10-QPeriod: Q1 FY2007

ALLSTATE CORP Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 1, 2007For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation reported solid financial results for the first quarter of 2007, with net income increasing by 5.7% to $1.50 billion, or $2.41 per diluted share, compared to the prior year. Total revenues saw a modest increase of 2.8% to $9.33 billion, driven by growth in investment income. The company's Property-Liability segment experienced a slight decrease in earned premiums but managed to maintain strong underwriting income, supported by favorable reserve reestimates. However, the combined ratio saw an increase due to higher catastrophe losses and claims frequency/severity in auto and homeowners lines. The Allstate Financial segment demonstrated significant growth, with net income surging 51.9% to $164 million, largely benefiting from improved investment yields and the strategic disposition of its variable annuity business in the prior year. The company also continued its commitment to returning capital to shareholders, with substantial stock repurchases totaling $700 million in the quarter. Looking ahead, Allstate authorized additional capital raises to fund further share repurchases, signaling confidence in its ongoing capital return strategy.

Key Highlights

  • 1Net income increased 5.7% to $1.50 billion in Q1 2007, with diluted EPS rising 10.0% to $2.41.
  • 2Total revenues grew 2.8% to $9.33 billion, primarily due to higher net investment income.
  • 3Property-Liability earned premiums decreased 1.0% to $6.81 billion, while the combined ratio increased to 84.6 from 81.9 due to higher catastrophe losses and claims costs.
  • 4Allstate Financial segment's net income surged 51.9% to $164 million, aided by investment income and prior year business disposals.
  • 5Book value per diluted share increased 14.3% year-over-year to $36.54.
  • 6The company repurchased $700 million of its stock in the first quarter of 2007, indicating a strong focus on capital return.
  • 7Allstate authorized the issuance of up to $1 billion in junior subordinated securities to fund additional stock repurchases.

Frequently Asked Questions

Allstate reported a 5.7% increase in net income to $1.50 billion for the first quarter of 2007, up from $1.42 billion in the same period of 2006. Diluted earnings per share also saw a significant increase of 10.0%, rising to $2.41 from $2.19.

The Property-Liability segment's earned premiums decreased slightly by 1.0% to $6.81 billion. While underwriting income remained robust, the combined ratio increased to 84.6 in Q1 2007 from 81.9 in Q1 2006. This deterioration was primarily attributed to higher catastrophe losses, an increase in auto and homeowners claim frequency and severity (excluding catastrophes), and lower favorable prior year reserve reestimates.

The Allstate Financial segment demonstrated strong performance, with net income increasing by 51.9% to $164 million. Key drivers included higher net investment income, improved yields on assets supporting deferred fixed annuities, and the positive impact from the disposition of its variable annuity business in June 2006. Contract charges, excluding the reinsured variable annuities, also saw growth.

Allstate continues to focus on returning capital to shareholders. In the first quarter of 2007, the company repurchased $700 million of its common stock. Furthermore, Allstate's board authorized the issuance of up to $1 billion in junior subordinated securities to fund an additional $1 billion in common stock repurchases by March 31, 2008, supplementing its existing $3 billion repurchase program.