10-QPeriod: Q2 FY1999

ALLSTATE CORP Quarterly Report for Q2 Ended Jun 30, 1999

Filed August 12, 1999For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation's Q2 1999 10-Q filing reveals a slight dip in net income for the quarter compared to the prior year, primarily due to lower realized capital gains and increased property-liability losses. However, earnings per share saw a positive impact from the ongoing stock repurchase program. The company continues to demonstrate revenue growth, driven by property-liability insurance premiums. Strategic acquisitions are underway, including the pending acquisition of CNA's personal lines business and American Heritage Life, indicating a focus on expanding market presence and product offerings. Despite a challenging operating environment with increased claims and expenses, Allstate is actively managing its property-liability exposures, particularly in catastrophe-prone areas, and has made progress in reducing its exposure in key regions. The Life and Savings segment shows robust growth in statutory premiums and deposits, especially from annuity products, reflecting successful new product introductions and marketing partnerships.

Key Highlights

  • 1Net income for Q2 1999 was $770 million ($0.95 diluted EPS), down from $885 million ($1.05 diluted EPS) in Q2 1998, impacted by lower realized capital gains and increased property-liability losses.
  • 2Consolidated revenues grew 0.8% in Q2 1999 and 3.2% for the first half of 1999, driven by increases in Property-Liability insurance premiums earned.
  • 3The company is actively pursuing growth through acquisitions, announcing agreements to acquire CNA's personal lines auto and homeowners business and American Heritage Life.
  • 4Property-Liability underwriting income decreased in Q2 1999 due to higher auto claim frequency and unfavorable homeowners severity, despite increased premiums written.
  • 5Catastrophe losses in Q2 1999 were $276 million, a decrease from $303 million in Q2 1998, with ongoing initiatives to manage catastrophe exposure.
  • 6Life and Savings statutory premiums and deposits saw significant growth (21.4% in Q2 1999), particularly in fixed and variable annuities, driven by new products and partnerships.
  • 7Allstate is proactively managing Year 2000 risks, with significant progress in assessment, remediation, and testing, and is developing contingency plans.

Frequently Asked Questions

The primary drivers for the decrease in net income for the second quarter of 1999 compared to the same period in 1998 were lower realized capital gains and increased property-liability claims and expenses. Additionally, the second quarter of 1998 benefited from a gain on the settlement of convertible securities.

Allstate is implementing several initiatives to manage catastrophe exposure, including limiting insurance exposures in catastrophe-prone regions, adjusting policy coverages and deductibles, and participating in catastrophe pools and authorities like the Florida Hurricane Catastrophe Fund and the California Earthquake Authority. While these initiatives aim to reduce the severity of future losses, the company remains exposed to significant catastrophic events.

The Life and Savings segment is experiencing significant growth, particularly in annuity products, with substantial increases in statutory premiums and deposits for both fixed and variable annuities. This growth is attributed to new product introductions and new marketing partnerships, especially in the independent agent and banking distribution channels.

The pending acquisitions of CNA's personal lines business and American Heritage Life are strategic moves to expand Allstate's market presence and product offerings. The CNA acquisition will add a significant block of personal auto and homeowners insurance business, while the American Heritage Life acquisition will bolster its life, health, and disability insurance capabilities through work-site marketing.