Transformative Growth Strategy Progresses
The Allstate Corporation (NYSE: ALL) today reported financial
results for the first quarter of 2022.
The Allstate Corporation
Consolidated Highlights
Three months ended March
31,
($ in millions, except per share data
and ratios)
2022
2021
% / pts
Change
Consolidated revenues
$12,337
$12,451
(0.9) %
Net income (loss) applicable to common
shareholders
630
(1,408)
NM
per diluted common share
2.24
(4.60)
NM
Adjusted net income*
726
1,871
(61.2)
per diluted common share*
2.58
6.11
(57.8)
Return on Allstate common shareholders’
equity (trailing twelve months)
Net income applicable to common
shareholders
15.4 %
15.1 %
0.3
Adjusted net income*
12.8 %
23.2 %
(10.4)
Common shares outstanding (in
millions)
275.7
300.1
(8.1)
Book value per common share
75.95
81.08
(6.3)
Property-Liability combined
ratio
Recorded
97.3
83.3
14.0
Underlying combined ratio*
90.9
77.1
13.8
Property and casualty insurance
premiums earned
10,981
10,307
6.5
Catastrophe losses
462
590
(21.7)
Total policies in force (in
thousands)
190,309
182,912
4.0
*
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 is addressing inflation by raising prices, reducing
expenses and changing investment allocations,” said Tom Wilson,
Chair, President and CEO of The Allstate Corporation. “Premiums
earned were $11.0 billion in the quarter, an increase of 6.5% over
the prior year due to policy growth and increased average premiums,
as auto and home insurance rate increases begin to increase
revenues. Net income was $630 million and adjusted net income* was
$726 million ($2.58 per share). Excellent profitability in
homeowners insurance, strong investment income and earnings from
Protection Services and Health and Benefits mitigated the negative
impact of inflation on auto insurance margins. Shareholder value
also benefited from a shortening of the bond portfolio duration in
late 2021 to reduce enterprise exposure to inflation and higher
interest rates.”
“We made excellent progress on the Transformative Growth
strategy by expanding customer access, improving pricing
sophistication and advancing expense reduction programs. Customer
access was expanded as Allstate agent new business sales were
maintained while direct distribution grew to 38% of new business
and National General expanded through independent agents. Allstate
brand auto insurance price increases of $862 million were
implemented in the quarter using sophisticated pricing algorithms.
While the expense ratio increased compared to prior year quarter
from higher employee-related costs, we remain committed to our
three-year expense reduction goals. Transformative Growth has
positioned us to quickly adapt to this inflationary environment
while improving our competitive position to grow market share,”
concluded Wilson.
First Quarter 2022 Results
- Total revenues of $12.3 billion in the first quarter of 2022
decreased 0.9% compared to the prior year quarter, reflecting
losses on fixed income sales and equity valuations in 2022 compared
to net gains in 2021. This was partially offset by higher
Property-Liability earned premium and increased Protection Services
revenue.
- Net income applicable to common shareholders was $630 million
in the first quarter of 2022 compared to a loss of $1.4 billion in
the prior year quarter, primarily due to a loss from discontinued
operations in 2021 associated with the sales of Allstate Life
Insurance Company and Allstate Life Insurance Company of New York,
partially offset by lower underwriting income and equity valuation
decreases.
- Adjusted net income* of $726 million, or $2.58 per diluted
share, was below the $1.9 billion generated in the prior year
quarter. The decrease reflects higher auto accident frequency and
increased inflation, unfavorable prior year reserve reestimates and
lower net investment income, partially offset by higher earned
premium and lower catastrophe losses.
Property-Liability
Results
Three months ended March
31,
($ in millions, except ratios)
2022
2021
% / pts Change
Premiums earned
$
10,498
$
9,896
6.1
%
Allstate Brand
9,011
8,681
3.8
National General
1,487
1,215
22.4
Underwriting income
280
1,657
(83.1
)
Allstate Brand
251
1,515
(83.4
)
National General
29
138
(79.0
)
Recorded combined ratio
97.3
83.3
14.0
Allstate Protection auto
102.1
80.5
21.6
Allstate Protection homeowners
84.2
88.8
(4.6
)
Underlying combined ratio*
90.9
77.1
13.8
Allstate Protection auto
98.8
80.1
18.7
Allstate Protection homeowners
69.0
67.7
1.3
- Property-Liability earned premium of $10.5 billion
increased 6.1% in the first quarter of 2022 compared to the prior
year quarter, driven by higher average premiums and item growth in
both the National General and Allstate brands. The recorded
combined ratio of 97.3 generated underwriting income of $280
million compared to $1.7 billion in the first quarter of 2021.
- Lower underwriting income compared to the prior year quarter
was primarily driven by lower auto insurance margins, reflecting
the impact from inflationary increases in claim severity and
increased auto insurance accident frequency as miles driven
increased with economic activity. This was partially offset by
higher premiums earned and lower catastrophe losses.
Non-catastrophe prior year reserve strengthening of $158 million
was primarily driven by adverse loss development in auto physical
damage and bodily injury coverages.
- The underlying combined ratio* of 90.9 in the first quarter of
2022 was 13.8 points above the prior year quarter, reflecting
higher auto and homeowners claims severity due to increased
inflationary impacts and higher auto accident frequency.
- The expense ratio of 24.0 in the first quarter decreased 0.5
points compared to prior full year and increased 0.8 points
compared to the first quarter 2021. The increase from the prior
year quarter was driven by higher operating costs and increased
amortization of purchased intangibles from the National General
acquisition, partially offset by lower distribution related
acquisition costs. While quarterly fluctuations are anticipated,
Allstate remains committed to the long-term objective of reducing
the adjusted expense ratio(1) to approximately 23.0 by year end
2024.
- Allstate Protection auto insurance earned premium
increased 4.0% driven by higher average premiums and policies in
force growth of 2.4% compared to the prior year quarter. Written
premium increased 7.8%, which was higher than earned premium growth
as rate increases are earned over the 6-month policy period after
customer renewal. Policies in force growth was driven by National
General, including impacts from the SafeAuto acquisition, and the
Allstate brand. New issued applications increased by 14.3% compared
to the prior year quarter due to growth in the direct and
independent agent channels. Allstate brand auto net written
premiums increased by 4.1% compared to the prior year quarter due
to increased average premiums and policies in force growth of 0.7%.
Allstate brand implemented auto rate increases were made in 28
locations in the first quarter at an average of 9.3%, or 3.6% on
total premiums. The recorded auto insurance combined ratio of 102.1
in the first quarter of 2022 was 21.6 points above the prior year
quarter, and the underlying combined ratio* of 98.8 was 18.7 points
above the prior year quarter. This increase was driven by higher
claim severity and accident frequency compared to the lower levels
experienced during the first quarter of 2021 due to the pandemic.
The first quarter of 2022 was also adversely impacted by 2.1 points
of unfavorable non-catastrophe prior year reserve reestimates
driven by physical damage and bodily injury coverages. Rising
severity levels compared to the prior year reflect increased used
car prices, higher parts and labor costs, medical inflation, and
greater attorney representation. In response, Allstate is taking
comprehensive action to improve profitability, including rate
increases, reducing expenses and claims operational actions. Given
ongoing inflationary pressures, we expect to implement rate
increases greater than our initial expectations for 2022 to restore
auto margins to target levels.
- Allstate Protection homeowners insurance earned premium
grew 8.8%, and policies in force increased 1.1% compared to the
first quarter of 2021. Allstate brand net written premium increased
17.0% compared to the prior year quarter, driven by an increase in
average premiums of 14.3% due to inflation in insured home
valuations and implemented rate increases combined with policies in
force growth of 1.7%. The recorded homeowners insurance combined
ratio of 84.2 was 4.6 points better than the first quarter of 2021
and generated an underwriting profit of $410 million in the
quarter. The improvement was driven by lower catastrophe losses.
The underlying combined ratio* of 69.0 increased 1.3 points
compared to the first quarter of 2021, driven by higher severity
due to inflation in labor and material costs, partially offset by
higher average earned premium.
_____________
(1)
A reconciliation of non-GAAP measure to
the expense ratio, a GAAP measure, is not possible on a
forward-looking basis because it is not possible to provide a
reliable forecast of future expenses and targeted reductions as of
the reporting date.
Protection Services
Results
Three months ended March
31,
($ in millions)
2022
2021
% / $
Change
Total revenues (1)
$
627
$
552
13.6
%
Allstate Protection Plans
329
275
19.6
Allstate Dealer Services
135
123
9.8
Allstate Roadside
65
59
10.2
Arity
62
64
(3.1
)
Allstate Identity Protection
36
31
16.1
Adjusted net income (loss)
$
53
$
49
$
4
Allstate Protection Plans
43
45
(2
)
Allstate Dealer Services
9
8
1
Allstate Roadside
2
4
(2
)
Arity
(1
)
2
(3
)
Allstate Identity Protection
—
(10
)
10
(1) Excludes net gains and losses on
investments and derivatives
- Protection Services revenues increased to $627 million
in the first quarter of 2022, 13.6% higher than the prior year
quarter, primarily driven by Allstate Protection Plans. Adjusted
net income of $53 million increased by $4 million compared to the
prior year quarter due to the absence of restructuring charges
incurred in 2021.
- Allstate Protection Plans revenue of $329 million
increased $54 million, or 19.6%, compared to the prior year
quarter, reflecting increased policies in force. Written premium of
$429 million increased 10.6% compared to the prior year quarter,
primarily driven by international growth and a full quarter of
results for policies distributed through The Home Depot compared to
the prior year quarter. Written premiums are earned into revenue
over the contractual period, generally one to five years, with
unearned premiums of $2.2 billion at quarter end. Adjusted net
income of $43 million in the first quarter of 2022 was $2 million
lower than the prior year quarter.
- Allstate Dealer Services revenue of $135 million was
9.8% higher than the first quarter of 2021, driven by higher earned
premium. Adjusted net income of $9 million in the first quarter was
$1 million higher than the prior year quarter.
- Allstate Roadside revenue of $65 million in the first
quarter of 2022 increased 10.2% compared to the prior year quarter,
as rescue volumes increased compared to the first quarter of 2021.
Adjusted net income declined by $2 million compared to the prior
year quarter from increased costs to tow vehicles.
- Arity revenue of $62 million decreased $2 million
compared to the prior year quarter as increased Milewise device
revenue was offset by lower LeadCloud and software revenue.
Adjusted net loss of $1 million in the first quarter of 2022 was $3
million worse than the prior year quarter, primarily driven by
lower revenue and increased expenses related to growth. Arity
continues to expand its data acquisition platform with over 800
billion miles of traffic data being used to serve an increasing
number of insurance and third-party application customers.
- Allstate Identity Protection revenue of $36 million in
the first quarter of 2022 increased 16.1% compared to the prior
year quarter, and policies in force increased by 9.1% to 2.9
million. Adjusted net income was breakeven, $10 million better than
a loss in the first quarter of 2021, driven by the absence of a
restructuring charge and higher revenue.
Allstate Health and Benefits
Results
Three months ended March
31,
($ in millions)
2022
2021
% Change
Premiums and contract charges
$
469
$
455
3.1
%
Employer voluntary benefits
266
263
1.1
Group health
94
83
13.3
Individual health
109
109
—
Adjusted net income
53
65
(18.5
)
- Allstate Health and Benefits premiums and contract
charges increased 3.1% compared to the prior year quarter,
primarily due to growth in group health. Adjusted net income of $53
million in the first quarter of 2022 decreased $12 million compared
to the first quarter of 2021, primarily due to increases in
individual and group health claims and favorable reserve
reestimates for group health in the prior year quarter.
Allstate Investment
Results
Three months ended March
31,
($ in millions, except ratios)
2022
2021
$ / pts
Change
Net investment income
$
594
$
708
$
(114
)
Market-based investment income (1)
323
354
(31
)
Performance-based investment income
(1)
306
378
(72
)
Net gains (losses) on investments and
derivatives
(267
)
426
(693
)
Change in unrealized net capital gains
and losses, pre-tax
(2,038
)
(1,374
)
(664
)
Total return on investment
portfolio
(2.8
) %
(0.2
) %
(2.6
)
Total return on investment portfolio
(trailing twelve months)
1.8
%
8.8
%
(7.0
)
(1)
Investment expenses are not allocated
between market-based and performance-based portfolios with the
exception of investee level expenses.
- Allstate Investments $61.8 billion portfolio generated
net investment income of $594 million in the first quarter of 2022,
a decrease of $114 million from the prior year quarter.
- Market-based investment income was $323 million in the
first quarter of 2022, a decrease of $31 million, or 8.8%, compared
to the prior year quarter. The decrease primarily reflected lower
reinvestment rates, including the impact of our fixed income
portfolio duration shortening to reduce enterprise economic
inflation exposure, which began in the fourth quarter of 2021. The
duration of the $40.7 billion fixed income portfolio was reduced
from 4.6 to 3.1 years since September 30, 2021 through the sale of
bonds and use of derivatives, which mitigated the valuation decline
in the portfolio by $0.8 billion in the first quarter.
- Performance-based investment income totaled $306
million in the first quarter of 2022, a decrease of $72 million
compared to the prior year quarter due to lower returns compared to
a very strong prior year.
- Net losses on investments and derivatives were $267
million in the first quarter of 2022, compared to $426 million of
gains in the prior year quarter, primarily due to losses on the
valuation of equity investments and the sale of fixed income
securities, partially offset by derivative gains associated with
bond portfolio duration shortening.
- Unrealized net capital gains and losses declined $2.0
billion in the first quarter of 2022, as higher market yields
resulted in lower fixed income valuations.
- Total return on the investment portfolio was a negative
2.8% for the quarter.
Proactive Capital Management
“Allstate’s capital position remains strong and enables
excellent cash returns to shareholders,” said Mario Rizzo, Chief
Financial Officer. “In the first quarter, Allstate returned more
than $1.0 billion to common shareholders through a combination of
$794 million in share repurchases and $230 million in common
shareholder dividends. In February, we announced a quarterly
dividend of $0.85, representing a 5% increase, that was paid on
April 1st, 2022. We have $2.5 billion remaining on the current $5
billion share repurchase authorization, which is expected to be
completed early next year. We have repurchased 9.2% and 20.0% of
our common shares outstanding over the last twelve months and three
years, respectively,” concluded Rizzo.
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, May 5.
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)
March 31, 2022
December 31, 2021
Assets
Investments
Fixed income securities, at fair value
(amortized cost, net $42,027 and $41,376)
$
40,745
$
42,136
Equity securities, at fair value (cost
$4,453 and $6,016)
5,315
7,061
Mortgage loans, net
855
821
Limited partnership interests
7,977
8,018
Short-term, at fair value (amortized cost
$4,345 and $4,009)
4,344
4,009
Other investments, net
2,532
2,656
Total investments
61,768
64,701
Cash
1,130
763
Premium installment receivables, net
8,874
8,364
Deferred policy acquisition costs
4,824
4,722
Reinsurance and indemnification
recoverables, net
9,691
10,024
Accrued investment income
341
339
Property and equipment, net
966
939
Goodwill
3,497
3,502
Other assets, net
6,059
6,086
Total assets
$
97,150
$
99,440
Liabilities
Reserve for property and casualty
insurance claims and claims expense
$
32,991
$
33,060
Reserve for future policy benefits
1,274
1,273
Contractholder funds
907
908
Unearned premiums
20,248
19,844
Claim payments outstanding
1,140
1,123
Deferred income taxes
402
833
Other liabilities and accrued expenses
9,077
9,296
Long-term debt
7,973
7,976
Total liabilities
74,012
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, 276 million and 281
million shares outstanding
9
9
Additional capital paid-in
3,706
3,722
Retained income
53,688
53,294
Treasury stock, at cost (624 million and
619 million shares)
(35,208
)
(34,471
)
Accumulated other comprehensive
income:
Unrealized net capital gains and
losses
(995
)
598
Unrealized foreign currency translation
adjustments
(15
)
(15
)
Unamortized pension and other
postretirement prior service credit
57
72
Total accumulated other comprehensive
income
(953
)
655
Total Allstate shareholders’
equity
23,212
25,179
Noncontrolling interest
(74
)
(52
)
Total equity
23,138
25,127
Total liabilities and equity
$
97,150
$
99,440
THE ALLSTATE CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
($ in millions, except per share
data)
Three months ended March
31,
2022
2021
Revenues
Property and casualty insurance
premiums
$
10,981
$
10,307
Accident and health insurance premiums and
contract charges
469
455
Other revenue
560
555
Net investment income
594
708
Net gains (losses) on investments and
derivatives
(267
)
426
Total revenues
12,337
12,451
Costs and expenses
Property and casualty insurance claims and
claims expense
7,822
6,043
Accident, health and other policy
benefits
269
242
Amortization of deferred policy
acquisition costs
1,612
1,523
Operating costs and expenses
1,902
1,731
Pension and other postretirement
remeasurement (gains) losses
(247
)
(310
)
Restructuring and related charges
12
51
Amortization of purchased intangibles
87
53
Interest expense
83
86
Total costs and expenses
11,540
9,419
Income from operations before income
tax expense
797
3,032
Income tax expense
151
626
Net income from continuing
operations
646
2,406
Income (loss) from discontinued
operations, net of tax
—
(3,793
)
Net income (loss)
646
(1,387
)
Less: Net loss attributable to
noncontrolling interest
(10
)
(6
)
Net income (loss) attributable to
Allstate
656
(1,381
)
Less: Preferred stock dividends
26
27
Net income (loss) applicable to common
shareholders
$
630
$
(1,408
)
Earnings per common share applicable to
common shareholders
Basic
Continuing operations
$
2.27
$
7.88
Discontinued operations
—
(12.53
)
Total
$
2.27
$
(4.65
)
Diluted
Continuing operations
$
2.24
$
7.78
Discontinued operations
—
(12.38
)
Total
$
2.24
$
(4.60
)
Weighted average common shares – Basic
278.1
302.5
Weighted average common shares –
Diluted
281.8
306.4
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 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
- 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
- Related income tax expense or benefit of these items
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 March
31,
Consolidated
Per diluted common
share
2022
2021
2022
2021
Net income (loss) applicable to common
shareholders
$
630
$
(1,408
)
$
2.24
$
(4.60
)
Net (gains) losses on investments and
derivatives
267
(426
)
0.95
(1.39
)
Pension and other postretirement
remeasurement (gains) losses
(247
)
(310
)
(0.88
)
(1.01
)
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
1
—
—
Business combination expenses and the
amortization of purchased intangibles
87
75
0.31
0.25
Loss on disposition of operations
16
—
0.06
—
(Income) loss from discontinued
operations
—
4,163
—
13.59
Income tax expense (benefit)
(27
)
(224
)
(0.10
)
(0.73
)
Adjusted net income *
$
726
$
1,871
$
2.58
$
6.11
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
March 31,
2022
2021
Return on Allstate common
shareholders’ equity
Numerator:
Net income applicable to common
shareholders
$
3,523
$
3,540
Denominator:
Beginning Allstate common shareholders’
equity
$
24,649
$
22,203
Ending Allstate common shareholders’
equity (1)
21,242
24,649
Average Allstate common shareholders’
equity
$
22,946
$
23,426
Return on Allstate common shareholders’
equity
15.4
%
15.1
%
($ in millions)
For the twelve months ended
March 31,
2022
2021
Adjusted net income return on Allstate
common shareholders’ equity
Numerator:
Adjusted net income *
$
2,888
$
5,179
Denominator:
Beginning Allstate common shareholders’
equity
$
24,649
$
22,203
Less: Unrealized net capital gains and
losses
1,680
530
Adjusted beginning Allstate common
shareholders’ equity
22,969
21,673
Ending Allstate common shareholders’
equity (1)
21,242
24,649
Less: Unrealized net capital gains and
losses
(995
)
1,680
Adjusted ending Allstate common
shareholders’ equity
22,237
22,969
Average adjusted Allstate common
shareholders’ equity
$
22,603
$
22,321
Adjusted net income return on Allstate
common shareholders’ equity *
12.8
%
23.2
%
_____________
(1)
Excludes equity related to preferred stock
of $1,970 million as of March 31, 2022 and $2,170 million as of
March 31, 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. 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. Underwriting margin is calculated as
100% minus the combined ratio.
Property-Liability
Three months ended March
31,
2022
2021
Combined ratio
97.3
83.3
Effect of catastrophe losses
(4.4
)
(6.0
)
Effect of prior year non-catastrophe
reserve reestimates
(1.5
)
(0.1
)
Effect of amortization of purchased
intangibles
(0.5
)
(0.1
)
Underlying combined ratio*
90.9
77.1
Effect of prior year catastrophe reserve
reestimates
(0.1
)
(2.5
)
Allstate
Protection - Auto Insurance
Three months ended March
31,
2022
2021
Combined ratio
102.1
80.5
Effect of catastrophe losses
(0.6
)
(0.4
)
Effect of prior year non-catastrophe
reserve reestimates
(2.1
)
0.2
Effect of amortization of purchased
intangibles
(0.6
)
(0.2
)
Underlying combined ratio*
98.8
80.1
Effect of prior year catastrophe reserve
reestimates
(0.1
)
(0.3
)
Allstate
Protection - Homeowners Insurance
Three months ended March
31,
2022
2021
Combined ratio
84.2
88.8
Effect of catastrophe losses
(14.8
)
(20.7
)
Effect of prior year non-catastrophe
reserve reestimates
0.1
(0.2
)
Effect of amortization of purchased
intangibles
(0.5
)
(0.2
)
Underlying combined ratio*
69.0
67.7
Effect of prior year catastrophe reserve
reestimates
(0.3
)
(8.7
)
Underlying expense ratio is a non-GAAP ratio, which is
computed as the difference between the expense ratio and the effect
of amortization or impairment of purchased intangibles on the
expense ratio. We believe that the measure provides investors with
a valuable measure of ongoing performance because it reveals trends
that may be obscured by the amortization or impairment of purchased
intangible assets. Amortization or Impairment 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 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 expense ratio. The underlying expense ratio should not be
considered a substitute for the expense ratio and does not reflect
the overall expense ratio of our business.
The following tables reconciles the respective expense ratio to
the underlying expense ratio.
Property-Liability
Three months ended March
31,
2022
2021
Expense ratio
24.0
23.2
Effect of amortization of purchased
intangibles
(0.5
)
(0.1
)
Underlying expense ratio*
23.5
23.1
Adjusted underwriting expense ratio is a non-GAAP ratio, which
is computed as the difference between the expense ratio and the
effect of advertising expense, restructuring and related charges,
amortization or impairment of purchased intangibles and Coronavirus
related expenses on the expense ratio. We believe that the measure
provides investors with a valuable measure of ongoing performance
because it reveals trends that may be obscured by the advertising
expense, restructuring and related charges, amortization or
impairment of purchased intangibles and Coronavirus related
expenses. Advertising expense is excluded as it may vary
significantly from period to period based on business decisions and
competitive position. Restructuring and related charges are
excluded because these items are not indicative of our business
results or trends. Coronavirus related expenses are excluded
because these items are related to programs offered during the peak
of the pandemic that are no longer available. Amortization or
impairment of purchased intangible assets is excluded because it
relates to the acquisition purchase price. These are not indicative
of our business results or trends. A reduction in expenses enables
investment flexibility that can drive growth. 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 expense ratio. The adjusted
underwriting expense ratio should not be considered a substitute
for the expense ratio and does not reflect the overall expense
ratio of our business.
Adjusted expense ratio is a non-GAAP ratio, which is computed as
the combination of the adjusted underwriting expense ratio and
claims expense ratio excluding catastrophe expense. We believe it
is useful for investors to evaluate this ratio which is linked to a
long-term expense ratio improvement commitment through 2024. The
most directly comparable GAAP measure is the expense ratio. The
adjusted expense ratio should not be considered a substitute for
the expense ratio and does not reflect the overall expense ratio of
our business.
Coronavirus related expenses includes shelter-in-place payback
and special payment plan bad debt expenses.
Claims expense ratio excluding catastrophe expense: Incurred
loss adjustment expenses, net of reinsurance, excluding expenses
related to catastrophes. These expenses are embedded within the
loss ratio.
The following table reconciles the respective underlying expense
ratio to the adjusted underlying expense ratio and adjusted expense
ratio.
Property-Liability
Three months ended March
31,
2022
2021
Underlying expense ratio*
23.5
23.1
Effect of advertising expense
(3.3
)
(3.2
)
Effect of restructuring and related
charges
(0.1
)
(0.3
)
Adjusted underwriting expense
ratio*
20.1
19.6
Claims expense ratio excluding catastrophe
expense
5.9
5.6
Adjusted expense ratio*
26.0
25.2
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504006247/en/
Al Scott Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
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