NORTHBROOK, Ill.–(BUSINESS WIRE)–The Allstate Corporation (NYSE: ALL) today reported financial results for the first quarter of 2023.
The Allstate Corporation Consolidated Highlights (1)
Three months ended March 31,
($ in millions, except per share data and ratios)
2023
2022
% / pts
Change
Consolidated revenues
$
13,786
$
12,336
11.8
%
Net income (loss) applicable to common shareholders
(346
)
634
NM
per diluted common share (2)
(1.31
)
2.25
NM
Adjusted net income (loss)*
(342
)
730
NM
per diluted common share* (2)
(1.30
)
2.59
NM
Return on Allstate common shareholders’ equity (trailing twelve months)
Net income applicable to common shareholders
(13.0
)%
15.6
%
(28.6
)
Adjusted net income*
(6.7
)%
13.0
%
(19.7
)
Common shares outstanding (in millions)
263.1
275.7
(4.6
)
Book value per common share
58.65
75.46
(22.3
)
Consolidated premiums written (3)
12,865
11,859
8.5
Property-Liability insurance premiums earned
11,635
10,498
10.8
Property-Liability combined ratio
Recorded
108.6
97.3
11.3
Underlying combined ratio*
93.3
90.9
2.4
Catastrophe losses
1,691
462
NM
Total policies in force (in thousands)
186,726
190,309
(1.9
)
(1)
Prior periods have been recast to reflect the impact of the adoption of Financial Accounting Standard Board (“FASB”) guidance revising the accounting for certain long-duration insurance contracts in the Health and Benefits segment.
(2)
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.
(3)
Includes premiums and contract charges for Allstate Health and Benefits segment.
“Allstate’s operating strength enabled us to continue implementing the auto insurance profit improvement plan and help over 100,000 customers recover from catastrophe losses in the first quarter, while executing the Transformative Growth initiative,” said Tom Wilson, Chair, CEO and President of The Allstate Corporation. “Property-Liability earned premiums increased by $1.1 billion or 10.8% over the prior year due to rate increases on auto and home insurance. The profit improvement plan also includes expense reductions and reduced new business volume, both of which are being successfully implemented. Auto loss costs, however, continued to increase rapidly and essentially offset higher premiums, which combined with exceptionally high first quarter catastrophe losses resulted in an underwriting loss of $1.0 billion. The investment portfolio total return was 2.4% for the quarter as extending duration into higher rates and a shift from equity risk into fixed income maintained investment income despite a decline in performance-based returns. Profits from Health and Benefits and Protection Services reduced the net loss to $346 million or $1.31 per share for the quarter.”
“Transformative Growth is critical to navigating the current operating environment and capturing future growth. The new auto insurance product is designed to be affordable, simple and connected and will be available to about one-third of the U.S. market in 2023. Expense reductions are partially offsetting current increases in claims severity and will support increased competitiveness when targeted profitability is restored. Distribution transformation is working, with higher Allstate exclusive agent productivity, expanded product offerings through independent agents and enhanced direct capabilities. Protection Plans continues to expand product coverage and grow internationally. Health and Benefits is rebuilding its operating systems to lower costs and support growth. The combination of an aggressive strategy and Allstate’s brand, customer base and financial strength will lead to long-term growth,” concluded Wilson.
First Quarter 2023 Results
Three months ended March 31,
($ in millions)
2023
2022
% / pts
Change
Premiums earned
11,635
10,498
10.8
Allstate Brand
9,852
9,011
9.3
National General
1,783
1,487
19.9
Underwriting income (loss)
(1,001
)
280
NM
Allstate Brand
(972
)
251
NM
National General
(28
)
29
NM
Three months ended March 31,
($ in millions, except ratios)
2023
2022
% / pts
Change
Premiums written
$
11,783
$
10,761
9.5
%
Allstate Brand
9,705
9,035
7.4
National General
2,078
1,726
20.4
Recorded combined ratio
108.6
97.3
11.3
Allstate Protection auto
104.4
102.1
2.3
Allstate Protection homeowners
119.0
83.9
35.1
Underlying combined ratio*
93.3
90.9
2.4
Allstate Protection auto
102.6
98.8
3.8
Allstate Protection homeowners
67.6
68.0
(0.4
)
The recorded auto insurance combined ratio of 104.4 in the first quarter of 2023 was 2.3 points above the prior year quarter, reflecting higher accident frequency, current report year claim severity, and catastrophe losses, which were partially offset by increased earned premium, expense reductions and lower adverse non-catastrophe prior year reserve reestimates. The underlying combined ratio* of 102.6 was 3.8 points above the prior year quarter primarily driven by higher incurred losses from increased accident frequency and claim severity across physical damage and injury coverages. We continue to execute a comprehensive plan to improve auto insurance profitability, including raising rates, reducing expenses, lowering growth and enhancing loss cost management.
The recorded homeowners insurance combined ratio of 119.0 increased 35.1 points compared to the first quarter of 2022, due to elevated catastrophe losses primarily related to five large wind events in March. The underlying combined ratio* of 67.6 decreased by 0.4 points compared to the prior year quarter, driven by higher earned premium and a lower expense ratio, partially offset by higher claim severity.
Three months ended March 31,
($ in millions)
2023
2022
% / $
Change
Total revenues (1)
$
671
$
627
7.0
%
Allstate Protection Plans
385
329
17.0
Allstate Dealer Services
148
135
9.6
Allstate Roadside
64
65
(1.5
)
Arity
37
62
(40.3
)
Allstate Identity Protection
37
36
2.8
Adjusted net income (loss)
$
34
$
53
$
(19
)
Allstate Protection Plans
28
43
(15
)
Allstate Dealer Services
7
9
(2
)
Allstate Roadside
4
2
2
Arity
(4
)
(1
)
(3
)
Allstate Identity Protection
(1
)
—
(1
)
(1) Excludes net gains and losses on investments and derivatives
Three months ended March 31, (1)
($ in millions)
2023
2022
% Change
Premiums and contract charges
$
463
$
468
(1.1
)%
Employer voluntary benefits
255
263
(3.0
)
Group health
107
94
13.8
Individual health
101
111
(9.0
)
Adjusted net income
56
57
(1.8
)
(1) Prior periods have been recast to reflect the impact of the adoption of FASB guidance revising the accounting for certain long-duration insurance contracts.
Three months ended March 31,
($ in millions, except ratios)
2023
2022
$ / pts
Change
Net investment income
$
575
$
594
$
(19
)
Market-based investment income (1)
507
323
184
Performance-based investment income (1)
126
306
(180
)
Net gains (losses) on investments and derivatives
14
(267
)
281
Change in unrealized net capital gains and losses, pre-tax
872
(2,038
)
2,910
Total return on investment portfolio
2.4
%
(2.8
)%
5.2
Total return on investment portfolio (trailing twelve months)
1.2
%
1.8
%
(0.6
)
(1) Investment expenses are not allocated between market-based and performance-based portfolios with the exception of investee level
Proactive Capital Management
“Allstate has the financial strength and asset-liability position to protect customers, fund operating priorities and thrive in a volatile economic environment,” said Jess Merten, Chief Financial Officer. “The investment portfolio risk profile is lower than long-term targets and could provide approximately $16 billion of liquidity within one week. Liability funding is highly predictable with approximately 75% related to future claim settlements and unearned insurance premiums. Statutory capital in the insurance companies of $15.0 billion and $4.2 billion of investments are held at the holding company as of March 31, 2023. Common shareholders received dividends of $224 million and $153 million of shares were repurchased in the first quarter,” concluded Merten.
Visit www.allstateinvestors.com for additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be at 9 a.m. ET on Thursday, May 4. Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.
Forward-Looking Statements
This news release contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward-looking statements are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.
THE ALLSTATE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
($ in millions, except par value data)
March 31,
2023
December
31, 2022
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $46,120 and $45,370)
$
44,103
$
42,485
Equity securities, at fair value (cost $2,147 and $4,253)
2,174
4,567
Mortgage loans, net
781
762
Limited partnership interests
7,971
8,114
Short-term, at fair value (amortized cost $6,722 and $4,174)
6,722
4,173
Other investments, net
1,724
1,728
Total investments
63,475
61,829
Cash
662
736
Premium installment receivables, net
9,483
9,165
Deferred policy acquisition costs
5,471
5,442
Reinsurance and indemnification recoverables, net
9,528
9,619
Accrued investment income
436
423
Deferred income taxes
345
382
Property and equipment, net
971
987
Goodwill
3,502
3,502
Other assets, net
5,758
5,904
Total assets
$
99,631
$
97,989
Liabilities
Reserve for property and casualty insurance claims and claims expense
$
38,644
$
37,541
Reserve for future policy benefits
1,338
1,322
Contractholder funds
878
879
Unearned premiums
22,499
22,299
Claim payments outstanding
1,333
1,268
Other liabilities and accrued expenses
9,114
9,353
Debt
8,452
7,964
Total liabilities
82,258
80,626
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, 263 million and 263 million shares outstanding
9
9
Additional capital paid-in
3,780
3,788
Retained income
50,388
50,970
Treasury stock, at cost (637 million and 637 million shares)
(36,980
)
(36,857
)
Accumulated other comprehensive income:
Unrealized net capital gains and losses
(1,573
)
(2,255
)
Unrealized foreign currency translation adjustments
(115
)
(165
)
Unamortized pension and other postretirement prior service credit
25
29
Discount rate for reserve for future policy benefits
(10
)
(1
)
Total accumulated other comprehensive income
(1,673
)
(2,392
)
Total Allstate shareholders’ equity
17,494
17,488
Noncontrolling interest
(121
)
(125
)
Total equity
17,373
17,363
Total liabilities and equity
$
99,631
$
97,989
THE ALLSTATE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($ in millions, except per share data)
Three months ended
March 31,
2023
2022
Revenues
Property and casualty insurance premiums
$
12,173
$
10,981
Accident and health insurance premiums and contract charges
463
468
Other revenue
561
560
Net investment income
575
594
Net gains (losses) on investments and derivatives
14
(267
)
Total revenues
13,786
12,336
Costs and expenses
Property and casualty insurance claims and claims expense
10,326
7,822
Accident, health and other policy benefits
265
268
Amortization of deferred policy acquisition costs
1,744
1,608
Operating costs and expenses
1,716
1,902
Pension and other postretirement remeasurement (gains) losses
(53
)
(247
)
Restructuring and related charges
27
12
Amortization of purchased intangibles
81
87
Interest expense
86
83
Total costs and expenses
14,192
11,535
(Loss) income from operations before income tax expense
(406
)
801
Income tax (benefit) expense
(85
)
151
Net (loss) income
(321
)
650
Less: Net loss attributable to noncontrolling interest
(1
)
(10
)
Net (loss) income attributable to Allstate
(320
)
660
Less: Preferred stock dividends
26
26
Net (loss) income applicable to common shareholders
$
(346
)
$
634
Earnings per common share:
Net (loss) income applicable to common shareholders per common share – Basic
$
(1.31
)
$
2.28
Weighted average common shares – Basic
263.5
278.1
Net (loss) income applicable to common shareholders per common share – Diluted
$
(1.31
)
$
2.25
Weighted average common shares – Diluted
263.5
281.8
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:
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, amortization or impairment of purchased intangibles, gain or loss on disposition 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. Gain or loss on disposition is excluded because it is non-recurring in nature and the amortization or impairment of purchased intangibles is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, adjusted net income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine adjusted net income is the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Adjusted net income is used by management along with the other components of net income (loss) applicable to common shareholders to assess our performance. We use adjusted measures of adjusted net income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income (loss) applicable to common shareholders, adjusted net income and their components separately and in the aggregate when reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the Company and management’s performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses adjusted net income as the denominator. Adjusted net income should not be considered a substitute for net income (loss) applicable to common shareholders and does not reflect the overall profitability of our business.
The following tables reconcile net income (loss) applicable to common shareholders and adjusted net income. Taxes on adjustments to reconcile net income (loss) applicable to common shareholders and adjusted net income generally use a 21% effective tax rate.
($ in millions, except per share data)
Three months ended March 31,
Consolidated
Per diluted common share
2023
2022
2023
2022
Net income (loss) applicable to common shareholders
$
(346
)
$
634
$
(1.31
)
(1
)
$
2.25
Net (gains) losses on investments and derivatives
(14
)
267
(0.05
)
0.95
Pension and other postretirement remeasurement (gains) losses
(53
)
(247
)
(0.20
)
(0.88
)
Amortization of purchased intangibles
81
87
0.31
0.31
(Gain) loss on disposition
(9
)
16
(0.04
)
0.06
Income tax expense (benefit)
(1
)
(27
)
(0.01
)
(0.10
)
Adjusted net income (loss) *
$
(342
)
$
730
$
(1.30
)
(1
)
$
2.59
_____________
(1) Due to a net loss reported for the three months ended March 31, 2023, calculation uses weighted average shares of 263.5 million, which excludes weighted average diluted shares of 2.6 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
March 31,
2023
2022
Return on Allstate common shareholders’ equity
Numerator:
Net income (loss) applicable to common shareholders
$
(2,374
)
$
3,545
Denominator:
Beginning Allstate common shareholders’ equity
$
21,105
$
24,421
Ending Allstate common shareholders’ equity (1)
15,524
21,105
Average Allstate common shareholders’ equity
$
18,315
$
22,763
Return on Allstate common shareholders’ equity
(13.0
)%
15.6
%
($ in millions)
For the twelve months ended
March 31,
2023
2022
Adjusted net income return on Allstate common shareholders’ equity
Numerator:
Adjusted net income (loss) *
$
(1,311
)
$
2,910
Denominator:
Beginning Allstate common shareholders’ equity
$
21,105
$
24,421
Less: Unrealized net capital gains and losses
(996
)
1,681
Adjusted beginning Allstate common shareholders’ equity
22,101
22,740
Ending Allstate common shareholders’ equity (1)
15,524
21,105
Less: Unrealized net capital gains and losses
(1,573
)
(996
)
Adjusted ending Allstate common shareholders’ equity
17,097
22,101
Average adjusted Allstate common shareholders’ equity
$
19,599
$
22,421
Adjusted net income return on Allstate common shareholders’ equity *
(6.7
)%
13.0
%
_____________
(1) Excludes equity related to preferred stock of $1,970 million for both periods.
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
March 31,
2023
2022
Combined ratio
108.6
97.3
Effect of catastrophe losses
(14.5
)
(4.4
)
Effect of prior year non-catastrophe reserve reestimates
(0.3
)
(1.5
)
Effect of amortization of purchased intangibles
(0.5
)
(0.5
)
Underlying combined ratio*
93.3
90.9
Effect of prior year catastrophe reserve reestimates
(0.4
)
(0.1
)
Allstate Protection – Auto Insurance
Three months ended
March 31,
2023
2022
Combined ratio
104.4
102.1
Effect of catastrophe losses
(1.2
)
(0.6
)
Effect of prior year non-catastrophe reserve reestimates
(0.1
)
(2.1
)
Effect of amortization of purchased intangibles
(0.5
)
(0.6
)
Underlying combined ratio*
102.6
98.8
Effect of prior year catastrophe reserve reestimates
(0.4
)
(0.1
)
Allstate Protection – Homeowners Insurance
Three months ended March 31,
2023
2022
Combined ratio
119.0
83.9
Effect of catastrophe losses
(51.6
)
(15.4
)
Effect of prior year non-catastrophe reserve reestimates
0.5
(0.1
)
Effect of amortization of purchased intangibles
(0.3
)
(0.4
)
Underlying combined ratio*
67.6
68.0
Effect of prior year catastrophe reserve reestimates
(0.2
)
(0.4
)
Al Scott
Media Relations
(847) 402-5600
Brent Vandermause
Investor Relations
(847) 402-2800
Al Scott
Media Relations
(847) 402-5600
Brent Vandermause
Investor Relations
(847) 402-2800