505 5,194 6,137 5,505
Total $ 6,362 $ 6,174 $ 6,009 $ 5,850 $ 5,740 $ 5,441 $ 6,362 $ 5,740
Investment income
Interest-bearing investments $ 2 $ 1 $ - $ 2 $ 5 $ 4 $ 3 $ 9
Equity securities 4 9 - - - - 13 -
LP and other alternative investments 265 130 190 145 136 129 395 265
Investment income, before expense 271 140 190 147 141 133 411 274
Investee level expenses (8) (9) (8) (8) (8) (8) (17) (16)
Income for yield calculation $ 263 $ 131 $ 182 $ 139 $ 133 $ 125 $ 394 $ 258
Performance-based pre-tax yield 16.8 % 8.7 % 12.3 % 9.7 % 9.5 % 9.3 % 12.8 % 9.4 %
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (9) $ (7) $ (23) $ (26) $ (13) $ (28) $ (16) $ (41)
Change in intent write-downs - - - - - (1) - (1)
Net other-than-temporary impairment
losses recognized in earnings (9) (7) (23) (26) (13) (29) (16) (42)
Sales and other 10 - 4 3 (19) 21 10 2
Valuation and settlements of derivative instruments (7) (5) 12 (2) 4 (3) (12) 1
Total $ (6) $ (12) $ (7) $ (25) $ (28) $ (11) $ (18) $ (39)
(1)
(2)
(3)
(4)
Market-based strategy seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities.
Market-based investments include publicly traded equity securities classified as limited partnerships.
When calculating the pre-tax yields, investee level expenses are netted against income for directly held real estate, timber and other consolidated investments.
Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, real estate, infrastructure, timber and agriculture-related assets.
THE ALLSTATE CORPORATION
CONSOLIDATED INVESTMENT POSITION AND RESULTS BY STRATEGY
($ in millions)
As of or for the three months ended As of or for the six months ended
53
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
MARKET-BASED
Investment Position
Interest-bearing investments $ 34,943 $ 34,389 $ 35,138 $ 34,057 $ 32,729 $ 31,852 $ 34,943 $ 32,729
Equity securities 4,359 3,956 4,022 3,554 3,589 3,660 4,359 3,589
LP and other alternative investments 400 376 369 333 282 277 400 282
Total $ 39,702 $ 38,721 $ 39,529 $ 37,944 $ 36,600 $ 35,789 $ 39,702 $ 36,600
Investment income
Interest-bearing investments $ 257 $ 248 $ 247 $ 236 $ 239 $ 240 $ 505 $ 479
Equity securities 31 24 24 21 30 20 55 50
LP and other alternative investments - - (1) - - - - -
Investment income, before expense 288 272 270 257 269 260 560 529
Investee level expenses (2) (1) (1) (1) (1) (1) (3) (2)
Income for yield calculation $ 286 $ 271 $ 269 $ 256 $ 268 $ 259 $ 557 $ 527
Market-based pre-tax yield 3.0 % 2.8 % 2.8 % 2.8 % 3.0 % 2.9 % 2.9 % 3.0 %
Interest-bearing investments pre-tax yield 3.0 2.9 2.9 2.9 3.0 3.0 2.9 3.0
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (11) $ (18) $ (13) $ (14) $ (25) $ (22) $ (29) $ (47)
Change in intent write-downs (21) (13) (17) (8) (12) (18) (34) (30)
Net other-than-temporary impairment
losses recognized in earnings (32) (31) (30) (22) (37) (40) (63) (77)
Sales and other 114 181 39 98 87 (48) 295 39
Valuation and settlements of derivative instruments (1) (9) 10 (13) (4) (3) (10) (7)
Total $ 81 $ 141 $ 19 $ 63 $ 46 $ (91) $ 222 $ (45)
PERFORMANCE-BASED
Investment Position
Interest-bearing investments $ 109 $ 94 $ 95 $ 109 $ 129 $ 128 $ 109 $ 129
Equity securities 51 56 52 50 43 49 51 43
LP and other alternative investments 3,221 3,129 3,046 2,954 2,917 2,770 3,221 2,917
Total $ 3,381 $ 3,279 $ 3,193 $ 3,113 $ 3,089 $ 2,947 $ 3,381 $ 3,089
Investment income
Interest-bearing investments $ 2 $ 1 $ (1) $ 2 $ 2 $ 3 $ 3 $ 5
Equity securities 2 5 - - - - 7 -
LP and other alternative investments 125 61 90 74 67 63 186 130
Investment income, before expense 129 67 89 76 69 66 196 135
Investee level expenses (3) (5) (4) (4) (3) (4) (8) (7)
Income for yield calculation $ 126 $ 62 $ 85 $ 72 $ 66 $ 62 $ 188 $ 128
Performance-based pre-tax yield 15.2 % 7.7 % 11.0 % 9.5 % 8.7 % 8.4 % 11.5 % 8.5 %
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (5) $ (4) $ (14) $ (12) $ (17) $ (13) $ (9) $ (30)
Change in intent write-downs - - - - - (1) - (1)
Net other-than-temporary impairment
losses recognized in earnings (5) (4) (14) (12) (17) (14) (9) (31)
Sales and other 12 (1) 4 3 (5) 7 11 2
Valuation and settlements of derivative instruments (3) (1) 5 (1) 2 (1) (4) 1
Total $ 4 $ (6) $ (5) $ (10) $ (20) $ (8) $ (2) $ (28)
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
INVESTMENT POSITION AND RESULTS BY STRATEGY
($ in millions)
As of or for the three months ended As of or for the six months ended
54
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
MARKET-BASED
Investment Position
Interest-bearing investments $ 31,630 $ 31,917 $ 32,317 $ 32,995 $ 33,387 $ 33,351 $ 31,630 $ 33,387
Equity securities 1,654 1,619 1,542 1,637 1,600 1,369 1,654 1,600
LP and other alternative investments 191 179 165 147 122 122 191 122
Total $ 33,475 $ 33,715 $ 34,024 $ 34,779 $ 35,109 $ 34,842 $ 33,475 $ 35,109
Investment income
Interest-bearing investments $ 360 $ 363 $ 363 $ 363 $ 366 $ 362 $ 723 $ 728
Equity securities 14 11 10 10 14 8 25 22
LP and other alternative investments - - - 1 - - - -
Investment income, before expense 374 374 373 374 380 370 748 750
Investee level expenses - - - - - - - -
Income for yield calculation $ 374 $ 374 $ 373 $ 374 $ 380 $ 370 $ 748 $ 750
Market-based pre-tax yield 4.7 % 4.6 % 4.5 % 4.5 % 4.6 % 4.4 % 4.6 % 4.5 %
Interest-bearing investments pre-tax yield 4.7 4.7 4.7 4.6 4.6 4.5 4.7 4.6
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (8) $ (18) $ (13) $ (23) $ (22) $ (9) $ (26) $ (31)
Change in intent write-downs (1) (3) (4) (2) (4) (3) (4) (7)
Net other-than-temporary impairment
losses recognized in earnings (9) (21) (17) (25) (26) (12) (30) (38)
Sales and other 15 27 5 19 35 (31) 42 4
Valuation and settlements of derivative instruments - (1) 3 - (1) (3) (1) (4)
Total $ 6 $ 5 $ (9) $ (6) $ 8 $ (46) $ 11 $ (38)
PERFORMANCE-BASED
Investment Position
Interest-bearing investments $ 20 $ 14 $ 18 $ 21 $ 33 $ 34 $ 20 $ 33
Equity securities 45 51 47 44 30 36 45 30
LP and other alternative investments 2,916 2,830 2,751 2,672 2,588 2,424 2,916 2,588
Total $ 2,981 $ 2,895 $ 2,816 $ 2,737 $ 2,651 $ 2,494 $ 2,981 $ 2,651
Investment income
Interest-bearing investments $ - $ - $ 1 $ - $ 3 $ 1 $ - $ 4
Equity securities 2 4 - - - - 6 -
LP and other alternative investments 140 69 100 71 69 66 209 135
Investment income, before expense 142 73 101 71 72 67 215 139
Investee level expenses (5) (4) (4) (4) (5) (4) (9) (9)
Income for yield calculation $ 137 $ 69 $ 97 $ 67 $ 67 $ 63 $ 206 $ 130
Performance-based pre-tax yield 18.6 % 9.8 % 13.8 % 10.0 % 10.4 % 10.4 % 14.2 % 10.4 %
Realized capital gains and losses
(pre-tax) by transaction type
Impairment write-downs $ (4) $ (3) $ (9) $ (14) $ 4 $ (15) $ (7) $ (11)
Change in intent write-downs - - - - - - - -
Net other-than-temporary impairment
losses recognized in earnings (4) (3) (9) (14) 4 (15) (7) (11)
Sales and other (2) 1 - - (14) 14 (1) -
Valuation and settlements of derivative instruments (4) (4) 7 (1) 2 (2) (8) -
Total $ (10) $ (6) $ (2) $ (15) $ (8) $ (3) $ (16) $ (11)
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL
INVESTMENT POSITION AND RESULTS BY STRATEGY
($ in millions)
As of or for the three months ended As of or for the six months ended
55
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30,
2017 2017 2016 2016 2016 2016 2017 2016
Investment position
Limited partnerships
Private equity (1) $ 4,333 $ 4,139 $ 4,031 $ 3,839 $ 3,663 $ 3,324 $ 4,333 $ 3,663
Real estate (2) 1,128 1,140 1,102 1,130 1,204 1,229 1,128 1,204
Timber and agriculture-related (3) 192 185 179 171 170 170 192 170
PB - limited partnerships 5,653 5,464 5,312 5,140 5,037 4,723 5,653 5,037
Non-LP
Private equity 171 161 151 165 179 190 171 179
Real estate 373 384 380 380 358 361 373 358
Timber and agriculture-related 165 165 166 165 166 167 165 166
PB - non-LP 709 710 697 710 703 718 709 703
Total
Private equity 4,504 4,300 4,182 4,004 3,842 3,514 4,504 3,842
Real estate 1,501 1,524 1,482 1,510 1,562 1,590 1,501 1,562
Timber and agriculture-related 357 350 345 336 336 337 357 336
Total PB $ 6,362 $ 6,174 $ 6,009 $ 5,850 $ 5,740 $ 5,441 $ 6,362 $ 5,740
Investment income
Limited partnerships
Private equity $ 209 $ 114 $ 145 $ 112 $ 113 $ 85 $ 323 $ 198
Real estate 43 4 35 23 12 33 47 45
Timber and agriculture-related 1 2 (1) - 1 3 3 4
PB - limited partnerships 253 120 179 135 126 121 373 247
Non-LP
Private equity 5 9 1 2 4 2 14 6
Real estate 10 10 9 8 8 8 20 16
Timber and agriculture-related 3 1 1 2 3 2 4 5
PB - non-LP 18 20 11 12 15 12 38 27
Total
Private equity 214 123 146 114 117 87 337 204
Real estate 53 14 44 31 20 41 67 61
Timber and agriculture-related 4 3 - 2 4 5 7 9
Total PB $ 271 $ 140 $ 190 $ 147 $ 141 $ 133 $ 411 $ 274
Investee level expenses $ (8) $ (9) $ (8) $ (8) $ (8) $ (8) $ (17) $ (16)
Realized capital gains and losses
Limited partnerships
Private equity $ (8) $ (10) $ (26) $ (23) $ (20) $ 12 $ (18) $ (8)
Real estate 4 1 2 2 - 1 5 1
Timber and agriculture-related - - - - - - - -
PB - limited partnerships (4) (9) (24) (21) (20) 13 (13) (7)
Non-LP
Private equity (11) (4) 16 (4) (8) (25) (15) (33)
Real estate 9 - 1 - - 1 9 1
Timber and agriculture-related - 1 - - - - 1 -
PB - non-LP (2) (3) 17 (4) (8) (24) (5) (32)
Total
Private equity (19) (14) (10) (27) (28) (13) (33) (41)
Real estate 13 1 3 2 - 2 14 2
Timber and agriculture-related - 1 - - - - 1 -
Total PB $ (6) $ (12) $ (7) $ (25) $ (28) $ (11) $ (18) $ (39)
Pre-Tax Yield 16.8 % 8.7 % 12.3 % 9.7 % 9.5 % 9.3 % 12.8 % 9.4 %
Internal Rate of Return (4)
10 Year 8.3 % 9.5 % 10.1 % 10.1 % 10.2 % 10.5 %
5 Year 11.9 11.9 12.0 11.7 12.0 12.7
(1)
(2)
(3)
(4)
Includes Private equity on page 56, excluding Timber and agriculture-related.
Includes Real estate on page 56.
Includes Timber and agriculture-related reflected in Private equity on page 56.
The internal rate of return ("IRR") is one of the measures we use to evaluate the performance of these investments. The IRR represents the rate of return on the investments considering the cash flows paid and received and, until the investment is
fully liquidated, the estimated value of investment holdings at the end of the measurement period. The calculated IRR for any measurement period is highly influenced by the values of the portfolio at the beginning and end of the period, which reflect
the estimated fair values of the investments as of such dates. As a result, the IRR can vary significantly for different measurement periods based on macroeconomic or other events that impact the estimated beginning or ending portfolio value, such
as the global financial crisis. Our IRR calculation method may differ from those used by other investors. The timing of the recognition of income in the financial statements may differ significantly from the cash distributions and changes in the value
of these investments.
THE ALLSTATE CORPORATION
PERFORMANCE-BASED INVESTMENTS
($ in millions)
As of or for the three months ended As of or for the six months ended
56
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2017 2017 2016 2016 2016 2016
Investment position
Accounting basis
Cost method $ 1,269 $ 1,293 $ 1,282 $ 1,375 $ 1,284 $ 1,193
Equity method ("EMA") (1) 4,937 4,689 4,532 4,213 4,123 3,898
Total $ 6,206 $ 5,982 $ 5,814 $ 5,588 $ 5,407 $ 5,091
Cost method-fair value (2) $ 1,511 $ 1,525 $ 1,493 $ 1,600 $ 1,511 $ 1,466
Underlying investment
Private equity $ 4,525 $ 4,324 $ 4,210 $ 4,010 $ 3,833 $ 3,494
Real estate 1,128 1,140 1,102 1,130 1,204 1,229
Other 553 518 502 448 370 368
Total $ 6,206 $ 5,982 $ 5,814 $ 5,588 $ 5,407 $ 5,091
Segment
Property-Liability $ 3,266 $ 3,122 $ 3,042 $ 2,913 $ 2,842 $ 2,688
Allstate Financial 2,940 2,860 2,771 2,674 2,564 2,399
Corporate and Other - - 1 1 1 4
Total $ 6,206 $ 5,982 $ 5,814 $ 5,588 $ 5,407 $ 5,091
Total Income
Accounting basis
Cost method $ 51 $ 37 $ 26 $ 43 $ 47 $ 39
Equity method 202 83 152 93 79 82
Total $ 253 $ 120 $ 178 $ 136 $ 126 $ 121
Underlying investment
Private equity $ 210 $ 116 $ 144 $ 112 $ 114 $ 88
Real estate 43 4 35 23 12 33
Other - - (1) 1 - -
Total $ 253 $ 120 $ 178 $ 136 $ 126 $ 121
Segment
Property-Liability $ 118 $ 55 $ 82 $ 69 $ 60 $ 58
Allstate Financial 135 65 96 67 66 63
Corporate and Other - - - - - -
Total $ 253 $ 120 $ 178 $ 136 $ 126 $ 121
(1) Approximate cumulative pre-tax appreciation $ 787 $ 611 $ 511 $ 469 $ 469 $ 408
(2) The fair value of cost method limited partnerships is determined using reported net asset values.
THE ALLSTATE CORPORATION
LIMITED PARTNERSHIP INTERESTS
($ in millions)
As of or for the three months ended
57
Definitions of Non-GAAP Measures
Operating income return on common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of common shareholders’ equity at the beginning and at the end of the 12-months, after excluding the effect of
unrealized net capital gains and losses. Return on common shareholders' equity is the most directly comparable GAAP measure. We use operating income as the numerator for the same reasons we use operating income, as discussed above. We use average common shareholders' equity excluding the
effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily attributable to the Company’s earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly between periods due
to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income 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".
Adjusted SquareTrade operating income is a non-GAAP measure, which is computed as net income (loss) applicable to common shareholders, excluding amortization of purchased intangible assets, after-tax, and realized capital gains and losses, after-tax, and adjusted for the after-tax income
statement effects of acquisition-related purchase accounting fair value adjustments to unearned premiums, contractual liability insurance policy premium expenses, and commissions paid to retailers. Net income (loss) applicable to shareholders is the GAAP measure that is most directly comparable to
adjusted SquareTrade operating income. We use adjusted SquareTrade operating income as an important measure to evaluate SquareTrade’s results of operations. We believe that the measure provides investors with a valuable measure of SquareTrade’s ongoing performance because it reveals trends
that may be obscured by the amortization of purchased intangible assets, the acquisition-related purchase accounting fair value adjustments, and the net effects of realized capital gains and losses. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price
and is not indicative of our business results or trends. We adjust for the effects of acquisition-related purchase accounting fair value adjustments because they relate to the acquisition and their effects are not indicative of the underlying business results and trends. Realized capital gains and losses 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 SquareTrade’s operations. Adjusted SquareTrade operating income highlights the results from ongoing operations
and the underlying profitability of our business and is used by management along with the other components of net income applicable to common shareholders to assess our performance. We believe it is useful for investors to evaluate net income applicable to common shareholders, adjusted
SquareTrade operating income and their components separately and in the aggregate when reviewing and evaluating SquareTrade’s performance. Adjusted SquareTrade 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 net income (loss) applicable to common shareholders to adjusted SquareTrade operating income is provided in the schedule, "SquareTrade Profitability Measures".
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 "Property Liability Results", "Allstate Brand Profitability
Measures", "Esurance Brand Profitability Measures and Statistics" and "Encompass Brand Profitability Measures and Statistics".
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,
- business combination expenses and the 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, business combination expenses and the 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. Business combination expenses are excluded because they are non-recurring in nature and the 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".
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and the 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, 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, 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 "Property Liability Results", "Allstate Brand
Profitability Measures", "Esurance Brand Profitability Measures and Statistics", "Encompass Brand Profitability Measures and Statistics", "SquareTrade Profitability Measures" and "Auto, Homeowners and Other Personal Lines Underlying Combined Ratios".
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".