New share repurchase program of $5 billion
The Allstate Corporation (NYSE: ALL) today reported financial
results for the second quarter of 2021.
The Allstate Corporation
Consolidated Highlights
Three months ended June
30,
Six months ended June
30,
($ in millions, except per share data
and ratios)
2021
2020
% / pts Change
2021
2020
% / pts Change
Consolidated revenues
$
12,646
$
10,403
21.6
$
25,097
$
20,269
23.8
Net income applicable to common
shareholders
1,595
1,224
30.3
187
1,737
(89.2)
per diluted common share
5.26
3.86
36.3
0.61
5.43
(88.8)
Adjusted net income*
1,149
816
40.8
3,020
2,018
49.7
per diluted common share*
3.79
2.58
46.9
9.90
6.31
56.9
Return on Allstate common shareholders’
equity (trailing twelve months)
Net income applicable to common
shareholders
15.3
%
18.2
%
(2.9)
Adjusted net income*
23.8
%
18.0
%
5.8
Book value per common share
86.33
79.21
9.0
Property-Liability combined
ratio
Recorded
95.7
89.8
5.9
89.5
87.3
2.2
Underlying combined ratio*
85.7
76.8
8.9
81.4
79.5
1.9
Property-Liability insurance premiums
earned
10,009
8,863
12.9
19,905
17,744
12.2
Catastrophe losses
952
1,186
(19.7)
1,542
1,397
10.4
Shelter-in-Place Payback
expense
29
738
(96.1)
29
948
(96.9)
Total policies in force (in
thousands)
189,361
165,463
14.4
*
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 has performed exceptionally as the economy rebounds
from the pandemic by focusing on execution, innovation and
long-term value creation,” said Tom Wilson, Chair, President and
CEO of The Allstate Corporation. “Revenues grew 21.6% over the
prior year, reflecting execution of a multi-faceted plan to
increase growth. The Property-Liability combined ratio of 95.7 was
attractive despite an increase in the frequency of auto accidents
and $952 million of catastrophe losses. Investment income from the
performance-based portfolio increased by $759 million, reflecting
our long-term approach to managing risk-adjusted returns. This
strong execution resulted in second quarter net income of $1.6
billion. Adjusted net income* was $3.79 per share, representing a
return on equity of 23.8% for the last twelve months.
“The Transformative Growth plan and innovation are also creating
long-term shareholder value. Property-Liability policies in force
and premiums written were 12.1% and 12.5%, respectively, above the
prior year due to expansion of auto insurance sold through
independent agents with the National General acquisition. Policies
in force through Allstate’s direct and agent operations were flat
as a 6.7% increase in new business, due to improved auto insurance
pricing and increased advertising, was offset by lower customer
retention reflecting pandemic-related customer support in the prior
year. Telematics innovation has resulted in rapid growth of
pay-per-mile auto insurance and Arity’s expansion into marketing
services. The new $5 billion share repurchase program that was
approved today will help maintain a top 15% ranking of cash returns
to shareholders among S&P 500 companies,” concluded Wilson.
Second Quarter 2021 Results
- Total revenues of $12.6 billion in the second quarter of 2021
increased 21.6% compared to the prior year quarter, primarily
reflecting higher earned premiums from the acquisition of National
General and increased net investment income. Higher revenues from
Protection Services, driven by the continued expansion of Allstate
Protection Plans, also contributed to revenue growth in the
quarter.
- Net income applicable to common shareholders increased to $1.6
billion in the second quarter of 2021, compared to net income of
$1.2 billion in the second quarter of 2020, primarily driven by
higher performance-based investment income results.
- Adjusted net income* of $1.1 billion, or $3.79 per diluted
share, increased $333 million compared to the prior year quarter.
The increase reflects higher net investment income and higher
earned premiums from the acquisition of National General and lower
Shelter-in-Place Payback expense, partially offset by higher
non-catastrophe losses. The second quarter of 2020 was
significantly impacted by the low level of auto accident frequency
experienced due to the pandemic.
Property-Liability
Results
Three months ended June
30,
Six months ended June
30,
($ in millions, except ratios)
2021
2020
% / pts Change
2021
2020
% / pts Change
Premiums written
$
10,323
$
9,172
12.5
%
20,091
17,764
13.1
%
Allstate Brand
9,008
8,909
1.1
17,429
17,279
0.9
National General
1,315
263
NM
2,662
485
NM
Underwriting income
429
902
(52.4
)
2,086
2,250
(7.3
)
Allstate Brand
414
899
(53.9
)
1,929
2,235
(13.7
)
National General
15
6
NM
153
20
NM
Recorded combined ratio
95.7
89.8
5.9
89.5
87.3
2.2
Allstate Protection auto
94.3
83.8
10.5
87.4
86.6
0.8
Allstate Protection homeowners
100.3
106.8
(6.5
)
94.6
89.2
5.4
Underlying combined ratio*
85.7
76.8
8.9
81.4
79.5
1.9
Allstate Protection auto
91.8
82.4
9.4
86.0
85.6
0.4
Allstate Protection homeowners
69.5
60.6
8.9
68.6
61.5
7.1
NM = not meaningful
- Property-Liability written premium of $10.3 billion increased
12.5% in the second quarter of 2021 compared to the prior year
quarter, primarily driven by the acquisition of National General.
The recorded combined ratio of 95.7 generated underwriting income
of $429 million, a decrease of $473 million compared to the prior
year quarter. Income decreased primarily due to higher
non-catastrophe losses in auto and homeowners insurance, which were
partially offset by increased premiums related to the acquisition
of National General and lower Shelter-in-Place Payback expense.
- The underlying combined ratio* of 85.7 for the second quarter
of 2021 was 8.9 points above the prior year quarter, reflecting
higher non-catastrophe losses due to increased auto accident
frequency and higher incurred auto and homeowners claims severity,
partially offset by lower expenses.
- Cost reductions implemented in 2020 and continuing in 2021
provide operational flexibility to improve customer value and
invest in growth. The expense ratio of 24.7 decreased 7.1 points
compared to the prior year quarter, due to lower
Coronavirus-related expenses from Shelter-in-Place Payback and bad
debt. This was partially offset by the amortization of purchased
intangibles, increased advertising of 0.7 points and restructuring
charges of $66 million. Excluding these items, the expense ratio
decreased 0.4 points compared to the prior year quarter due to
lower operating expenses. Increased claims process efficiency and
expanded digital capabilities have also resulted in lower expenses
while improving the customer experience.
- Allstate Protection auto insurance net written premium
increased 10.1%, and policies in force increased 14.1% 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 new issued applications were offset by lower average
premiums. Policies in force increased sequentially for the second
consecutive quarter, increasing 161 thousand compared to the end of
the first quarter 2021, including 96 thousand from the Allstate
brand. The recorded auto insurance combined ratio of 94.3 in the
second quarter of 2021 was 10.5 points above the prior year
quarter, and the underlying combined ratio* of 91.8 was 9.4 points
above the prior year quarter, primarily due to an increase in the
loss ratio, partially offset by a lower expense ratio. The auto
loss ratio increase was driven by higher accident frequency as
miles driven rebound toward pre-pandemic levels and higher incurred
claim severity from inflation and supply chain disruptions.
- Allstate Protection homeowners insurance net written
premium grew 19.2%, and policies in force increased 7.5% compared
to the second quarter of 2020, due to the acquisition of National
General and growth of Allstate brand policies. Allstate brand net
written premium increased 6.2% compared to the prior year quarter,
driven by higher average premiums and new issued application
growth. The recorded homeowners insurance combined ratio of 100.3
in the second quarter of 2021 was 6.5 points below the second
quarter of 2020, primarily driven by lower catastrophe losses and
increased premiums earned, partially offset by higher
non-catastrophe losses. The underlying combined ratio* of 69.5 was
8.9 points higher than the prior year quarter, reflecting the
inclusion of National General’s results, higher non-catastrophe
claim frequency and increased severity due to inflation in labor
and material costs.
Protection Services
Results
Three months ended June
30,
Six months ended June
30,
($ in millions)
2021
2020
% / $ Change
2021
2020
% / $ Change
Total revenues (1)
$
581
$
457
27.1
%
$
1,133
$
911
24.4
%
Allstate Protection Plans
295
232
27.2
570
451
26.4
Allstate Dealer Services
130
118
10.2
253
235
7.7
Allstate Roadside
60
53
13.2
119
113
5.3
Arity
64
26
146.2
128
56
128.6
Allstate Identity Protection
32
28
14.3
63
56
12.5
Adjusted net income (loss)
$
56
$
38
$
18
$
105
$
75
$
30
Allstate Protection Plans
42
35
7
87
69
18
Allstate Dealer Services
10
8
2
18
15
3
Allstate Roadside
2
2
—
6
4
2
Arity
1
(3
)
4
3
(6
)
9
Allstate Identity Protection
1
(4
)
5
(9
)
(7
)
(2
)
(1)
Excludes realized capital gains
and losses
- Protection Services revenues increased to $581 million
in the second quarter of 2021, 27.1% higher than the prior year
quarter. Adjusted net income of $56 million increased by $18
million compared to the prior year quarter, due to growth at
Allstate Protection Plans and profits at Arity and Allstate
Identity Protection.
- Allstate Protection Plans revenue of $295 million
increased $63 million, or 27.2%, compared to the prior year
quarter, reflecting increased policies in force. Adjusted net
income of $42 million in the second quarter of 2021 was $7 million
higher than the prior year quarter, driven by profitable
growth.
- Allstate Dealer Services revenue of $130 million was
10.2% higher than the second quarter of 2020, driven by increased
auto industry sales and the impact of lower volumes in the second
quarter of 2020 from shelter-in-place orders. Adjusted net income
of $10 million in the second quarter was $2 million higher than the
prior year quarter.
- Allstate Roadside revenue of $60 million in the second
quarter of 2021 increased 13.2% compared to the prior year quarter,
driven by the impact of lower rescue volumes in the second quarter
of 2020 from shelter-in-place orders. Adjusted net income of $2
million in the second quarter of 2021 was flat compared to the
prior year quarter.
- Arity revenue of $64 million increased $38 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 second quarter of 2021 improved $4 million
compared to the prior year quarter.
- Allstate Identity Protection revenue of $32 million in
the second quarter of 2021 increased 14.3% compared to the prior
year quarter. Adjusted net income of $1 million in the second
quarter of 2021 increased $5 million compared to the prior year
quarter.
Allstate Health and Benefits
Results
Three months ended June
30,
Six months ended June
30,
($ in millions)
2021
2020
% Change
2021
2020
% Change
Premiums and contract charges
447
263
70.0
902
545
65.5
Employer voluntary benefits
255
263
(3.0
)
518
545
(5.0
)
Group health
87
—
NM
170
—
NM
Individual accident and health
105
—
NM
214
—
NM
Adjusted net income
62
5
NM
127
29
NM
- Allstate Health and Benefits premiums and contract
charges increased 70.0% 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 $62 million in the second quarter of 2021
increased by $57 million compared to the second quarter of 2020,
primarily due to the addition of National General and the absence
of a capitalized software write-off recognized in the prior year
quarter.
Allstate Investment
Results
Three months ended June
30,
Six months ended June
30,
($ in millions, except ratios)
2021
2020
$ / pts
Change
2021
2020
$ / pts
Change
Net investment income
$
974
$
220
754
$
1,682
$
466
1,216
Market-based investment income (1)
355
352
3
709
712
(3
)
Performance-based investment income
(1)
649
(110
)
759
1,027
(196
)
1,223
Realized capital gains (losses)
287
440
(153
)
713
278
435
Change in unrealized net capital gains
and losses, pre-tax
324
1,829
NM
(1,050
)
704
NM
Total return on investment
portfolio
2.6
%
4.8
%
(2.2
)
2.4
%
2.6
%
(0.2
)
Total return on investment portfolio
(trailing twelve months)
6.8
%
5.9
%
0.9
(1)
Investment expenses are not
allocated between market-based and performance-based portfolios
with the exception of investee level expenses.
- Allstate Investments $62.6 billion portfolio generated
net investment income of $974 million in the second quarter of
2021, an increase of $754 million from the prior year quarter,
driven by higher performance-based income.
- Market-based investment income contributed $355 million
of investment income in the second quarter of 2021, an increase of
$3 million, or 0.9%, compared to the prior year quarter as the
impact of low reinvestment rates was mitigated by higher average
assets under management and prepayment fee income.
- Performance-based investment income totaled $649
million in the second quarter of 2021, an increase of $759 million
compared to the prior year quarter. The increase reflects higher
private equity investment valuations and net gains from sales of
real estate investments.
- Net realized capital gains were $287 million in the
second quarter of 2021, compared to $440 million in the prior year
quarter, primarily due to higher equity valuations and gains on
sales of fixed income securities and real estate.
- Unrealized net capital gains increased $324 million from
the first quarter of 2021 as lower interest rates resulted in
higher fixed income valuations.
- Total return on the investment portfolio was 2.6% for
the second quarter of 2021 and 6.8% over the trailing twelve-month
period.
- Discontinued Operations generated $196 million of income
in the second quarter of 2021, primarily driven by 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 $37.0 billion of assets and $32.8 billion of liabilities
as of June 30, 2021.
Proactive Capital Management
“Allstate’s focus on current results and long-term value
creation is designed to increase shareholder value,” said Mario
Rizzo, Chief Financial Officer. “The previously announced
divestitures of the life and annuity businesses are on pace to
close in 2021, and the acquisition of National General enhances our
position in the independent agent channel and increases market
share. We returned $807 million to shareholders through dividends
and share repurchases in the quarter. The new $5 billion share
repurchase program, which is expected to be completed by March 31,
2023, represents 13% of current market capitalization and will be
initiated in the third quarter upon completion of the prior $3
billion program. Accelerating growth and increasing
Property-Liability market share is also expected to increase
shareholder value,” 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 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)
June 30, 2021
December 31, 2020
Assets
Investments
Fixed income securities, at fair value
(amortized cost, net $41,344 and $40,034)
$
42,825
$
42,565
Equity securities, at fair value (cost
$2,537 and $2,740)
3,059
3,168
Mortgage loans, net
786
746
Limited partnership interests
7,073
4,563
Short-term, at fair value (amortized cost
$5,516 and $6,807)
5,516
6,807
Other, net
3,311
1,691
Total investments
62,570
59,540
Cash
656
311
Premium installment receivables, net
8,146
6,463
Deferred policy acquisition costs
4,374
3,774
Reinsurance and indemnification
recoverables, net
9,497
7,215
Accrued investment income
350
371
Property and equipment, net
1,026
1,057
Goodwill
3,349
2,369
Other assets, net
5,706
2,756
Assets held for sale
36,969
42,131
Total assets
$
132,643
$
125,987
Liabilities
Reserve for property and casualty
insurance claims and claims expense
$
31,637
$
27,610
Reserve for future policy benefits
1,239
1,028
Contractholder funds
858
857
Unearned premiums
18,756
15,946
Claim payments outstanding
1,040
957
Deferred income taxes
758
382
Other liabilities and accrued expenses
9,392
7,840
Long-term debt
7,996
7,825
Liabilities held for sale
32,775
33,325
Total liabilities
104,451
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; $.01 par value, 8 million shares authorized, 200.0
thousand shares issued and outstanding, $200 aggregate liquidation
preference for $200 in 2021
2,170
1,970
Common stock, $.01 par value, 2.0 billion
shares authorized and 900 million issued, 297 million and 304
million shares outstanding
9
9
Additional capital paid-in
3,668
3,498
Retained income
52,464
52,767
Treasury stock, at cost (603 million and
596 million shares)
(32,394
)
(31,331
)
Accumulated other comprehensive
income:
Other unrealized net capital gains and
losses
2,726
3,860
Unrealized adjustment to DAC, DSI and
insurance reserves
(562
)
(680
)
Total unrealized net capital gains and
losses
2,164
3,180
Unrealized foreign currency translation
adjustments
24
(7
)
Unamortized pension and other
postretirement prior service credit
102
131
Total accumulated other comprehensive
income
2,290
3,304
Total Allstate shareholders’
equity
28,207
30,217
Noncontrolling interest
(15
)
—
Total equity
28,192
30,217
Total liabilities and equity
$
132,643
$
125,987
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,
2021
2020
2021
2020
Revenues
Property and casualty insurance
premiums
$
10,444
$
9,223
$
20,751
$
18,458
Accident and health insurance premiums and
contract charges
447
263
902
545
Other revenue
494
257
1,049
522
Net investment income
974
220
1,682
466
Realized capital gains (losses)
287
440
713
278
Total revenues
12,646
10,403
25,097
20,269
Costs and expenses
Property and casualty insurance claims and
claims expense
7,207
5,222
13,250
10,563
Shelter-in-Place Payback expense
29
738
29
948
Accident and health insurance policy
benefits
244
123
477
264
Interest credited to contractholder
funds
8
9
17
18
Amortization of deferred policy
acquisition costs
1,545
1,344
3,068
2,709
Operating costs and expenses
1,683
1,394
3,414
2,732
Pension and other postretirement
remeasurement (gains) losses
(134
)
73
(444
)
391
Restructuring and related charges
71
13
122
17
Amortization of purchased intangibles
105
29
158
57
Interest expense
91
79
177
160
Total costs and expenses
10,849
9,024
20,268
17,859
Income from operations before income
tax expense
1,797
1,379
4,829
2,410
Income tax expense
362
273
988
467
Net income from continuing
operations
1,435
1,106
3,841
1,943
Income (loss) from discontinued
operations, net of tax
196
144
(3,597
)
(144
)
Net income
1,631
1,250
244
1,799
Less: Net income attributable to
noncontrolling interest
6
—
—
—
Net income attributable to
Allstate
1,625
1,250
244
1,799
Less: Preferred stock dividends
30
26
57
62
Net income applicable to common
shareholders
$
1,595
$
1,224
$
187
$
1,737
Earnings per common share applicable to
common shareholders
Basic
Continuing operations
$
4.68
$
3.44
$
12.59
$
5.96
Discontinued operations
0.66
0.46
(11.97
)
(0.46
)
Total
$
5.34
$
3.90
$
0.62
$
5.50
Diluted
Continuing operations
$
4.61
$
3.41
$
12.41
$
5.88
Discontinued operations
0.65
0.45
(11.80
)
(0.45
)
Total
$
5.26
$
3.86
$
0.61
$
5.43
Weighted average common shares –
Basic
298.8
313.7
300.6
315.6
Weighted average common shares –
Diluted
303.3
317.0
304.9
319.8
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, and
- 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 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 June
30,
Consolidated
Per diluted common
share
2021
2020
2021
2020
Net income (loss) applicable to common
shareholders
$
1,595
$
1,224
$
5.26
$
3.86
Realized capital (gains) losses
(287
)
(440
)
(0.95
)
(1.39
)
Pension and other postretirement
remeasurement (gains) losses
(134
)
73
(0.44
)
0.23
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
—
—
—
Business combination expenses and the
amortization of purchased intangibles
105
29
0.35
0.09
Business combination fair value
adjustment
(6
)
—
(0.02
)
—
(Income) loss from discontinued
operations
(493
)
(167
)
(1.63
)
(0.52
)
Income tax expense (benefit)
369
97
1.22
0.31
Adjusted net income *
$
1,149
$
816
$
3.79
$
2.58
Six months ended June
30,
Consolidated
Per diluted common
share
2021
2020
2021
2020
Net income (loss) applicable to common
shareholders
$
187
$
1,737
$
0.61
$
5.43
Realized capital (gains) losses
(713
)
(278
)
(2.34
)
(0.87
)
Pension and other postretirement
remeasurement (gains) losses
(444
)
391
(1.46
)
1.22
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
1
—
—
—
Business combination expenses and the
amortization of purchased intangibles
180
57
0.59
0.18
Business combination fair value
adjustment
(6
)
—
(0.02
)
—
(Income) loss from discontinued
operations
3,670
203
12.04
0.63
Income tax expense (benefit)
145
(92
)
0.48
(0.28
)
Adjusted net income *
$
3,020
$
2,018
$
9.90
$
6.31
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 above. 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 the 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,
2021
2020
Return on Allstate common
shareholders’ equity
Numerator:
Net income applicable to common
shareholders
$
3,911
$
4,333
Denominator:
Beginning Allstate common shareholders’
equity (1)
$
25,016
$
22,546
Ending Allstate common shareholders’
equity (1)
26,037
25,016
Average Allstate common shareholders’
equity
$
25,527
$
23,781
Return on Allstate common shareholders’
equity
15.3
%
18.2
%
($ in millions)
For the twelve months ended
June 30,
2021
2020
Adjusted net income return on Allstate
common shareholders’ equity
Numerator:
Adjusted net income *
$
5,512
$
3,887
Denominator:
Beginning Allstate common shareholders’
equity (1)
$
25,016
$
22,546
Less: Unrealized net capital gains and
losses
2,602
1,654
Adjusted beginning Allstate common
shareholders’ equity
22,414
20,892
Ending Allstate common shareholders’
equity (1)
26,037
25,016
Less: Unrealized net capital gains and
losses
2,164
2,602
Adjusted ending Allstate common
shareholders’ equity
23,873
22,414
Average adjusted Allstate common
shareholders’ equity
$
23,144
$
21,653
Adjusted net income return on Allstate
common shareholders’ equity *
23.8
%
18.0
%
_____________
(1)
Excludes equity related to
preferred stock of $2,170 million as of June 30, 2021, $1,970
million as of June 30, 2020 and $1,930 million as of June 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 June
30,
Six months ended June
30,
2021
2020
2021
2020
Combined ratio
95.7
89.8
89.5
87.3
Effect of catastrophe losses
(9.5
)
(13.4
)
(7.7
)
(7.9
)
Effect of prior year non-catastrophe
reserve reestimates
0.2
0.4
0.1
0.1
Effect of amortization of purchased
intangibles
(0.7
)
—
(0.5
)
—
Underlying combined ratio*
85.7
76.8
81.4
79.5
Effect of prior year catastrophe reserve
reestimates
0.4
0.3
(1.0
)
—
Allstate
Protection - Auto Insurance
Three months ended June
30,
Six months ended June
30,
2021
2020
2021
2020
Combined ratio
94.3
83.8
87.4
86.6
Effect of catastrophe losses
(2.2
)
(2.2
)
(1.3
)
(1.2
)
Effect of prior year non-catastrophe
reserve reestimates
0.4
0.8
0.3
0.2
Effect of amortization of purchased
intangibles
(0.7
)
—
(0.4
)
—
Underlying combined ratio*
91.8
82.4
86.0
85.6
Effect of prior year catastrophe reserve
reestimates
(0.1
)
(0.1
)
(0.2
)
(0.1
)
Allstate
Protection - Homeowners Insurance
Three months ended June
30,
Six months ended June
30,
2021
2020
2021
2020
Combined ratio
100.3
106.8
94.6
89.2
Effect of catastrophe losses
(30.3
)
(46.4
)
(25.5
)
(27.8
)
Effect of prior year non-catastrophe
reserve reestimates
0.3
0.2
—
0.1
Effect of amortization of purchased
intangibles
(0.8
)
—
(0.5
)
—
Underlying combined ratio*
69.5
60.6
68.6
61.5
Effect of prior year catastrophe reserve
reestimates
1.5
1.3
(3.6
)
0.5
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804006160/en/
Rachel Hill Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
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