01—Abstract
Summary
Summary of the 10-K filed February 26, 2018. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Allstate 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.
- The 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.
- Acquisition 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.
- Net investment income increased by 11.8% to $3.40 billion, boosted by strong performance-based investment results, particularly from limited partnerships.
- The company returned $1.9 billion to shareholders in 2017 through common stock dividends and share repurchases, demonstrating a commitment to shareholder value.
- Allstate Protection's combined ratio improved to 93.6% in 2017 from 96.0% in 2016, indicating enhanced underwriting profitability.
- Despite 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.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 26, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $39.41B$37.40B | +5.4% |
| Interest Expense | $335.00M$295.00M | +13.6% |
| Net Income | $3.55B$1.88B | +89.3% |
| EPS (Basic) | $9.50$4.72 | +101.3% |
| EPS (Diluted) | $9.35$4.67 | +100.2% |
| Shares Outstanding (Basic) | 362.00M372.80M | −2.9% |
| Shares Outstanding (Diluted) | 367.80M377.30M | −2.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of Allstate's improved financial performance in 2017?
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.
How did the acquisition of SquareTrade impact the company's financial results?
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.
What is Allstate's strategy for managing catastrophe risk?
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.
How did the Tax Cuts and Jobs Act of 2017 affect Allstate's financial results?
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.
06—Continue