10-QPeriod: Q2 FY2002

ALLSTATE CORP Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 13, 2002For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation reported mixed financial results for the second quarter and first six months of 2002. The second quarter saw a significant 104.8% increase in net income, primarily driven by improved operating results in both the Property-Liability and Allstate Financial segments, despite higher realized capital losses. This positive trend contrasted with the first six months of 2002, which experienced a 34.3% decline in net income. This decrease was largely attributed to a substantial $331 million after-tax goodwill impairment charge resulting from the adoption of SFAS No. 142, along with higher realized capital losses, partially offset by gains in operating results across both segments. Revenues saw a modest increase of 3.5% in Q2 2002 and 2.9% year-to-date, bolstered by higher earned premiums in Property-Liability and life and annuity business. However, the Property-Liability segment reported an underwriting loss of $15 million for the quarter, an improvement from the prior year's $340 million loss, driven by lower catastrophe losses and higher earned premiums, though partially offset by increased non-catastrophe losses. Allstate Financial demonstrated strength with a 20.2% increase in operating income for the quarter, fueled by improved investment and mortality margins.

Key Highlights

  • 1Net income surged by 104.8% in Q2 2002 compared to Q2 2001, reaching $344 million, driven by segment operational improvements.
  • 2A $331 million after-tax goodwill impairment charge was recognized in the first half of 2002 due to the adoption of SFAS No. 142, significantly impacting year-to-date net income.
  • 3Property-Liability underwriting results improved, with a loss of $15 million in Q2 2002, a substantial improvement from a $340 million loss in Q2 2001, due to lower catastrophe losses and higher earned premiums.
  • 4Allstate Financial operating income increased by 20.2% in Q2 2002, primarily driven by stronger investment and mortality margins.
  • 5Consolidated revenues grew by 3.5% in Q2 2002 and 2.9% year-to-date, indicating steady top-line growth despite market conditions.
  • 6Shareholders' equity saw a slight increase of $21 million in the first six months of 2002, supported by net income and unrealized gains, but partially offset by dividends and share repurchases.
  • 7Total investments grew to $86.8 billion as of June 30, 2002, an increase from $79.9 billion at year-end 2001, reflecting strategic deployment of assets.

Frequently Asked Questions

The net income increase of 104.8% in the second quarter of 2002 was primarily driven by improved operating results in both the Property-Liability and Allstate Financial businesses. These gains were partially offset by higher realized capital losses during the period.

The adoption of SFAS No. 142 led to the cessation of goodwill amortization. However, the company recorded a significant $331 million after-tax goodwill impairment charge in the second quarter of 2002 as part of its initial goodwill impairment test. This charge was recorded as a cumulative effect of a change in accounting principle, significantly reducing the net income for the first six months of 2002.

The Property-Liability segment showed improved underwriting results in the second quarter of 2002, reporting a loss of $15 million compared to a loss of $340 million in the prior year's second quarter. This improvement was due to higher earned premiums and lower catastrophe losses, though this was partially offset by increased non-catastrophe losses.

Total investments increased to $86.8 billion as of June 30, 2002. The company's liquidity is supported by strong operating cash flows from its insurance operations and has access to significant borrowing limits through commercial paper programs and credit facilities. Management expects continued positive cash flows to meet liquidity requirements.