10-KPeriod: FY2004

ALLSTATE CORP Annual Report, Year Ended Dec 31, 2004

Filed February 24, 2005For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation's (ALL) 2004 Form 10-K highlights a strong financial performance, with net income increasing by 17.6% to $3.18 billion and diluted earnings per share reaching $4.54. Total revenues also saw a record high of $33.94 billion. The Property-Liability segment demonstrated improved underwriting results, with earned premiums up 5.3% to $25.99 billion and a combined ratio of 93.0%, a 1.6-point improvement. However, catastrophe losses significantly impacted results, totaling $2.47 billion, primarily due to hurricanes in the third quarter, compared to $1.49 billion in the prior year. The Allstate Financial segment experienced growth in investments, driven by record contractholder fund deposits, though net income decreased due to a change in accounting principle. The company also completed its $1.5 billion share repurchase program and announced a new $4.0 billion program, signaling a commitment to returning capital to shareholders. Management's focus remains on profitable growth through strategic pricing, underwriting discipline, and customer retention, while navigating a competitive and evolving regulatory landscape.

Key Highlights

  • 1Net income surged by 17.6% to $3.18 billion, with diluted EPS at $4.54.
  • 2Total revenues reached a record $33.94 billion, a 5.6% increase.
  • 3Property-Liability segment premiums earned grew 5.3% to $25.99 billion, and the combined ratio improved to 93.0%.
  • 4Pre-tax catastrophe losses significantly increased to $2.47 billion in 2004, primarily due to hurricanes, impacting the combined ratio by 9.5 points.
  • 5Allstate Financial segment investments saw a 15.3% increase due to strong contractholder fund deposits.
  • 6The company completed its $1.5 billion share repurchase program and initiated a new $4.0 billion program.
  • 7Book value per share increased by 9.2% to $31.72, and return on equity improved to 15.0%.

Frequently Asked Questions

Allstate's business is primarily conducted through four segments: Allstate Protection (personal property and casualty insurance), Discontinued Lines and Coverages (run-off business, including asbestos and environmental liabilities), Allstate Financial (life insurance, retirement, and investment products), and Corporate and Other (holding company activities and non-insurance operations).

Allstate establishes reserves based on estimated future claim costs, considering incurred but not reported (IBNR) losses, historical claims data, and external factors. The company regularly updates these estimates. In 2004, prior year reserve reestimates for the Allstate Protection segment were favorable, reducing reserves by $865 million, primarily due to better-than-expected auto injury severity and late reported loss development. This was partially offset by increases in reserves for asbestos and environmental liabilities in the Discontinued Lines and Coverages segment.

Allstate experienced significant catastrophe losses in 2004, totaling $2.47 billion (pre-tax), primarily due to four hurricanes in Florida and the southeastern U.S. (Charley, Frances, Ivan, and Jeanne). These losses added 9.5 percentage points to the combined ratio. This was a substantial increase compared to $1.49 billion in catastrophe losses in 2003, which added 6.0 percentage points to the combined ratio.

Total investments grew to $115.53 billion at year-end 2004. Net investment income increased by 5.7% to $5.28 billion, driven by higher portfolio balances, although portfolio yields slightly decreased. Realized capital gains and losses, after-tax, were $392 million, a significant improvement from $134 million in 2003 and a turnaround from a $598 million loss in 2002.