01—Abstract
Summary
Summary of the 10-K filed February 24, 2011. Cited figures are marked; the original filing is the authoritative source.
The Allstate Corporation's 2010 Form 10-K filing reveals a company navigating a challenging but stabilizing financial landscape.
In 2010, Allstate reported a net income of $928 milliona, a slight increase from $854 million in 2009, signaling a recovery after a significant net loss in 2008. The Allstate Protection segment, primarily auto and homeowners insurance, remains the core of the business, accounting for 92% of consolidated insurance premiums. While this segment experienced a decline in net income due to increased claims and a less favorable combined ratio (98.1% in 2010 vs. 96.2% in 2009), it showed resilience with growth in Allstate brand auto and homeowners premiums.
The Allstate Financial segment turned profitable in 2010 with a net income of $58 millionb, a significant improvement from a net loss of $483 million in 2009, driven by lower amortization of deferred policy acquisition costs and reduced interest credited to contractholder funds. Key strategic priorities for 2011 include improving operating results, growing profitable businesses, and differentiating through innovation. The company is actively managing its catastrophe exposure through reinsurance and refining its underwriting and pricing strategies, particularly in property lines.
A significant development is the agreement to sell substantially all of Allstate Bank's deposits to Discover Bank, expected to close mid-year 2011, which will allow Allstate Financial to focus on its core insurance and retirement products. Investors should note the company's ongoing efforts to manage investment risks, particularly in its fixed income and equity portfolios, and its continued commitment to returning capital to shareholders through dividends and share repurchases, with a new $1 billionc repurchase program announced.
02—Key points
Key Highlights
- Allstate reported a net income of $928 million in 2010, up from $854 million in 2009, indicating a positive trend after a substantial loss in 2008.
- The Allstate Protection segment, the largest contributor to revenue, saw its combined ratio increase to 98.1% in 2010 from 96.2% in 2009, reflecting higher claims and expenses.
- The Allstate Financial segment achieved profitability in 2010 with $58 million in net income, a significant turnaround from a $483 million net loss in 2009.
- The company announced an agreement to sell substantially all of Allstate Bank's deposits to Discover Bank, signaling a strategic shift to focus on core insurance and retirement offerings.
- Allstate announced a new $1 billion share repurchase program in November 2010, demonstrating a commitment to returning capital to shareholders.
- The company continues to manage catastrophe risk through reinsurance and is actively adjusting property business underwriting practices in catastrophe-prone markets.
- Despite a challenging investment environment, Allstate's total investments remained stable at approximately $100.5 billion, with efforts to optimize asset allocation and manage interest rate and credit spread risks.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 24, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $31.40B$32.01B | −1.9% |
| Interest Expense | $367.00M$392.00M | −6.4% |
| Net Income | $911.00M$854.00M | +6.7% |
| EPS (Basic) | $1.69$1.58 | +7.0% |
| EPS (Diluted) | $1.68$1.58 | +6.3% |
| Shares Outstanding (Basic) | 540.30M539.60M | +0.1% |
| Shares Outstanding (Diluted) | 542.50M540.90M | +0.3% |
05—Questions
Frequently Asked Questions
What was Allstate's financial performance in 2010 compared to 2009?
Allstate reported a net income of $928 million in 2010, an increase from $854 million in 2009. The Allstate Protection segment's combined ratio worsened slightly to 98.1% from 96.2%, while the Allstate Financial segment improved significantly, moving from a net loss of $483 million in 2009 to a net income of $58 million in 2010.
What are Allstate's key strategic priorities for 2011?
Allstate's three main priorities for 2011 are to improve operating results, grow businesses profitably, and differentiate itself from the competition by reinventing its business.
What significant changes are occurring in Allstate's financial services business?
Allstate announced an agreement to sell substantially all of Allstate Bank's deposits to Discover Bank, with plans to enter into a marketing and distribution agreement for banking products. This move allows Allstate Financial to concentrate on its insurance and retirement products and reduce its concentration in spread-based products.
How is Allstate managing its exposure to catastrophes?
Allstate actively manages its property catastrophe exposure by purchasing reinsurance to cover known exposures to hurricanes, earthquakes, wildfires, and other catastrophes. The company is also working on regulatory changes and exploring government-sponsored solutions for mega-catastrophes, while also adjusting underwriting practices in high-risk markets.
What is the outlook for Allstate's investment portfolio?
Allstate expects moderate economic recovery in developed economies and stronger growth in emerging markets, which should support higher equity prices and moderately rising interest rates. The company plans to optimize its asset allocation, explore global investments, manage the impact of rising rates on its fixed income portfolio, and continue to favor credit risk while managing municipal exposure. Investment income is expected to decline slightly due to reduced contractholder obligations.
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