Slowing Policy Growth and Reducing Costs to
Improve Profitability
The Allstate Corporation (NYSE: ALL) today reported financial
results for the second quarter of 2022.
The Allstate Corporation
Consolidated Highlights
Three months ended June
30,
Six months ended June
30,
($ in millions, except per share data
and ratios)
2022
2021
% / pts
Change
2022
2021
% / pts
Change
Consolidated revenues
$
12,220
$
12,646
(3.4
) %
$
24,557
$
25,097
(2.2
) %
Net income (loss) applicable to common
shareholders
(1,042
)
1,595
NM
(412
)
187
NM
per diluted common share (1)
(3.81
)
5.26
NM
(1.49
)
0.61
NM
Adjusted net income (loss)*
(209
)
1,149
NM
517
3,020
(82.9
)
per diluted common share* (1)
(0.76
)
3.79
NM
1.85
9.90
(81.3
)
Return on Allstate common shareholders’
equity (trailing twelve months)
Net income applicable to common
shareholders
4.0
%
15.3
%
(11.3
)
Adjusted net income*
6.9
%
23.8
%
(16.9
)
Common shares outstanding (in
millions)
271.2
296.9
(8.7
)
Book value per common share
66.15
86.33
(23.4
)
Property-Liability insurance premiums
earned
10,874
10,009
8.6
21,372
19,905
7.4
Property-Liability combined
ratio
Recorded
107.9
95.7
12.2
102.7
89.5
13.2
Underlying combined ratio*
93.4
85.7
7.7
92.2
81.4
10.8
Catastrophe losses
1,108
952
16.4
1,570
1,542
1.8
Total policies in force (in
thousands)
187,680
189,361
(0.9
)
(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 has a long history of successfully navigating
challenging environments, and we are confident in our ability to
restore profitability to target levels while continuing to innovate
and transform our company,” said Tom Wilson, Chair, President and
CEO of The Allstate Corporation. “The impact of rising claim repair
costs and upward prior year loss reserve development led to a
recorded combined ratio of 107.9 in the second quarter. The
underwriting loss combined with equity valuation declines and
losses on fixed income sales resulted in a net loss of $1.04
billion and an adjusted net loss* of $209 million in the quarter.
As a result, we are further accelerating insurance price increases,
implementing underwriting restrictions in underperforming states
and reducing advertising spend, which is expected to improve
profitability and slow policy growth. Insurance premiums earned of
$10.9 billion increased 8.6% primarily due to higher average
premiums in auto and homeowners insurance. While the current
operating environment necessitates focus on improving insurance
margins, progress was made on the Transformative Growth strategy
including launching beta versions of a new auto insurance product
and technology ecosystem. Shareholders also benefited from strong
capital management with cash returns of $919 million through common
shareholder dividends and share repurchases,” concluded Wilson.
Second Quarter 2022 Results
- Total revenues of $12.2 billion in the second quarter of 2022
decreased 3.4% compared to the prior year quarter as an 8.6%
increase in Property-Liability earned premium was more than offset
by net losses on investments and derivatives in 2022 compared to
net gains in 2021 and lower net investment income.
- Net loss applicable to common shareholders was $1.04 billion in
the second quarter of 2022 compared to income of $1.60 billion in
the prior year quarter, primarily due to lower underlying
underwriting income, higher catastrophe losses, equity valuation
declines and losses on fixed income sales.
- Adjusted net loss* of $209 million, or $(0.76) per diluted
share, compares to adjusted net income* of $1.15 billion generated
in the prior year quarter. The decline reflects increased claims
severity and unfavorable prior year reserve reestimates, lower net
investment income and higher catastrophe losses.
Property-Liability
Results
Three months ended June
30,
Six months ended June
30,
($ in millions, except ratios)
2022
2021
% / pts
Change
2022
2021
% / pts
Change
Premiums earned
$
10,874
$
10,009
8.6
%
$
21,372
$
19,905
7.4
%
Allstate Brand
9,288
8,746
6.2
18,299
17,427
5.0
National General
1,586
1,263
25.6
3,073
2,478
24.0
Underwriting income (loss)
(864
)
429
NM
(584
)
2,086
NM
Allstate Brand
(825
)
414
NM
(574
)
1,929
NM
National General
(38
)
15
NM
(9
)
153
NM
Recorded combined ratio
107.9
95.7
12.2
102.7
89.5
13.2
Allstate Protection auto
107.9
94.3
13.6
105.0
87.4
17.6
Allstate Protection homeowners
106.9
100.3
6.6
95.8
94.6
1.2
Underlying combined ratio*
93.4
85.7
7.7
92.2
81.4
10.8
Allstate Protection auto
102.1
91.8
10.3
100.5
86.0
14.5
Allstate Protection homeowners
70.3
69.5
0.8
69.7
68.6
1.1
- Property-Liability earned premium of $10.9 billion
increased 8.6% in the second quarter of 2022 compared to the prior
year quarter, driven primarily by higher average premiums and
policies in force growth. The recorded combined ratio of 107.9
generated an underwriting loss of $864 million compared to income
of $429 million in the second quarter of 2021.
- The underwriting loss was primarily driven by adverse prior
year reserve reestimates, higher current report year claim
severities and increased catastrophe losses. This was partially
offset by higher premiums earned.
- Non-catastrophe prior year reserve strengthening of $411
million in the second quarter of 2022 included $275 million related
to personal auto insurance and $91 million related to commercial
auto insurance, largely from shared economy business written in
states which Allstate has exited.
- The underlying combined ratio* of 93.4 in the second quarter of
2022 was 7.7 points above the prior year quarter, reflecting a
higher auto insurance loss ratio.
- The expense ratio of 23.0 in the second quarter decreased 1.7
points compared to the second quarter of 2021, mainly from lower
advertising expenses and reduced amortization of deferred
acquisition costs.
- Allstate Protection auto insurance earned premium
increased 6.8% driven by higher average premiums from rate
increases and policies in force growth of 2.3% compared to the
prior year quarter. Policies in force growth was driven by National
General, including impacts from the SafeAuto acquisition, and the
Allstate brand. Allstate brand auto net written premium growth of
7.1% compared to the prior year quarter reflected a 7.3% increase
in average gross written premium and 0.3% increase in policies in
force. Allstate brand implemented auto rate increases in 30
locations in the second quarter at an average of 8.7%, or 2.5% on
total premiums, bringing the year to date impact to 6.1% on total
premiums. The recorded auto insurance combined ratio of 107.9 in
the second quarter of 2022 was 13.6 points above the prior year
quarter due to higher claim severity and accident frequency
compared to the second quarter of 2021 and 3.8 points of
unfavorable non-catastrophe prior year reserve reestimates driven
by physical damage and bodily injury coverages. The underlying
combined ratio* of 102.1 was 10.3 points above the prior year
quarter. Rising auto claim severity levels compared to the prior
year reflect higher costs for used cars, parts and labor and are
geographically widespread across the United States. Injury claim
cost increases reflect more severe auto accidents, increased
medical inflation, higher consumption of medical treatment and more
claims with attorney involvement.
- Allstate Protection homeowners insurance earned premium
grew 11.4%, and policies in force increased 1.2% compared to the
second quarter of 2021. Allstate brand net written premium
increased 15.2% compared to the prior year quarter, driven by
average premium increases of 13.2% 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 106.9 increased 6.6 points compared to the second quarter
of 2021 and generated an underwriting loss of $186 million in the
quarter. The increase reflects higher catastrophe and
non-catastrophe losses and unfavorable prior year reserve
reestimates. The underlying combined ratio* of 70.3 increased 0.8
points compared to the second quarter of 2021, driven by higher
severity due to inflation in labor and materials costs, partially
offset by higher average earned premium.
Protection Services
Results
Three months ended June
30,
Six months ended June
30,
($ in millions)
2022
2021
% / $
Change
2022
2021
% / $
Change
Total revenues (1)
$
629
$
581
8.3
%
$
1,256
$
1,133
10.9
%
Allstate Protection Plans
338
295
14.6
667
570
17.0
Allstate Dealer Services
139
130
6.9
274
253
8.3
Allstate Roadside
64
60
6.7
129
119
8.4
Arity
52
64
(18.8
)
114
128
(10.9
)
Allstate Identity Protection
36
32
12.5
72
63
14.3
Adjusted net income (loss)
$
43
$
56
$
(13
)
$
96
$
105
$
(9
)
Allstate Protection Plans
36
42
(6
)
79
87
(8
)
Allstate Dealer Services
8
10
(2
)
17
18
(1
)
Allstate Roadside
1
2
(1
)
3
6
(3
)
Arity
(1
)
1
(2
)
(2
)
3
(5
)
Allstate Identity Protection
(1
)
1
(2
)
(1
)
(9
)
8
(1)
Excludes net gains and losses on
investments and derivatives
- Protection Services revenues increased to $629 million
in the second quarter of 2022, 8.3% higher than the prior year
quarter, primarily due to Allstate Protection Plans, partially
offset by declines at Arity. Adjusted net income of $43 million
decreased by $13 million compared to the prior year quarter.
- Allstate Protection Plans revenue of $338 million
increased $43 million, or 14.6%, compared to the prior year
quarter, reflecting higher earned premium. Adjusted net income of
$36 million in the second quarter of 2022 was $6 million lower than
the prior year quarter, due to investments in growth.
- Allstate Dealer Services revenue of $139 million was
6.9% higher than the second quarter of 2021. Adjusted net income of
$8 million in the second quarter was $2 million lower than the
prior year quarter.
- Allstate Roadside revenue of $64 million in the second
quarter of 2022 increased 6.7% compared to the prior year quarter,
driven by increased rescue volumes and new business. Adjusted net
income declined by $1 million compared to the prior year
quarter.
- Arity revenue of $52 million decreased $12 million
compared to the prior year quarter, due to reductions in client
advertising. Adjusted net loss of $1 million in the second quarter
of 2022 was $2 million worse than the prior year quarter. Arity
continues to expand its data acquisition platform with over 870
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 second quarter of 2022 increased 12.5% compared to the prior
year quarter, due to new client launches and increased
participation rates at existing clients. Adjusted net loss of $1
million compared to income of $1 million in the second quarter of
2021.
Allstate Health and Benefits
Results
Three months ended June
30,
Six months ended June
30,
($ in millions)
2022
2021
% Change
2022
2021
% Change
Premiums and contract charges
$
466
$
447
4.3
%
$
935
$
902
3.7
%
Employer voluntary benefits
257
255
0.8
523
518
1.0
Group health
95
87
9.2
189
170
11.2
Individual health
114
105
8.6
223
214
4.2
Adjusted net income
65
62
4.8
118
127
(7.1
)
- Allstate Health and Benefits premiums and contract
charges increased 4.3% compared to the prior year quarter, due to
growth in individual and group health. Adjusted net income of $65
million in the second quarter of 2022 increased $3 million compared
to the second quarter of 2021 as increased premiums and contract
charges were only partially offset by higher individual health
claims.
Allstate Investment
Results
Three months ended June
30,
Six months ended June
30,
($ in millions, except ratios)
2022
2021
$ / pts
Change
2022
2021
$ / pts
Change
Net investment income
$
562
$
974
$
(412
)
$
1,156
$
1,682
$
(526
)
Market-based investment income (1)
368
355
13
691
709
(18
)
Performance-based investment income
(1)
236
649
(413
)
542
1,027
(485
)
Net gains (losses) on investments and
derivatives
(733
)
287
(1,020
)
(1,000
)
713
(1,713
)
Change in unrealized net capital gains
and losses, pre-tax
(1,459
)
324
(1,783
)
(3,497
)
(1,050
)
(2,447
)
Total return on investment
portfolio
(2.8
) %
2.6
%
(5.4
)
(5.6
) %
2.4
%
(8.0
)
Total return on investment portfolio
(trailing twelve months)
(3.5
) %
6.8
%
(10.3
)
(1)
Investment expenses are not allocated
between market-based and performance-based portfolios with the
exception of investee level expenses.
- Allstate Investments $61.1 billion portfolio generated
net investment income of $562 million in the second quarter of
2022, a decrease of $412 million from the prior year quarter,
driven by lower performance-based income.
- Market-based investment income was $368 million in the
second quarter of 2022, an increase of $13 million, or 3.7%,
compared to the prior year quarter reflecting an increase in the
fixed income portfolio yield, which has benefited from reinvesting
at higher interest rates.
- Performance-based investment income totaled $236
million in the second quarter of 2022, a decrease of $413 million
compared to an exceptional prior year quarter. Second quarter 2022
results benefited from portfolio diversification as contributions
from real estate and other asset classes, including infrastructure
investments, contributed more to income than private equity
investments.
- Net losses on investments and derivatives were $733
million in the second quarter of 2022, compared to gains of $287
million in the prior year quarter, primarily due to declines in the
valuation of equity investments and losses on the sales of fixed
income securities. Partially offsetting the net losses were gains
on derivatives used to shorten the bond portfolio duration, which
began in 2021 to reduce exposure to inflation and higher interest
rates.
- Unrealized net capital gains and losses declined $1.5
billion in the second quarter of 2022, as higher interest rates and
credit spreads resulted in lower fixed income valuations. Reducing
the fixed income portfolio duration from 4.6 to 3.2 years since
September 30, 2021, through the sale of bonds and use of
derivatives, mitigated the valuation decline in the portfolio by
approximately $1.3 billion year to date.
- Total return on the investment portfolio was a negative
2.8% for the second quarter of 2022.
Proactive Capital Management
“In the second quarter, Allstate continued to provide meaningful
cash returns to shareholders. We returned $919 million to common
shareholders through a combination of $683 million in share
repurchases and $236 million in common shareholder dividends,” said
Mario Rizzo, Chief Financial Officer. “Shares outstanding have been
reduced by 8.7% over the last twelve months and $1.8 billion
remains on the current $5 billion share repurchase authorization,
which is expected to be completed early next year,” concluded
Rizzo.
Visit www.allstateinvestors.com for
additional information about Allstate’s results, including a
webcast of its quarterly conference call and the call presentation.
The conference call will be at 9 a.m. ET on Thursday, August 4.
Financial information, including material announcements about The
Allstate Corporation, is routinely posted on www.allstateinvestors.com.
Forward-Looking Statements This news release contains
“forward-looking statements” that anticipate results based on our
estimates, assumptions and plans that are subject to uncertainty.
These statements are made subject to the safe-harbor provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements do not relate strictly to historical or
current facts and may be identified by their use of words like
“plans,” “seeks,” “expects,” “will,” “should,” “anticipates,”
“estimates,” “intends,” “believes,” “likely,” “targets” and other
words with similar meanings. We believe these statements are based
on reasonable estimates, assumptions and plans. However, if the
estimates, assumptions or plans underlying the forward-looking
statements prove inaccurate or if other risks or uncertainties
arise, actual results could differ materially from those
communicated in these forward-looking statements. Factors that
could cause actual results to differ materially from those
expressed in, or implied by, the forward-looking statements may be
found in our filings with the U.S. Securities and Exchange
Commission, including the “Risk Factors” section in our most recent
annual report on Form 10-K. Forward-looking statements are as of
the date on which they are made, and we assume no obligation to
update or revise any forward-looking statement.
THE ALLSTATE CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
($ in millions, except par value
data)
June 30,
2022
December 31,
2021
Assets
Investments
Fixed income securities, at fair value
(amortized cost, net $44,027 and $41,376)
$
41,282
$
42,136
Equity securities, at fair value (cost
$4,410 and $6,016)
4,681
7,061
Mortgage loans, net
848
821
Limited partnership interests
7,943
8,018
Short-term, at fair value (amortized cost
$4,384 and $4,009)
4,384
4,009
Other investments, net
1,917
2,656
Total investments
61,055
64,701
Cash
766
763
Premium installment receivables, net
8,824
8,364
Deferred policy acquisition costs
5,030
4,722
Reinsurance and indemnification
recoverables, net
9,376
10,024
Accrued investment income
359
339
Deferred income taxes
118
—
Property and equipment, net
975
939
Goodwill
3,496
3,502
Other assets, net
6,351
6,086
Total assets
$
96,350
$
99,440
Liabilities
Reserve for property and casualty
insurance claims and claims expense
$
34,276
$
33,060
Reserve for future policy benefits
1,295
1,273
Contractholder funds
908
908
Unearned premiums
21,026
19,844
Claim payments outstanding
1,216
1,123
Deferred income taxes
—
833
Other liabilities and accrued expenses
9,635
9,296
Long-term debt
7,970
7,976
Total liabilities
76,326
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, 271 million and 281
million shares outstanding
9
9
Additional capital paid-in
3,740
3,722
Retained income
52,412
53,294
Treasury stock, at cost (629 million and
619 million shares)
(35,858
)
(34,471
)
Accumulated other comprehensive
income:
Unrealized net capital gains and
losses
(2,138
)
598
Unrealized foreign currency translation
adjustments
(62
)
(15
)
Unamortized pension and other
postretirement prior service credit
42
72
Total accumulated other comprehensive
income
(2,158
)
655
Total Allstate shareholders’
equity
20,115
25,179
Noncontrolling interest
(91
)
(52
)
Total equity
20,024
25,127
Total liabilities and equity
$
96,350
$
99,440
THE ALLSTATE CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
($ in millions, except per share
data)
Three months ended June
30,
Six months ended June
30,
2022
2021
2022
2021
Revenues
Property and casualty insurance
premiums
$
11,362
$
10,444
$
22,343
$
20,751
Accident and health insurance premiums and
contract charges
466
447
935
902
Other revenue
563
494
1,123
1,049
Net investment income
562
974
1,156
1,682
Net gains (losses) on investments and
derivatives
(733
)
287
(1,000
)
713
Total revenues
12,220
12,646
24,557
25,097
Costs and expenses
Property and casualty insurance claims and
claims expense
9,367
7,207
17,189
13,250
Shelter-in-Place Payback expense
—
29
—
29
Accident, health and other policy
benefits
269
252
538
494
Amortization of deferred policy
acquisition costs
1,619
1,545
3,231
3,068
Operating costs and expenses
1,850
1,683
3,752
3,414
Pension and other postretirement
remeasurement (gains) losses
259
(134
)
12
(444
)
Restructuring and related charges
1
71
13
122
Amortization of purchased intangibles
87
105
174
158
Interest expense
83
91
166
177
Total costs and expenses
13,535
10,849
25,075
20,268
(Loss) income from operations before
income tax expense
(1,315
)
1,797
(518
)
4,829
Income tax (benefit) expense
(291
)
362
(140
)
988
Net (loss) income from continuing
operations
(1,024
)
1,435
(378
)
3,841
Income (loss) from discontinued
operations, net of tax
—
196
—
(3,597
)
Net (loss) income
(1,024
)
1,631
(378
)
244
Less: Net (loss) income attributable to
noncontrolling interest
(9
)
6
(19
)
—
Net (loss) income attributable to
Allstate
(1,015
)
1,625
(359
)
244
Less: Preferred stock dividends
27
30
53
57
Net (loss) income applicable to common
shareholders
$
(1,042
)
$
1,595
$
(412
)
$
187
Earnings per common share applicable to
common shareholders
Basic
Continuing operations
$
(3.81
)
$
4.68
$
(1.49
)
$
12.59
Discontinued operations
—
0.66
—
(11.97
)
Total
$
(3.81
)
$
5.34
$
(1.49
)
$
0.62
Diluted
Continuing operations
$
(3.81
)
$
4.61
$
(1.49
)
$
12.41
Discontinued operations
—
0.65
—
(11.80
)
Total
$
(3.81
)
$
5.26
$
(1.49
)
$
0.61
Weighted average common shares – Basic
273.8
298.8
275.9
300.6
Weighted average common shares –
Diluted
273.8
303.3
275.9
304.9
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 June
30,
Consolidated
Per diluted common
share
2022
2021
2022
2021
Net income (loss) applicable to common
shareholders
$
(1,042
)
$
1,595
$
(3.81
)
(1)
$
5.26
Net (gains) losses on investments and
derivatives
733
(287
)
2.68
(0.95
)
Pension and other postretirement
remeasurement (gains) losses
259
(134
)
0.95
(0.44
)
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
—
—
—
Business combination expenses and the
amortization of purchased intangibles
87
105
0.32
0.35
Business combination fair value
adjustment
—
(6
)
—
(0.02
)
(Gain) loss on disposition of
operations
(27
)
—
(0.10
)
—
(Income) loss from discontinued
operations
—
(493
)
—
(1.63
)
Income tax expense (benefit)
(219
)
369
(0.80
)
1.22
Adjusted net income (loss) *
$
(209
)
$
1,149
$
(0.76
)
(1)
$
3.79
Six months ended June
30,
Consolidated
Per diluted common
share
2022
2021
2022
2021
Net income (loss) applicable to common
shareholders
$
(412
)
$
187
$
(1.49
)
(2)
$
0.61
Net (gains) losses on investments and
derivatives
1,000
(713
)
3.58
(2.34
)
Pension and other postretirement
remeasurement (gains) losses
12
(444
)
0.05
(1.46
)
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
1
—
—
Business combination expenses and the
amortization of purchased intangibles
174
180
0.63
0.59
Business combination fair value
adjustment
—
(6
)
—
(0.02
)
(Gain) loss on disposition of
operations
(11
)
—
(0.04
)
—
(Income) loss from discontinued
operations
—
3,670
—
12.04
Income tax expense (benefit)
(246
)
145
(0.88
)
0.48
Adjusted net income (loss) *
$
517
$
3,020
$
1.85
$
9.90
_____________
(1)
Due to a net loss reported for the three
months ended June 30, 2022, calculation uses weighted average
shares of 273.8 million, which excludes weighted average diluted
shares of 3.2 million.
(2)
Due to a net loss reported for the six
months ended June 30, 2022, calculation uses weighted average
shares of 275.9 million, which excludes weighted average diluted
shares of 3.5 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
June 30,
2022
2021
Return on Allstate common
shareholders’ equity
Numerator:
Net income applicable to common
shareholders
$
886
$
3,911
Denominator:
Beginning Allstate common shareholders’
equity
$
26,037
$
25,016
Ending Allstate common shareholders’
equity (1)
18,145
26,037
Average Allstate common shareholders’
equity
$
22,091
$
25,527
Return on Allstate common shareholders’
equity
4.0
%
15.3
%
($ in millions)
For the twelve months
ended
June 30,
2022
2021
Adjusted net income return on Allstate
common shareholders’ equity
Numerator:
Adjusted net income *
$
1,530
$
5,512
Denominator:
Beginning Allstate common shareholders’
equity
$
26,037
$
25,016
Less: Unrealized net capital gains and
losses
2,164
2,602
Adjusted beginning Allstate common
shareholders’ equity
23,873
22,414
Ending Allstate common shareholders’
equity (1)
18,145
26,037
Less: Unrealized net capital gains and
losses
(2,138
)
2,164
Adjusted ending Allstate common
shareholders’ equity
20,283
23,873
Average adjusted Allstate common
shareholders’ equity
$
22,078
$
23,144
Adjusted net income return on Allstate
common shareholders’ equity *
6.9
%
23.8
%
_____________
(1)
Excludes equity related to preferred stock
of $1,970 million as of June 30, 2022 and $2,170 million as of June
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
June 30,
Six months ended
June 30,
2022
2021
2022
2021
Combined ratio
107.9
95.7
102.7
89.5
Effect of catastrophe losses
(10.2
)
(9.5
)
(7.3
)
(7.7
)
Effect of prior year non-catastrophe
reserve reestimates
(3.8
)
0.2
(2.7
)
0.1
Effect of amortization of purchased
intangibles
(0.5
)
(0.7
)
(0.5
)
(0.5
)
Underlying combined ratio*
93.4
85.7
92.2
81.4
Effect of prior year catastrophe reserve
reestimates
0.4
0.4
0.2
(1.0
)
Allstate
Protection - Auto Insurance
Three months ended
June 30,
Six months ended
June 30,
2022
2021
2022
2021
Combined ratio
107.9
94.3
105.0
87.4
Effect of catastrophe losses
(1.5
)
(2.2
)
(1.0
)
(1.3
)
Effect of prior year non-catastrophe
reserve reestimates
(3.8
)
0.4
(2.9
)
0.3
Effect of amortization of purchased
intangibles
(0.5
)
(0.7
)
(0.6
)
(0.4
)
Underlying combined ratio*
102.1
91.8
100.5
86.0
Effect of prior year catastrophe reserve
reestimates
(0.5
)
(0.1
)
(0.3
)
(0.2
)
Allstate
Protection - Homeowners Insurance
Three months ended
June 30,
Six months ended
June 30,
2022
2021
2022
2021
Combined ratio
106.9
100.3
95.8
94.6
Effect of catastrophe losses
(34.3
)
(30.3
)
(24.7
)
(25.5
)
Effect of prior year non-catastrophe
reserve reestimates
(1.7
)
0.3
(0.8
)
—
Effect of amortization of purchased
intangibles
(0.6
)
(0.8
)
(0.6
)
(0.5
)
Underlying combined ratio*
70.3
69.5
69.7
68.6
Effect of prior year catastrophe reserve
reestimates
3.2
1.5
1.5
(3.6
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005994/en/
Al Scott Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
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