10-KPeriod: FY2006

ALLSTATE CORP Annual Report, Year Ended Dec 31, 2006

Filed February 22, 2007For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

In fiscal year 2006, The Allstate Corporation reported a significant increase in net income, reaching $4.99 billion, a substantial rise from $1.77 billion in 2005. This turnaround was largely driven by a dramatic decrease in catastrophe losses, which fell to $810 million from $5.67 billion in the previous year. The Property-Liability segment showed strong performance, with the combined ratio improving to 83.6 from 102.4 in 2005, reflecting improved underwriting results and favorable prior-year reserve reestimates. Allstate Financial also contributed positively, with net income increasing by 11.5% to $464 million, supported by higher investment income and growth in contractholder funds. The company continued its commitment to shareholder returns, repurchasing $1.75 billion of its stock during the year and increasing its book value per share by 12.4% to $34.84. Overall, Allstate demonstrated a robust recovery and improved financial health in 2006, primarily due to reduced catastrophe impacts and disciplined operational management.

Key Highlights

  • 1Net income surged to $4.99 billion in 2006, a significant improvement from $1.77 billion in 2005, driven by lower catastrophe losses.
  • 2The Property-Liability segment's combined ratio improved significantly to 83.6 in 2006, compared to 102.4 in 2005, indicating better underwriting profitability.
  • 3Catastrophe losses decreased substantially to $810 million in 2006 from $5.67 billion in 2005, a key driver of improved net income.
  • 4Allstate Financial segment's net income grew by 11.5% to $464 million, supported by increased investment income and growth in contractholder funds.
  • 5Total revenues reached a record $35.80 billion, with Property-Liability premiums earned increasing by 1.2% to $27.37 billion.
  • 6The company repurchased $1.75 billion of its stock in 2006 and returned $1.40 per share in dividends to shareholders.
  • 7Book value per share increased by 12.4% to $34.84 as of December 31, 2006.

Frequently Asked Questions

The primary driver for the substantial increase in net income was the significant reduction in catastrophe losses. Catastrophe losses decreased to $810 million in 2006 from $5.67 billion in 2005, which greatly improved underwriting results.

The Allstate Protection segment showed strong improvement, with its combined ratio decreasing to 83.6 in 2006 from 102.4 in 2005. This was due to lower catastrophe losses, increased premiums earned, improved claim frequency (excluding catastrophes), and favorable prior-year reserve reestimates, partially offset by higher current-year claim severity and the cost of catastrophe reinsurance.

Allstate is actively managing its property catastrophe exposure through various actions, including purchasing additional reinsurance, limiting new business writings in high-risk coastal areas, adjusting rates and deductibles, and in some cases, withdrawing from certain geographic markets or discontinuing coverage for specific types of residences.

Allstate demonstrated a commitment to shareholder returns by repurchasing $1.75 billion of its stock in 2006 and paying $1.40 per share in dividends. The company also aims to increase shareholder value through profitable growth and operational efficiencies.