Transformative Growth positions for continued
success
The Allstate Corporation (NYSE: ALL) today reported financial
results for the third quarter of 2021.
The Allstate Corporation
Consolidated Highlights
Three months ended September
30,
Nine months ended September
30,
($ in millions, except per share data
and ratios)
2021
2020
% / pts Change
2021
2020
% / pts Change
Consolidated revenues
$
12,480
$
10,678
16.9
%
$
37,577
$
30,947
21.4
%
Net income applicable to common
shareholders
508
1,126
(54.9)
695
2,863
(75.7)
per diluted common share
1.71
3.58
(52.2)
2.30
9.01
(74.5)
Adjusted net income*
217
900
(75.9)
3,237
2,918
10.9
per diluted common share*
0.73
2.87
(74.6)
10.70
9.18
16.6
Return on Allstate common shareholders’
equity (trailing twelve months)
Net income applicable to common
shareholders
13.2
%
18.9
%
(5.7)
Adjusted net income*
21.2
%
17.9
%
3.3
Book value per common share
84.62
82.39
2.7
Property-Liability combined
ratio
Recorded
105.3
91.6
13.7
94.8
88.8
6.0
Underlying combined ratio*
90.4
79.7
10.7
84.5
79.6
4.9
Property-Liability insurance premiums
earned
10,159
8,952
13.5
30,064
26,696
12.6
Catastrophe losses
1,269
990
28.2
2,811
2,387
17.8
Shelter-in-Place Payback
expense
—
—
—
29
948
(96.9)
Total policies in force (in
thousands)
191,856
170,787
12.3
*
Measures used in this release that are not
based on accounting principles generally accepted in the United
States of America (“non-GAAP”) are denoted with an asterisk and
defined and reconciled to the most directly comparable GAAP measure
in the “Definitions of Non-GAAP Measures” section of this
document.
“Allstate’s operational expertise enables us to address
inflation in auto repair costs while executing our Transformative
Growth strategy,” said Tom Wilson, Chair, President and CEO of The
Allstate Corporation. “Auto insurance had an underwriting loss in
the quarter as supply chain disruptions drove rapid price increases
for used cars and original equipment parts. Auto insurance did
generate attractive margins for the first nine months of the year,
and we are filing for rate increases to maintain historical
profitability levels. Performance-based investment income increased
by $308 million reflecting the strategic decision to increase these
investments, which offsets some of the decline in quarterly
underwriting income. Transformative Growth is lowering expenses,
providing further protection from increased loss costs. The
catastrophe risk and return strategy also benefited results as
nearly $1 billion of net reinsurance recoveries offset the impact
of increased severe weather, including Hurricane Ida. In the
quarter, revenues of $12.5 billion generated net income of $508
million and adjusted net income* earnings per share of $0.73.”
“In addition to offsetting short-term volatility, our ongoing
strategic initiatives have increased long-term value.
Transformative Growth continued to reduce costs, allowing us to
provide more competitive prices. Expanded customer access has
increased Allstate brand auto new business by 5% and direct sales
increased to 30% of auto insurance sales in the quarter, which more
than offset a slight decline in existing Allstate agent
productivity. The National General acquisition is ahead of cost
savings and growth goals and will increase our total market share
by one percentage point this year. Allstate Protection Plans
rapidly grew by leveraging retail distribution and the Allstate
brand. The strategies for Allstate Health and Benefits, Roadside,
Identity Protection and Arity are also on track. The Allstate Life
Insurance Company divestiture closed earlier this week and combined
with the previously announced divestiture of Allstate Life
Insurance Company of New York increased deployable capital by $1.7
billion. The strategy to increase market share in personal
property-liability and expand protection solutions is working,”
concluded Wilson.
Third Quarter 2021 Results
- Total revenues of $12.5 billion in the third quarter of 2021
increased 16.9% compared to the prior year quarter, reflecting
higher earned premiums from National General, Allstate brand
homeowners premium growth and increased net investment income.
Protection Services revenues also increased, reflecting a 23.9%
increase for Allstate Protection Plans compared to the prior year
quarter.
- Net income applicable to common shareholders of $508 million in
the third quarter of 2021 decreased $618 million compared to the
prior year quarter, primarily driven by lower underwriting income
partially offset by a $300 million increase in net investment
income.
- Adjusted net income* of $217 million, or $0.73 per diluted
share, decreased $683 million compared to the prior year quarter.
The decrease reflects higher non-catastrophe losses in auto and
homeowners insurance and increased catastrophe losses, partially
offset by higher earned premiums.
Property-Liability
Results
Three months ended September
30,
Nine months ended September
30,
($ in millions, except ratios)
2021
2020
% / pts Change
2021
2020
% / pts Change
Premiums written
$
10,966
$
9,395
16.7
%
$
31,057
$
27,159
14.4
%
Allstate Brand
9,355
9,135
2.4
26,784
26,414
1.4
National General
1,611
260
NM
4,273
745
NM
Underwriting income (loss)
(534)
752
NM
1,552
3,002
(48.3)
Allstate Brand
(311)
842
NM
1,618
3,077
(47.4)
National General
(112)
43
NM
41
63
(34.9)
Recorded combined ratio
105.3
91.6
13.7
94.8
88.8
6.0
Allstate Protection auto
102.3
85.4
16.9
92.4
86.2
6.2
Allstate Protection homeowners
111.0
103.2
7.8
100.2
93.9
6.3
Underlying combined ratio*
90.4
79.7
10.7
84.5
79.6
4.9
Allstate Protection auto
97.6
84.3
13.3
89.9
85.1
4.8
Allstate Protection homeowners
71.6
64.8
6.8
69.6
62.6
7.0
NM = not meaningful
- Property-Liability written premium of $11.0 billion
increased 16.7% in the third quarter of 2021 compared to the prior
year quarter, primarily driven by the addition of National General
and Allstate brand homeowners growth. The recorded combined ratio
of 105.3 generated an underwriting loss of $534 million, compared
to income of $752 million in the prior year quarter. This was
primarily driven by higher non-catastrophe losses in auto and
homeowners insurance and increased catastrophe losses, partially
offset by increased premiums.
- Underwriting income was impacted by non-catastrophe prior year
reserve strengthening of $162 million in the third quarter of 2021,
which increased the combined ratio by 1.6 points. This includes
$111 million related to asbestos, environmental and other reserves
in the Run-off Property-Liability segment as a result of our annual
comprehensive reserve review.
- The underlying combined ratio* of 90.4 for the third quarter of
2021 was 10.7 points above the prior year quarter, reflecting
higher non-catastrophe losses primarily driven by higher incurred
auto and homeowners claims severity due to increased inflationary
impacts and higher auto accident frequency.
- Cost reductions implemented in 2020 and continuing in 2021
provide operational flexibility to improve customer value and
competitive price position. The underlying expense ratio*, which
excludes the amortization of purchased intangibles, decreased by
0.6 points compared to the prior year quarter. The decline was
driven by lower restructuring and related charges, partially offset
by higher advertising expenses. Increased claims process efficiency
and expanded digital capabilities continue to drive lower loss
adjustment expenses while improving the customer experience. The
long-term goal is to further reduce the adjusted expense ratio*
(which includes underwriting and claims) by 3 percent of
premiums.
- Allstate Protection auto insurance net written premium
increased 13.4%, and policies in force increased 14.7% compared to
the prior year quarter, driven by the acquisition of National
General and increased new issued applications. Allstate brand auto
net written premiums declined slightly from the prior year quarter
as increased policies in force were offset by lower average
premiums. The recorded auto insurance combined ratio of 102.3 in
the third quarter of 2021 was 16.9 points above the prior year
quarter, and the underlying combined ratio* of 97.6 was 13.3 points
above the prior year quarter, primarily due to an increase in the
loss ratio. The auto loss ratio increase was driven by higher claim
severity from rising inflationary impacts and increased accident
frequency as miles driven rebound toward pre-pandemic levels. While
frequency increased relative to the prior year, it remains below
pre-pandemic levels. The third quarter combined ratio for auto
insurance was also impacted by 2.2 points for reserve strengthening
for the first two quarters of 2021. Unfavorable non-catastrophe
prior year reserve reestimates also contributed to the higher loss
ratio, adding 1.1 points in the quarter. Auto insurance loss costs
increased primarily due to higher used car values and replacement
parts costs. Used car values began increasing above the Consumer
Price Index (CPI) in late 2020, which accelerated in 2021 resulting
in an increase of approximately 44% in the third quarter 2021
compared to the end of 2018. Similarly, original equipment parts
prices have dramatically increased and are now up approximately 17%
over the same period, approximately twice the core CPI.
- Allstate Protection homeowners insurance net written
premium grew 28.4%, and policies in force increased 7.6% compared
to the third quarter of 2020, due to the addition of National
General and Allstate brand growth. Allstate brand net written
premium increased 9.8% compared to the prior year quarter, driven
by policies in force growth and higher average premiums due to
inflation in insured home valuations and approved rate increases.
The recorded homeowners insurance combined ratio of 111.0 in the
third quarter of 2021 increased 7.8 points above the prior year
quarter, and the underlying combined ratio* of 71.6 increased 6.8
points compared to the third quarter of 2020. The increases were
primarily driven by higher severity due to inflation in labor and
material costs and the inclusion of National General’s results,
partially offset by higher average premium. Catastrophe losses were
$1.27 billion in the third quarter with approximately 75% related
to homeowners insurance. This includes 45 events, the largest of
which was Hurricane Ida. Hurricane Ida gross and net losses were
$1.5 billion and $689 million, respectively. Net losses include
reinsurance recoveries of $986 million and reinstatement premiums
of $181 million.
Protection Services
Results
Three months ended September
30,
Nine months ended September
30,
($ in millions)
2021
2020
% / $ Change
2021
2020
% / $ Change
Total revenues (1)
$
597
$
484
23.3
%
$
1,730
$
1,395
24.0
%
Allstate Protection Plans
311
251
23.9
881
702
25.5
Allstate Dealer Services
129
121
6.6
382
356
7.3
Allstate Roadside
64
59
8.5
183
172
6.4
Arity
62
25
148.0
190
81
134.6
Allstate Identity Protection
31
28
10.7
94
84
11.9
Adjusted net income (loss)
$
45
$
40
$
5
$
150
$
115
$
35
Allstate Protection Plans
32
36
(4)
119
105
14
Allstate Dealer Services
7
7
—
25
22
3
Allstate Roadside
1
4
(3)
7
8
(1)
Arity
1
(3)
4
4
(9)
13
Allstate Identity Protection
4
(4)
8
(5)
(11)
6
(1) Excludes realized capital gains and
losses
- Protection Services revenues increased to $597 million
in the third quarter of 2021, 23.3% higher than the prior year
quarter, and written premium of $651 million increased by 34.2%
primarily driven by continued Allstate Protection Plans growth.
Adjusted net income of $45 million increased by $5 million compared
to the prior year quarter, due to higher profitability at Allstate
Identity Protection and Arity.
- Allstate Protection Plans revenue of $311 million
increased $60 million, or 23.9%, compared to the prior year
quarter, reflecting increased policies in force. Written premium of
$439 million increased 46.3% compared to the prior year quarter,
driven by the launch with the Home Depot in the first quarter, and
are approximately 5.5 times higher since the acquisition in 2017.
Adjusted net income of $32 million in the third quarter of 2021 was
$4 million lower than the prior year quarter, driven by
restructuring charges and investments in growth.
- Allstate Dealer Services revenue of $129 million was
6.6% higher than the third quarter of 2020, driven by increased
sales and the impact of lower volumes in the third quarter of 2020
from impacts of the pandemic. Adjusted net income of $7 million in
the third quarter was comparable to the prior year quarter.
- Allstate Roadside revenue of $64 million in the third
quarter of 2021 increased 8.5% compared to the prior year quarter,
driven by the impact of lower rescue volumes in the third quarter
of 2020 from impacts of the pandemic. Margins declined slightly due
to capacity constraints with third party tow providers and the
proprietary “gig” Good Hands Rescue Network. Adjusted net income of
$1 million in the third quarter of 2021 was $3 million below the
prior year quarter.
- Arity revenue of $62 million increased $37 million
compared to the prior year quarter, primarily driven by the
inclusion of Transparent.ly and LeadCloud as a result of the
National General acquisition, and increased device sales driven by
growth in the Allstate brand Milewise® product. Adjusted net income
of $1 million in the third quarter of 2021 improved $4 million
compared to the prior year quarter. Arity continues to expand its
data acquisition platform with over 600 billion miles of traffic
data being used to serve an increasing number of insurance and
third-party application customers.
- Allstate Identity Protection revenue of $31 million in
the third quarter of 2021 increased 10.7% compared to the prior
year quarter and policies in force increased by 28.4% to 3.2
million. Adjusted net income of $4 million in the third quarter of
2021 increased $8 million compared to the prior year quarter
primarily driven by timing of expenses and a one-time expense
benefit.
Allstate Health and Benefits
Results
Three months ended September
30,
Nine months ended September
30,
($ in millions)
2021
2020
% Change
2021
2020
% Change
Premiums and contract charges
$
460
$
287
60.3
%
$
1,362
$
832
63.7
%
Employer voluntary benefits
251
287
(12.5)
769
832
(7.6)
Group health
90
—
NM
260
—
NM
Individual accident and health
119
—
NM
333
—
NM
Adjusted net income
33
33
—
160
62
158.1
- Allstate Health and Benefits premiums and contract
charges increased 60.3% compared to the prior year quarter,
primarily due to the addition of group health and individual
accident and health businesses acquired with National General.
Adjusted net income of $33 million in the third quarter of 2021 was
comparable to the third quarter of 2020 as income from the addition
of National General was offset by a higher benefit ratio compared
to the prior year quarter, when benefit utilization was lower due
to the pandemic.
Allstate Investment
Results
Three months ended September
30,
Nine months ended September
30,
($ in millions, except ratios)
2021
2020
$ / pts Change
2021
2020
$ / pts Change
Net investment income
$
764
$
464
$
300
$
2,446
$
930
$
1,516
Market-based investment income (1)
352
358
(6)
1,061
1,070
(9)
Performance-based investment income
(1)
437
129
308
1,464
(67)
1,531
Realized capital gains (losses)
105
319
(214)
818
597
221
Change in unrealized net capital gains
and losses, pre-tax
(302)
198
NM
(1,352)
902
NM
Total return on investment
portfolio
1.0
%
1.8
%
(0.8)
3.3
%
4.6
%
(1.3)
Total return on investment portfolio
(trailing twelve months)
6.0
%
5.9
%
0.1
(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 $764 million in the third quarter of 2021,
an increase of $300 million from the prior year quarter, driven by
higher performance-based income.
- Market-based investment income contributed $352 million
of investment income in the third quarter of 2021, a decrease of $6
million, or 1.7%, compared to the prior year quarter as the impact
of low reinvestment rates was largely mitigated by higher average
assets under management and prepayment fee income.
- Performance-based investment income totaled $437
million in the third quarter of 2021, an increase of $308 million
compared to the prior year quarter, primarily due to higher private
equity investment valuations. These results represent a long-term
and broad approach to growth investing with nearly 90% of
year-to-date performance-based income coming from assets with
inception years of 2018 and prior. Approximately half of the total
year-to-date performance-based income was generated by 25
individual investments.
- Net realized capital gains were $105 million in the
third quarter of 2021, compared to $319 million in the prior year
quarter, primarily due to lower gains on sales of fixed income
securities and a net loss on the valuation of equity investments in
the current quarter compared to gains in the prior year
quarter.
- Unrealized net capital losses were $302 million in the
third quarter of 2021 as an increase in interest rates resulted in
lower fixed income valuations.
- Total return on the investment portfolio was 1.0% and
3.3% for the third quarter and year-to-date periods of 2021,
respectively.
- Discontinued Operations generated $325 million of income
in the third quarter of 2021, primarily driven by a decrease in the
loss on disposal and higher performance-based income. In the first
quarter of 2021, the assets and liabilities of Allstate Life
Insurance Company and Allstate Life Insurance Company of New York
were reclassified as held for sale with results presented as
discontinued operations. This includes $36.8 billion of assets and
$32.4 billion of liabilities as of September 30, 2021. On October
1, 2021 Allstate closed on the sale of Allstate Life Insurance
Company of New York to Wilton Re, and on November 1, 2021 closed on
the sale of Allstate Life Insurance Company to entities managed by
Blackstone. These transactions generated combined proceeds of
approximately $4.4 billion. Allstate agents and financial
specialists will meet customers’ needs primarily by offering a full
suite of life insurance and retirement solutions from third-party
providers.
Proactive Capital Management
“Allstate’s proactive capital deployment provides top tier cash
returns to shareholders while funding growth,” said Mario Rizzo,
Chief Financial Officer. “Through a combination of dividends and
share repurchases, Allstate returned nearly $1.5 billion to
shareholders in the third quarter. This included executing a $750
million accelerated share repurchase program as part of the current
$5 billion authorization. Earlier this week the previously
announced divestiture of Allstate Life Insurance Company was
completed, which combined with the sale of Allstate Life Insurance
Company of New York, increased deployable capital by $1.7 billion
and reduced interest rate risk. SafeAuto was acquired on October 1,
2021 to consolidate into National General’s platform, further
increasing personal lines market share,” 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, November 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)
September 30, 2021
December 31, 2020
Assets
Investments
Fixed income securities, at fair value
(amortized cost, net $38,811 and $40,034)
$
39,989
$
42,565
Equity securities, at fair value (cost
$2,939 and $2,740)
3,807
3,168
Mortgage loans, net
752
746
Limited partnership interests
7,578
4,563
Short-term, at fair value (amortized cost
$6,428 and $6,807)
6,428
6,807
Other, net
3,286
1,691
Total investments
61,840
59,540
Cash
690
311
Premium installment receivables, net
8,406
6,463
Deferred policy acquisition costs
4,600
3,774
Reinsurance and indemnification
recoverables, net
10,442
7,215
Accrued investment income
339
371
Property and equipment, net
965
1,057
Goodwill
3,389
2,369
Other assets, net
5,966
2,756
Assets held for sale
36,803
42,131
Total assets
$
133,440
$
125,987
Liabilities
Reserve for property and casualty
insurance claims and claims expense
$
33,286
$
27,610
Reserve for future policy benefits
1,263
1,028
Contractholder funds
863
857
Unearned premiums
19,627
15,946
Claim payments outstanding
1,179
957
Deferred income taxes
711
382
Other liabilities and accrued expenses
9,403
7,840
Long-term debt
7,980
7,825
Liabilities held for sale
32,421
33,325
Total liabilities
106,733
95,770
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, 288 million and 304
million shares outstanding
9
9
Additional capital paid-in
3,700
3,498
Retained income
52,736
52,767
Treasury stock, at cost (612 million and
596 million shares)
(33,604
)
(31,331
)
Accumulated other comprehensive
income:
Unrealized net capital gains and
losses
1,828
3,180
Unrealized foreign currency translation
adjustments
3
(7
)
Unamortized pension and other
postretirement prior service credit
87
131
Total accumulated other comprehensive
income
1,918
3,304
Total Allstate shareholders’
equity
26,729
30,217
Noncontrolling interest
(22
)
—
Total equity
26,707
30,217
Total liabilities and equity
$
133,440
$
125,987
THE ALLSTATE CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
($ in millions, except per share
data)
Three months ended September
30,
Nine months ended September
30,
2021
2020
2021
2020
Revenues
Property and casualty insurance
premiums
$
10,615
$
9,336
$
31,366
$
27,794
Accident and health insurance premiums and
contract charges
460
287
1,362
832
Other revenue
536
272
1,585
794
Net investment income
764
464
2,446
930
Realized capital gains (losses)
105
319
818
597
Total revenues
12,480
10,678
37,577
30,947
Costs and expenses
Property and casualty insurance claims and
claims expense
8,264
6,072
21,514
16,635
Shelter-in-Place Payback expense
—
—
29
948
Accident and health insurance policy
benefits
269
128
746
392
Interest credited to contractholder
funds
8
8
25
26
Amortization of deferred policy
acquisition costs
1,582
1,386
4,650
4,095
Operating costs and expenses
1,890
1,322
5,304
4,054
Pension and other postretirement
remeasurement (gains) losses
40
(71
)
(404
)
320
Restructuring and related charges
23
196
145
213
Amortization of purchased intangibles
109
31
267
88
Interest expense
69
78
246
238
Total costs and expenses
12,254
9,150
32,522
27,009
Income from operations before income
tax expense
226
1,528
5,055
3,938
Income tax expense
20
312
1,008
779
Net income from continuing
operations
206
1,216
4,047
3,159
Income (loss) from discontinued
operations, net of tax
325
(63
)
(3,272
)
(207
)
Net income
531
1,153
775
2,952
Less: Net income attributable to
noncontrolling interest
(7
)
—
(7
)
—
Net income attributable to
Allstate
538
1,153
782
2,952
Less: Preferred stock dividends
30
27
87
89
Net income applicable to common
shareholders
$
508
$
1,126
$
695
$
2,863
Earnings per common share applicable to
common shareholders
Basic
Continuing operations
$
0.62
$
3.82
$
13.31
$
9.77
Discontinued operations
1.11
(0.20
)
(10.98
)
(0.66
)
Total
$
1.73
$
3.62
$
2.33
$
9.11
Diluted
Continuing operations
$
0.62
$
3.78
$
13.11
$
9.66
Discontinued operations
1.09
(0.20
)
(10.81
)
(0.65
)
Total
$
1.71
$
3.58
$
2.30
$
9.01
Weighted average common shares – Basic
293.1
311.2
298.1
314.1
Weighted average common shares –
Diluted
297.9
314.1
302.6
317.9
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:
- Realized capital gains and losses except for periodic
settlements and accruals on non-hedge derivative instruments, which
are reported with realized capital gains and losses but included in
adjusted net income
- 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
- 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 realized capital gains and losses, 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 and
adjustments for other significant non-recurring, infrequent or
unusual items and the related tax expense or benefit of these
items. Realized capital gains and losses, 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 and income or
loss from discontinued 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
2021
2020
2021
2020
Net income (loss) applicable to common
shareholders
$
508
$
1,126
$
1.71
$
3.58
Realized capital (gains) losses
(105
)
(319
)
(0.35
)
(1.01
)
Pension and other postretirement
remeasurement (gains) losses
40
(71
)
0.13
(0.22
)
Curtailment (gains) losses
—
(8
)
—
(0.02
)
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
1
—
—
Business combination expenses and the
amortization of purchased intangibles
109
31
0.37
0.10
Business combination fair value
adjustment
—
—
—
—
(Income) loss from discontinued
operations
(235
)
86
(0.79
)
0.27
Income tax expense (benefit)
(100
)
54
(0.34
)
0.17
Adjusted net income *
$
217
$
900
$
0.73
$
2.87
Nine months ended September
30,
Consolidated
Per diluted common
share
2021
2020
2021
2020
Net income (loss) applicable to common
shareholders
$
695
$
2,863
$
2.30
$
9.01
Realized capital (gains) losses
(818
)
(597
)
(2.70
)
(1.88
)
Pension and other postretirement
remeasurement (gains) losses
(404
)
320
(1.34
)
1.01
Curtailment (gains) losses
—
(8
)
—
(0.03
)
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
1
1
—
—
Business combination expenses and the
amortization of purchased intangibles
289
88
0.96
0.28
Business combination fair value
adjustment
(6
)
—
(0.02
)
—
(Income) loss from discontinued
operations
3,435
289
11.35
0.91
Income tax expense (benefit)
45
(38
)
0.15
(0.12
)
Adjusted net income *
$
3,237
$
2,918
$
10.70
$
9.18
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
September 30,
2021
2020
Return on Allstate common
shareholders’ equity
Numerator:
Net income applicable to common
shareholders
$
3,293
$
4,570
Denominator:
Beginning Allstate common shareholders’
equity (1)
$
25,293
$
23,088
Ending Allstate common shareholders’
equity (1)
24,759
25,293
Average Allstate common shareholders’
equity
$
25,026
$
24,191
Return on Allstate common shareholders’
equity
13.2
%
18.9
%
($ in millions)
For the twelve months ended
September 30,
2021
2020
Adjusted net income return on Allstate
common shareholders’ equity
Numerator:
Adjusted net income *
$
4,829
$
3,897
Denominator:
Beginning Allstate common shareholders’
equity (1)
$
25,293
$
23,088
Less: Unrealized net capital gains and
losses
2,744
2,023
Adjusted beginning Allstate common
shareholders’ equity
22,549
21,065
Ending Allstate common shareholders’
equity (1)
24,759
25,293
Less: Unrealized net capital gains and
losses
1,828
2,744
Adjusted ending Allstate common
shareholders’ equity
22,931
22,549
Average adjusted Allstate common
shareholders’ equity
$
22,740
$
21,807
Adjusted net income return on Allstate
common shareholders’ equity *
21.2
%
17.9
%
_____________
(1)
Excludes equity related to preferred stock
of $1,970 million as of September 30, 2021, $1,970 million as of
September 30, 2020 and $3,052 million as of September 30, 2019.
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 September
30,
Nine months ended September
30,
2021
2020
2021
2020
Combined ratio
105.3
91.6
94.8
88.8
Effect of catastrophe losses
(12.5)
(11.1)
(9.4)
(8.9)
Effect of prior year non-catastrophe
reserve reestimates
(1.6)
(0.8)
(0.4)
(0.3)
Effect of amortization of purchased
intangibles
(0.8)
—
(0.5)
—
Underlying combined ratio*
90.4
79.7
84.5
79.6
Effect of prior year catastrophe reserve
reestimates
—
(5.7)
(0.7)
(1.9)
Allstate Protection - Auto
Insurance
Three months ended September
30,
Nine months ended September
30,
2021
2020
2021
2020
Combined ratio
102.3
85.4
92.4
86.2
Effect of catastrophe losses
(2.9
)
(1.6
)
(1.9
)
(1.4
)
Effect of prior year non-catastrophe
reserve reestimates
(1.1
)
0.5
(0.1
)
0.3
Effect of amortization of purchased
intangibles
(0.7
)
—
(0.5
)
—
Underlying combined ratio*
97.6
84.3
89.9
85.1
Effect of prior year catastrophe reserve
reestimates
(0.1
)
(0.4
)
(0.1
)
(0.2
)
Allstate Protection - Homeowners
Insurance
Three months ended September
30,
Nine months ended September
30,
2021
2020
2021
2020
Combined ratio
111.0
103.2
100.2
93.9
Effect of catastrophe losses
(38.0
)
(39.1
)
(29.8
)
(31.6
)
Effect of prior year non-catastrophe
reserve reestimates
(0.6
)
0.7
(0.2
)
0.3
Effect of amortization of purchased
intangibles
(0.8
)
—
(0.6
)
—
Underlying combined ratio*
71.6
64.8
69.6
62.6
Effect of prior year catastrophe reserve
reestimates
0.1
(21.3
)
(2.3
)
(6.8
)
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 September
30,
Nine months ended September
30,
2021
2020
2021
2020
Expense ratio
25.1
24.9
24.3
27.5
Effect of amortization of purchased
intangibles
(0.8
)
—
(0.5
)
—
Underlying expense ratio*
24.3
24.9
23.8
27.5
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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20211103006329/en/
Al Scott Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
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