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NORTHBROOK, Ill.--(BUSINESS WIRE)--Nov 2, 2022--
The Allstate Corporation (NYSE: ALL) today reported financial results for the third quarter of 2022.
The Allstate Corporation Consolidated Highlights | ||||||||||||||||
| Three months ended |
| Nine months ended | |||||||||||||
($ in millions, except per share data and ratios) |
| 2022 |
|
| 2021 | % / pts |
|
| 2022 |
|
| 2021 |
| % / pts | ||
Consolidated revenues | $ | 13,208 |
| $ | 12,480 | 5.8 | % |
| $ | 37,765 |
| $ | 37,577 |
| 0.5 | % |
Net income (loss) applicable to common shareholders |
| (694 | ) |
| 508 | NM |
|
|
| (1,106 | ) |
| 695 |
| NM |
|
per diluted common share (1) |
| (2.58 | ) |
| 1.71 | NM |
|
|
| (4.04 | ) |
| 2.30 |
| NM |
|
Adjusted net income (loss)* |
| (420 | ) |
| 217 | NM |
|
|
| 97 |
|
| 3,237 |
| (97.0 | ) % |
per diluted common share* (1) |
| (1.56 | ) |
| 0.73 | NM |
|
|
| 0.35 |
|
| 10.70 |
| (96.7 | ) |
Return on Allstate common shareholders’ equity (trailing twelve months) |
|
|
|
|
| |||||||||||
Net income applicable to common shareholders |
|
|
|
|
| (1.6 | ) % |
| 13.2 | % | (14.8 | ) | ||||
Adjusted net income* |
|
|
|
|
| 4.3 | % |
| 21.2 | % | (16.9 | ) | ||||
Common shares outstanding (in millions) |
|
|
|
|
| 265.9 |
|
| 288.0 |
| (7.7 | ) | ||||
Book value per common share |
|
|
|
|
| 58.35 |
|
| 84.62 |
| (31.0 | ) | ||||
Property-Liability insurance premiums earned |
| 11,157 |
|
| 10,159 | 9.8 |
|
|
| 32,529 |
|
| 30,064 |
| 8.2 |
|
Property-Liability combined ratio |
|
|
|
|
|
|
| |||||||||
Recorded |
| 111.6 |
|
| 105.3 | 6.3 |
|
|
| 105.8 |
|
| 94.8 |
| 11.0 |
|
Underlying combined ratio* |
| 96.4 |
|
| 90.4 | 6.0 |
|
|
| 93.6 |
|
| 84.5 |
| 9.1 |
|
Catastrophe losses |
| 763 |
|
| 1,269 | (39.9 | ) |
|
| 2,333 |
|
| 2,811 |
| (17.0 | ) |
Total policies in force (in thousands) |
|
|
|
|
| 185,007 |
|
| 191,856 |
| (3.6 | ) |
(1) | In periods where a net loss or adjusted net loss is reported, weighted average shares for basic earnings per share is used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation. |
| * | 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. |
| NM = not meaningful |
“Allstate’s operational excellence and financial strength enabled us to navigate a difficult economic environment while serving customers, adapting to significant cost increases and executing profitable growth strategies,” said Tom Wilson, Chair, President and CEO of The Allstate Corporation. “Revenues increased to $13.2 billion for the quarter due to a 9.8% growth in Property-Liability earned premiums largely due to higher average premiums for auto and home insurance and a 7.2% increase in Protection Services revenue. Auto and home insurance prices continue to be increased, reflecting cost inflation with Allstate brand increases of 10.4% and 13.3% respectively, being effective in 2022. Plans to reduce personal lines insurance in states with unacceptable auto and home insurance margins are being expanded. Additionally, we are exiting commercial and shared economy insurance markets that comprise 55% of commercial premiums. The net loss of $694 million reflected a small underlying underwriting margin that was more than offset by prior year reserve increases and a $199 million valuation decline in public equity related investments in the quarter. Prior year reserves, excluding catastrophes, were increased by $875 million, primarily due to higher expected settlements with non-customer claimants reflecting more severe accidents and higher medical and litigation costs. Adjusted net income* was a loss of $420 million for the quarter.”
“Excellent progress was also made in executing the strategy to increase Property-Liability market share and expand protection offerings to customers,” continued Wilson. “Customer value for auto and homeowners insurance will be increased through further cost reductions and sophisticated pricing. Expanded customer access is being achieved with growth through independent agents. While Allstate branded direct sales and marketing investment have been reduced given current auto insurance profitability, execution capabilities were improved. Growth strategies for Health and Benefits, Protection Plans and Identity Protection also advanced. Allstate’s capital position is strong, enabling us to provide cash returns to shareholders of $2.8 billion year-to-date through dividends and share repurchases," concluded Wilson.
Third Quarter 2022 Results
Property-Liability Results | ||||||||||||||||
| Three months ended |
| Nine months ended | |||||||||||||
($ in millions, except ratios) |
| 2022 |
|
| 2021 |
| % / pts |
|
| 2022 |
|
| 2021 | % / pts | ||
Premiums earned | $ | 11,157 |
| $ | 10,159 |
| 9.8 | % |
| $ | 32,529 |
| $ | 30,064 | 8.2 | % |
Allstate Brand |
| 9,517 |
|
| 8,774 |
| 8.5 |
|
|
| 27,816 |
|
| 26,201 | 6.2 |
|
National General |
| 1,640 |
|
| 1,385 |
| 18.4 |
|
|
| 4,713 |
|
| 3,863 | 22.0 |
|
|
|
|
|
|
|
|
| |||||||||
Underwriting income (loss) |
| (1,292 | ) |
| (534 | ) | NM |
|
|
| (1,876 | ) |
| 1,552 | NM |
|
Allstate Brand |
| (1,049 | ) |
| (311 | ) | NM |
|
|
| (1,623 | ) |
| 1,618 | NM |
|
National General |
| (124 | ) |
| (112 | ) | 10.7 |
|
|
| (133 | ) |
| 41 | NM |
|
|
|
|
|
|
|
|
| |||||||||
Recorded combined ratio |
| 111.6 |
|
| 105.3 |
| 6.3 |
|
|
| 105.8 |
|
| 94.8 | 11.0 |
|
Allstate Protection auto |
| 117.4 |
|
| 102.3 |
| 15.1 |
|
|
| 109.3 |
|
| 92.4 | 16.9 |
|
Allstate Protection homeowners |
| 91.2 |
|
| 111.0 |
| (19.8 | ) |
|
| 94.2 |
|
| 100.2 | (6.0 | ) |
|
|
|
|
|
|
|
| |||||||||
Underlying combined ratio* |
| 96.4 |
|
| 90.4 |
| 6.0 |
|
|
| 93.6 |
|
| 84.5 | 9.1 |
|
Allstate Protection auto |
| 104.0 |
|
| 97.6 |
| 6.4 |
|
|
| 101.7 |
|
| 89.9 | 11.8 |
|
Allstate Protection homeowners |
| 74.6 |
|
| 71.6 |
| 3.0 |
|
|
| 71.4 |
|
| 69.6 | 1.8 |
|
“We continue to implement a multi-faceted program to restore Property-Liability margins to targeted levels,” said Mario Rizzo, President, Property-Liability. “This includes continued increases in auto and home insurance prices, reducing expenses and adapting claims settlement practices to a high inflation environment. In addition, growth is being reduced in states and lines of business that are underperforming. At this time we will no longer write new homeowners and condominium business in California, although we will offer continuing coverage to existing customers. Commercial insurance is being exited in five states and coverage to transportation network companies will not be offered unless it utilizes telematics-based pricing. Additional actions are likely in personal auto insurance. This balanced approach enables us to serve customers while generating appropriate returns for investors,” concluded Rizzo.
Protection Services Results | ||||||||||||||||||
| Three months ended |
| Nine months ended | |||||||||||||||
($ in millions) |
| 2022 |
|
| 2021 | % / $ |
|
| 2022 |
|
| 2021 |
| % / $ | ||||
Total revenues (1) | $ | 640 |
| $ | 597 |
| 7.2 | % |
| $ | 1,896 |
| $ | 1,730 |
|
| 9.6 | % |
Allstate Protection Plans |
| 349 |
|
| 311 |
| 12.2 |
|
|
| 1,016 |
|
| 881 |
|
| 15.3 |
|
Allstate Dealer Services |
| 143 |
|
| 129 |
| 10.9 |
|
|
| 417 |
|
| 382 |
|
| 9.2 |
|
Allstate Roadside |
| 65 |
|
| 64 |
| 1.6 |
|
|
| 194 |
|
| 183 |
|
| 6.0 |
|
Arity |
| 49 |
|
| 62 |
| (21.0 | ) |
|
| 163 |
|
| 190 |
|
| (14.2 | ) |
Allstate Identity Protection |
| 34 |
|
| 31 |
| 9.7 |
|
|
| 106 |
|
| 94 |
|
| 12.8 |
|
Adjusted net income (loss) | $ | 35 |
| $ | 45 | $ | (10 | ) |
| $ | 131 |
| $ | 150 |
| $ | (19 | ) |
Allstate Protection Plans |
| 29 |
|
| 32 |
| (3 | ) |
|
| 108 |
|
| 119 |
|
| (11 | ) |
Allstate Dealer Services |
| 10 |
|
| 7 |
| 3 |
|
|
| 27 |
|
| 25 |
|
| 2 |
|
Allstate Roadside |
| 1 |
|
| 1 |
| — |
|
|
| 4 |
|
| 7 |
|
| (3 | ) |
Arity |
| (2 | ) |
| 1 |
| (3 | ) |
|
| (4 | ) |
| 4 |
|
| (8 | ) |
Allstate Identity Protection |
| (3 | ) |
| 4 |
| (7 | ) |
|
| (4 | ) |
| (5 | ) |
| 1 |
|
(1) Excludes net gains and losses on investments and derivatives |
Allstate Health and Benefits Results | |||||||||||||
| Three months ended |
| Nine months ended | ||||||||||
($ in millions) |
| 2022 |
| 2021 | % |
|
| 2022 |
| 2021 | % | ||
Premiums and contract charges | $ | 463 | $ | 460 | 0.7 | % |
| $ | 1,398 | $ | 1,362 | 2.6 | % |
Employer voluntary benefits |
| 257 |
| 251 | 2.4 |
|
|
| 780 |
| 769 | 1.4 |
|
Group health |
| 96 |
| 90 | 6.7 |
|
|
| 285 |
| 260 | 9.6 |
|
Individual health |
| 110 |
| 119 | (7.6 | ) |
|
| 333 |
| 333 | — |
|
Adjusted net income |
| 54 |
| 33 | 63.6 |
|
|
| 172 |
| 160 | 7.5 |
|
Allstate Investment Results | |||||||||||||||||||
| Three months ended |
| Nine months ended | ||||||||||||||||
($ in millions, except ratios) |
| 2022 |
|
| 2021 |
| $ / pts |
|
| 2022 |
|
| 2021 |
| $ / pts | ||||
Net investment income | $ | 690 |
| $ | 764 |
| $ | (74 | ) |
| $ | 1,846 |
| $ | 2,446 |
| $ | (600 | ) |
Market-based investment income (1) |
| 402 |
|
| 352 |
|
| 50 |
|
|
| 1,093 |
|
| 1,061 |
|
| 32 |
|
Performance-based investment income (1) |
| 335 |
|
| 437 |
|
| (102 | ) |
|
| 877 |
|
| 1,464 |
|
| (587 | ) |
Net gains (losses) on investments and derivatives |
| (167 | ) |
| 105 |
|
| (272 | ) |
|
| (1,167 | ) |
| 818 |
|
| (1,985 | ) |
Change in unrealized net capital gains and losses, pre-tax |
| (1,009 | ) |
| (302 | ) |
| (707 | ) |
|
| (4,506 | ) |
| (1,352 | ) |
| (3,154 | ) |
Total return on investment portfolio |
| (0.8 | ) % |
| 1.0 | % |
| (1.8 | ) |
|
| (6.4 | ) % |
| 3.3 | % |
| (9.7 | ) |
Total return on investment portfolio (trailing twelve months) |
|
|
|
|
| (5.3 | ) % |
| 6.0 | % |
| (11.3 | ) |
(1) | Investment expenses are not allocated between market-based and performance-based portfolios with the exception of investee level expenses. |
Proactive Capital Management
“Allstate’s capital position and liquidity remain strong with $4.5 billion of parent holding company deployable assets,” said Jess Merten, Chief Financial Officer. “This enables us to navigate the challenging inflationary environment, invest in Transformative Growth and provide cash returns to shareholders. In the third quarter we returned $897 million to common shareholders through a combination of $665 million in share repurchases and $232 million in common shareholder dividends. We have $1.2 billion remaining on our current $5 billion share repurchase authorization, which is expected to be completed after the first quarter of 2023 as we moderate the pace of share repurchases,” concluded Merten.
Visit www.allstateinvestors.com for additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be at 9 a.m. ET on Thursday, November 3. 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 are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.
THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) | |||||||
|
|
|
| ||||
($ in millions, except par value data)
| September 30, |
| December 31, | ||||
Assets |
|
|
| ||||
Investments |
|
|
| ||||
Fixed income securities, at fair value (amortized cost, net $45,468 and $41,376) | $ | 41,715 |
|
| $ | 42,136 |
|
Equity securities, at fair value (cost $4,652 and $6,016) |
| 4,723 |
|
|
| 7,061 |
|
Mortgage loans, net |
| 833 |
|
|
| 821 |
|
Limited partnership interests |
| 7,907 |
|
|
| 8,018 |
|
Short-term, at fair value (amortized cost $4,031 and $4,009) |
| 4,030 |
|
|
| 4,009 |
|
Other investments, net |
| 1,798 |
|
|
| 2,656 |
|
Total investments |
| 61,006 |
|
|
| 64,701 |
|
Cash |
| 786 |
|
|
| 763 |
|
Premium installment receivables, net |
| 9,150 |
|
|
| 8,364 |
|
Deferred policy acquisition costs |
| 5,273 |
|
|
| 4,722 |
|
Reinsurance and indemnification recoverables, net |
| 9,961 |
|
|
| 10,024 |
|
Accrued investment income |
| 389 |
|
|
| 339 |
|
Deferred income taxes |
| 492 |
|
|
| — |
|
Property and equipment, net |
| 1,008 |
|
|
| 939 |
|
Goodwill |
| 3,502 |
|
|
| 3,502 |
|
Other assets, net |
| 6,109 |
|
|
| 6,086 |
|
Total assets | $ | 97,676 |
|
| $ | 99,440 |
|
Liabilities |
|
|
| ||||
Reserve for property and casualty insurance claims and claims expense | $ | 36,529 |
|
| $ | 33,060 |
|
Reserve for future policy benefits |
| 1,276 |
|
|
| 1,273 |
|
Contractholder funds |
| 909 |
|
|
| 908 |
|
Unearned premiums |
| 22,026 |
|
|
| 19,844 |
|
Claim payments outstanding |
| 1,196 |
|
|
| 1,123 |
|
Deferred income taxes |
| — |
|
|
| 833 |
|
Other liabilities and accrued expenses |
| 10,212 |
|
|
| 9,296 |
|
Long-term debt |
| 7,967 |
|
|
| 7,976 |
|
Total liabilities |
| 80,115 |
|
|
| 74,313 |
|
Equity |
|
|
| ||||
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand shares issued and outstanding, $2,025 aggregate liquidation preference |
| 1,970 |
|
|
| 1,970 |
|
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 266 million and 281 million shares outstanding |
| 9 |
|
|
| 9 |
|
Additional capital paid-in |
| 3,765 |
|
|
| 3,722 |
|
Retained income |
| 51,490 |
|
|
| 53,294 |
|
Treasury stock, at cost (634 million and 619 million shares) |
| (36,518 | ) |
|
| (34,471 | ) |
Accumulated other comprehensive income: |
|
|
| ||||
Unrealized net capital gains and losses |
| (2,927 | ) |
|
| 598 |
|
Unrealized foreign currency translation adjustments |
| (150 | ) |
|
| (15 | ) |
Unamortized pension and other postretirement prior service credit |
| 34 |
|
|
| 72 |
|
Total accumulated other comprehensive income |
| (3,043 | ) |
|
| 655 |
|
Total Allstate shareholders’ equity |
| 17,673 |
|
|
| 25,179 |
|
Noncontrolling interest |
| (112 | ) |
|
| (52 | ) |
Total equity |
| 17,561 |
|
|
| 25,127 |
|
Total liabilities and equity | $ | 97,676 |
|
| $ | 99,440 |
|
THE ALLSTATE CORPORATION AND SUBSIDIARIES | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||
|
|
|
| ||||||||||||
($ in millions, except per share data) | Three months ended |
| Nine months ended | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
|
|
|
|
|
|
|
| ||||||||
Revenues |
|
|
|
|
|
|
| ||||||||
Property and casualty insurance premiums | $ | 11,661 |
|
| $ | 10,615 |
|
| $ | 34,004 |
|
| $ | 31,366 |
|
Accident and health insurance premiums and contract charges |
| 463 |
|
|
| 460 |
|
|
| 1,398 |
|
|
| 1,362 |
|
Other revenue |
| 561 |
|
|
| 536 |
|
|
| 1,684 |
|
|
| 1,585 |
|
Net investment income |
| 690 |
|
|
| 764 |
|
|
| 1,846 |
|
|
| 2,446 |
|
Net gains (losses) on investments and derivatives |
| (167 | ) |
|
| 105 |
|
|
| (1,167 | ) |
|
| 818 |
|
Total revenues |
| 13,208 |
|
|
| 12,480 |
|
|
| 37,765 |
|
|
| 37,577 |
|
|
|
|
|
|
|
|
| ||||||||
Costs and expenses |
|
|
|
|
|
|
| ||||||||
Property and casualty insurance claims and claims expense |
| 10,073 |
|
|
| 8,264 |
|
|
| 27,262 |
|
|
| 21,514 |
|
Shelter-in-Place Payback expense |
| — |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
Accident, health and other policy benefits |
| 263 |
|
|
| 277 |
|
|
| 801 |
|
|
| 771 |
|
Amortization of deferred policy acquisition costs |
| 1,682 |
|
|
| 1,582 |
|
|
| 4,913 |
|
|
| 4,650 |
|
Operating costs and expenses |
| 1,842 |
|
|
| 1,890 |
|
|
| 5,594 |
|
|
| 5,304 |
|
Pension and other postretirement remeasurement (gains) losses |
| 79 |
|
|
| 40 |
|
|
| 91 |
|
|
| (404 | ) |
Restructuring and related charges |
| 14 |
|
|
| 23 |
|
|
| 27 |
|
|
| 145 |
|
Amortization of purchased intangibles |
| 90 |
|
|
| 109 |
|
|
| 264 |
|
|
| 267 |
|
Interest expense |
| 85 |
|
|
| 69 |
|
|
| 251 |
|
|
| 246 |
|
Total costs and expenses |
| 14,128 |
|
|
| 12,254 |
|
|
| 39,203 |
|
|
| 32,522 |
|
|
|
|
|
|
|
|
| ||||||||
(Loss) income from operations before income tax expense |
| (920 | ) |
|
| 226 |
|
|
| (1,438 | ) |
|
| 5,055 |
|
|
|
|
|
|
|
|
| ||||||||
Income tax (benefit) expense |
| (237 | ) |
|
| 20 |
|
|
| (377 | ) |
|
| 1,008 |
|
|
|
|
|
|
|
|
| ||||||||
Net (loss) income from continuing operations |
| (683 | ) |
|
| 206 |
|
|
| (1,061 | ) |
|
| 4,047 |
|
|
|
|
|
|
|
|
| ||||||||
Income (loss) from discontinued operations, net of tax |
| — |
|
|
| 325 |
|
|
| — |
|
|
| (3,272 | ) |
|
|
|
|
|
|
|
| ||||||||
Net (loss) income |
| (683 | ) |
|
| 531 |
|
|
| (1,061 | ) |
|
| 775 |
|
|
|
|
|
|
|
|
| ||||||||
Less: Net loss attributable to noncontrolling interest |
| (15 | ) |
|
| (7 | ) |
|
| (34 | ) |
|
| (7 | ) |
|
|
|
|
|
|
|
| ||||||||
Net (loss) income attributable to Allstate |
| (668 | ) |
|
| 538 |
|
|
| (1,027 | ) |
|
| 782 |
|
|
|
|
|
|
|
|
| ||||||||
Less: Preferred stock dividends |
| 26 |
|
|
| 30 |
|
|
| 79 |
|
|
| 87 |
|
|
|
|
|
|
|
|
| ||||||||
Net (loss) income applicable to common shareholders | $ | (694 | ) |
| $ | 508 |
|
| $ | (1,106 | ) |
| $ | 695 |
|
|
|
|
|
|
|
|
| ||||||||
Earnings per common share applicable to common shareholders |
|
|
|
|
|
|
| ||||||||
Basic |
|
|
|
|
|
|
| ||||||||
Continuing operations | $ | (2.58 | ) |
| $ | 0.62 |
|
| $ | (4.04 | ) |
| $ | 13.31 |
|
Discontinued operations |
| — |
|
|
| 1.11 |
|
|
| — |
|
|
| (10.98 | ) |
Total | $ | (2.58 | ) |
| $ | 1.73 |
|
| $ | (4.04 | ) |
| $ | 2.33 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted |
|
|
|
|
|
|
| ||||||||
Continuing operations | $ | (2.58 | ) |
| $ | 0.62 |
|
| $ | (4.04 | ) |
| $ | 13.11 |
|
Discontinued operations |
| — |
|
|
| 1.09 |
|
|
| — |
|
|
| (10.81 | ) |
Total | $ | (2.58 | ) |
| $ | 1.71 |
|
| $ | (4.04 | ) |
| $ | 2.30 |
|
|
|
|
|
|
|
|
| ||||||||
Weighted average common shares – Basic |
| 268.7 |
|
|
| 293.1 |
|
|
| 273.5 |
|
|
| 298.1 |
|
Weighted average common shares – Diluted |
| 268.7 |
|
|
| 297.9 |
|
|
| 273.5 |
|
|
| 302.6 |
|
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.
Adjusted net income is net income (loss) applicable to common shareholders, excluding:
Net income (loss) applicable to common shareholders is the GAAP measure that is most directly comparable to adjusted net income.
We use adjusted net 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 net gains and losses on investments and derivatives, pension and other postretirement remeasurement gains and losses, business combination expenses and the amortization or impairment of purchased intangibles, income or loss from discontinued operations, gain or loss on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items and the related tax expense or benefit of these items. Net gains and losses on investments and derivatives, and pension and other postretirement remeasurement 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 the insurance underwriting process. Business combination expenses, income or loss from discontinued operations and gain or loss on disposition of operations are excluded because they are non-recurring in nature and the amortization or impairment of purchased intangibles is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, adjusted net 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 adjusted net 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. Adjusted net income is used by management along with the other components of net income (loss) applicable to common shareholders to assess our performance. We use adjusted measures of adjusted net income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income (loss) applicable to common shareholders, adjusted net 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 adjusted net 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 adjusted net income as the denominator. Adjusted net income should not be considered a substitute for net income (loss) applicable to common shareholders and does not reflect the overall profitability of our business.
The following tables reconcile net income (loss) applicable to common shareholders and adjusted net income. Taxes on adjustments to reconcile net income (loss) applicable to common shareholders and adjusted net income generally use a 21% effective tax rate.
($ in millions, except per share data) | Three months ended September 30, | ||||||||||||||
| Consolidated |
| Per diluted common share | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
Net income (loss) applicable to common shareholders | $ | (694 | ) |
| $ | 508 |
|
| $ | (2.58 | ) | (1) | $ | 1.71 |
|
Net (gains) losses on investments and derivatives |
| 167 |
|
|
| (105 | ) |
|
| 0.62 |
|
|
| (0.35 | ) |
Pension and other postretirement remeasurement (gains) losses |
| 79 |
|
|
| 40 |
|
|
| 0.29 |
|
|
| 0.13 |
|
Reclassification of periodic settlements and accruals on non-hedge derivative instruments |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Business combination expenses and the amortization of purchased intangibles |
| 90 |
|
|
| 109 |
|
|
| 0.34 |
|
|
| 0.37 |
|
Business combination fair value adjustment |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
(Gain) loss on disposition of operations |
| 5 |
|
|
| — |
|
|
| 0.02 |
|
|
| — |
|
(Income) loss from discontinued operations |
| — |
|
|
| (235 | ) |
|
| — |
|
|
| (0.79 | ) |
Income tax expense (benefit) |
| (67 | ) |
|
| (100 | ) |
|
| (0.25 | ) |
|
| (0.34 | ) |
Adjusted net income (loss) * | $ | (420 | ) |
| $ | 217 |
|
| $ | (1.56 | ) | (1) | $ | 0.73 |
|
|
|
|
|
|
|
|
| ||||||||
| Nine months ended September 30, | ||||||||||||||
| Consolidated |
| Per diluted common share | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
Net income (loss) applicable to common shareholders | $ | (1,106 | ) |
| $ | 695 |
|
| $ | (4.04 | ) | (2) | $ | 2.30 |
|
Net (gains) losses on investments and derivatives |
| 1,167 |
|
|
| (818 | ) |
|
| 4.23 |
|
|
| (2.70 | ) |
Pension and other postretirement remeasurement (gains) losses |
| 91 |
|
|
| (404 | ) |
|
| 0.34 |
|
|
| (1.34 | ) |
Reclassification of periodic settlements and accruals on non-hedge derivative instruments |
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
Business combination expenses and the amortization of purchased intangibles |
| 264 |
|
|
| 289 |
|
|
| 0.96 |
|
|
| 0.96 |
|
Business combination fair value adjustment |
| — |
|
|
| (6 | ) |
|
| — |
|
|
| (0.02 | ) |
(Gain) loss on disposition of operations |
| (6 | ) |
|
| — |
|
|
| (0.02 | ) |
|
| — |
|
(Income) loss from discontinued operations |
| — |
|
|
| 3,435 |
|
|
| — |
|
|
| 11.35 |
|
Income tax expense (benefit) |
| (313 | ) |
|
| 45 |
|
|
| (1.12 | ) |
|
| 0.15 |
|
Adjusted net income (loss) * | $ | 97 |
|
| $ | 3,237 |
|
| $ | 0.35 |
|
| $ | 10.70 |
|
_____________ | |
(1) | Due to a net loss reported for the three months ended September 30, 2022, calculation uses weighted average shares of 268.7 million, which excludes weighted average diluted shares of 2.9 million. |
(2) | Due to a net loss reported for the nine months ended September 30, 2022, calculation uses weighted average shares of 273.5 million, which excludes weigh average diluted shares of 3.3 million. |
Adjusted net income return on Allstate common shareholders’ equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month adjusted net income by the average of Allstate 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 Allstate common shareholders’ equity is the most directly comparable GAAP measure. We use adjusted net income as the numerator for the same reasons we use adjusted net income, as discussed previously. We use average Allstate common shareholders’ equity excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily applicable to Allstate'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 (loss) applicable to common shareholders and return on Allstate 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 Allstate 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 adjusted net income return on Allstate common shareholders’ equity from return on Allstate 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 adjusted net income return on Allstate common shareholders’ equity in incentive compensation. Therefore, we believe it is useful for investors to have adjusted net income return on Allstate common shareholders’ equity and return on Allstate common shareholders’ equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net 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. We also provide it to facilitate a comparison to our long-term adjusted net income return on Allstate common shareholders’ equity goal. Adjusted net income return on Allstate common shareholders’ equity should not be considered a substitute for return on Allstate common shareholders’ equity and does not reflect the overall profitability of our business.
The following tables reconcile return on Allstate common shareholders’ equity and adjusted net income return on Allstate common shareholders’ equity.
($ in millions) | For the twelve months ended | ||||||
|
| 2022 |
|
|
| 2021 |
|
Return on Allstate commonshareholders’ equity |
|
|
| ||||
Numerator: |
|
|
| ||||
Net income applicable to common shareholders | $ | (316 | ) |
| $ | 3,293 |
|
Denominator: |
|
|
| ||||
Beginning Allstate common shareholders’ equity | $ | 24,759 |
|
| $ | 25,293 |
|
Ending Allstate common shareholders’ equity (1) |
| 15,703 |
|
|
| 24,759 |
|
Average Allstate common shareholders’ equity | $ | 20,231 |
|
| $ | 25,026 |
|
Return on Allstate common shareholders’ equity |
| (1.6 | ) % |
|
| 13.2 | % |
($ in millions) | For the twelve months ended | ||||||
|
| 2022 |
|
|
| 2021 |
|
Adjusted net income return on Allstate common shareholders’ equity |
|
|
| ||||
Numerator: |
|
|
| ||||
Adjusted net income * | $ | 893 |
|
| $ | 4,829 |
|
|
|
|
| ||||
Denominator: |
|
|
| ||||
Beginning Allstate common shareholders’ equity | $ | 24,759 |
|
| $ | 25,293 |
|
Less: Unrealized net capital gains and losses |
| 1,828 |
|
|
| 2,744 |
|
Adjusted beginning Allstate common shareholders’ equity |
| 22,931 |
|
|
| 22,549 |
|
|
|
|
| ||||
Ending Allstate common shareholders’ equity (1) |
| 15,703 |
|
|
| 24,759 |
|
Less: Unrealized net capital gains and losses |
| (2,927 | ) |
|
| 1,828 |
|
Adjusted ending Allstate common shareholders’ equity |
| 18,630 |
|
|
| 22,931 |
|
Average adjusted Allstate common shareholders’ equity | $ | 20,781 |
|
| $ | 22,740 |
|
Adjusted net income return on Allstate common shareholders’ equity * |
| 4.3 | % |
|
| 21.2 | % |
_____________ | |
(1) | Excludes equity related to preferred stock of $1,970 million as of September 30, 2022 and September 30, 2021. |
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization or impairment of purchased intangibles (“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 or impairment of purchased intangibles 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 or impairment of purchased intangibles. 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, which could increase or decrease current year net income. Amortization or impairment of purchased intangibles 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. 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. Underwriting margin is calculated as 100% minus the combined ratio.
Property-Liability | Three months ended |
| Nine months ended | ||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
Combined ratio | 111.6 |
|
| 105.3 |
|
| 105.8 |
|
| 94.8 |
|
Effect of catastrophe losses | (6.8 | ) |
| (12.5 | ) |
| (7.2 | ) |
| (9.4 | ) |
Effect of prior year non-catastrophe reserve reestimates | (7.8 | ) |
| (1.6 | ) |
| (4.5 | ) |
| (0.4 | ) |
Effect of amortization of purchased intangibles | (0.6 | ) |
| (0.8 | ) |
| (0.5 | ) |
| (0.5 | ) |
Underlying combined ratio* | 96.4 |
|
| 90.4 |
|
| 93.6 |
|
| 84.5 |
|
|
|
|
|
|
|
|
| ||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) |
| — |
|
| 0.1 |
|
| (0.7 | ) |
Allstate Protection - Auto Insurance | Three months ended |
| Nine months ended | ||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
Combined ratio | 117.4 |
|
| 102.3 |
|
| 109.3 |
|
| 92.4 |
|
Effect of catastrophe losses | (4.4 | ) |
| (2.9 | ) |
| (2.2 | ) |
| (1.9 | ) |
Effect of prior year non-catastrophe reserve reestimates | (8.5 | ) |
| (1.1 | ) |
| (4.9 | ) |
| (0.1 | ) |
Effect of amortization of purchased intangibles | (0.5 | ) |
| (0.7 | ) |
| (0.5 | ) |
| (0.5 | ) |
Underlying combined ratio* | 104.0 |
|
| 97.6 |
|
| 101.7 |
|
| 89.9 |
|
|
|
|
|
|
|
|
| ||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) |
| (0.1 | ) |
| (0.3 | ) |
| (0.1 | ) |
Allstate Protection - Homeowners Insurance | Three months ended |
| Nine months ended | ||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
Combined ratio | 91.2 |
|
| 111.0 |
|
| 94.2 |
|
| 100.2 |
|
Effect of catastrophe losses | (14.1 | ) |
| (38.0 | ) |
| (21.0 | ) |
| (29.8 | ) |
Effect of prior year non-catastrophe reserve reestimates | (1.8 | ) |
| (0.6 | ) |
| (1.2 | ) |
| (0.2 | ) |
Effect of amortization of purchased intangibles | (0.7 | ) |
| (0.8 | ) |
| (0.6 | ) |
| (0.6 | ) |
Underlying combined ratio* | 74.6 |
|
| 71.6 |
|
| 71.4 |
|
| 69.6 |
|
|
|
|
|
|
|
|
| ||||
Effect of prior year catastrophe reserve reestimates | 0.2 |
|
| 0.1 |
|
| 1.0 |
|
| (2.3 | ) |
View source version on businesswire.com:https://www.businesswire.com/news/home/20221102006120/en/
CONTACT: Al Scott
Media Relations
(847) 402-5600
Mark Nogal
Investor Relations
(847) 402-2800
KEYWORD: UNITED STATES NORTH AMERICA ILLINOIS
INDUSTRY KEYWORD: INSURANCE PROFESSIONAL SERVICES
SOURCE: The Allstate Corporation
Copyright Business Wire 2022.
PUB: 11/02/2022 06:13 PM/DISC: 11/02/2022 06:13 PM
http://www.businesswire.com/news/home/20221102006120/en