10-KPeriod: FY2017

ALLSTATE CORP Annual Report, Year Ended Dec 31, 2017

Filed February 26, 2018For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation's 2017 10-K filing highlights a strong year for the company, driven primarily by robust performance in its Allstate Protection segment. Despite a notable increase in catastrophe losses, underwriting income in this segment saw a significant rise, signaling effective pricing and risk management strategies. The company also benefited from a favorable tax impact due to the Tax Cuts and Jobs Act of 2017, which reduced the corporate tax rate and resulted in a substantial one-time tax benefit, boosting net income applicable to common shareholders. Allstate's strategy emphasizes serving distinct customer segments with differentiated offerings, leveraging its well-recognized "You're In Good Hands With Allstate®" brand. Investments in technology and operational improvements, such as digital claim handling capabilities, are underway to enhance customer experience and operational efficiency. While the Service Businesses segment experienced a net loss primarily due to strategic investments, the overall financial health of Allstate appears solid, supported by growth in premiums and a stable investment portfolio. The company continues its commitment to returning capital to shareholders through share repurchases and dividends, underscoring its focus on shareholder value.

Financial Highlights

39 data points
Beta

Revenue

$39.41B

Net Income

$3.55B

9.0% Net Margin

EPS (Diluted)

$9.35

Total Assets

$112.42B

Cash & Equivalents

$617.00M

Free Cash Flow

$4.01B

Financial Statements
Beta
Revenue$39.41B
Interest Expense$335.00M
Net Income$3.55B
EPS (Basic)$9.50
EPS (Diluted)$9.35
Shares Outstanding (Basic)362.00M
Shares Outstanding (Diluted)367.80M

Key Highlights

  • 1Allstate Protection segment delivered a strong underwriting income of $2.11 billion, a 59.1% increase year-over-year, driven by higher premiums and improved loss costs.
  • 2The company recognized a significant tax benefit of $506 million in 2017 due to the Tax Cuts and Jobs Act, which reduced the corporate tax rate and positively impacted net income.
  • 3Acquisition of SquareTrade in January 2017 for $1.4 billion expanded Allstate's service offerings and contributed to a 54.3% increase in premiums written for the Service Businesses segment.
  • 4Net investment income increased by 11.8% to $3.40 billion, boosted by strong performance-based investment results, particularly from limited partnerships.
  • 5The company returned $1.9 billion to shareholders in 2017 through common stock dividends and share repurchases, demonstrating a commitment to shareholder value.
  • 6Allstate Protection's combined ratio improved to 93.6% in 2017 from 96.0% in 2016, indicating enhanced underwriting profitability.
  • 7Despite a 10.3% impact from catastrophe losses on the combined ratio in 2017, favorable prior year reserve reestimates and lower non-catastrophe loss costs helped mitigate the overall impact.

Frequently Asked Questions

The primary driver of Allstate's improved financial performance in 2017 was the strong underwriting income from the Allstate Protection segment, bolstered by higher premiums earned, lower loss costs, and favorable prior year reserve reestimates, despite an increase in catastrophe losses. Additionally, the company benefited significantly from a tax reduction related to the Tax Cuts and Jobs Act.

The acquisition of SquareTrade in January 2017 for $1.4 billion expanded Allstate's Service Businesses segment, contributing significantly to a 54.3% increase in premiums written for that segment. While the Service Businesses segment reported an adjusted net loss in 2017 due to strategic investments in areas like Arity and SquareTrade, the acquisition is seen as a strategic move to broaden Allstate's product offerings and enhance customer value.

Allstate manages catastrophe risk through a comprehensive strategy that includes purchasing reinsurance to provide coverage for known exposures to hurricanes, earthquakes, wildfires, and other catastrophes. They also limit or do not offer new business in certain geographies with significant catastrophe risk and implement tropical cyclone deductibles for coastal properties. Furthermore, Allstate actively promotes measures to prevent and mitigate losses and enhance community resilience.

The Tax Cuts and Jobs Act of 2017 significantly impacted Allstate's financial results by permanently reducing the U.S. corporate income tax rate from 35% to 21%. This resulted in a revaluation of deferred tax assets and liabilities and the recognition of a transition tax liability, ultimately leading to a net tax benefit of $506 million, or $1.38 per share, for the year ended December 31, 2017. This benefit was excluded from adjusted net income when evaluating segment performance.