10-QPeriod: Q3 FY2008

ALLSTATE CORP Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 6, 2008For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation reported a significant net loss of $923 million for the third quarter of 2008, a stark contrast to the $978 million net income reported in the same period of the previous year. This downturn was driven by a substantial increase in catastrophe losses, primarily from Hurricanes Ike and Gustav, which amounted to $1.82 billion in the quarter. The Property-Liability segment also experienced a net loss of $661 million, with its combined ratio deteriorating to 112.7% from 91.0% year-over-year. Net investment income declined, impacted by lower asset balances and reduced portfolio yields, while realized capital losses were significant at $1.29 billion, a reversal from gains in the prior year. Amidst challenging economic conditions and market volatility, Allstate took steps to manage its financial position, including suspending its share repurchase program. The company's investment portfolio saw a decrease in value, with particular pressure on less liquid asset classes. Liquidity remained a focus, with actions taken to enhance cash and short-term investment positions. Despite the quarterly loss, the company affirmed its capital strength and liquidity, with ongoing efforts to manage risk and optimize returns in a difficult financial environment.

Financial Highlights

20 data points
Beta

Revenue

$7.32B

Net Income

-$923.00M

-12.6% Net Margin

EPS (Diluted)

$-1.70

Cash & Equivalents

$355.00M

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$7.32B
Interest Expense$88.00M
Net Income-$923.00M
EPS (Basic)$-1.70
EPS (Diluted)$-1.70
Shares Outstanding (Basic)542.40M
Shares Outstanding (Diluted)542.40M

Key Highlights

  • 1Consolidated net loss of $923 million in Q3 2008, compared to net income of $978 million in Q3 2007.
  • 2Property-Liability segment incurred a net loss of $661 million in Q3 2008, with a combined ratio of 112.7%.
  • 3Catastrophe losses significantly increased to $1.82 billion in Q3 2008, primarily due to Hurricanes Ike and Gustav.
  • 4Net investment income decreased by 15.5% to $1.36 billion in Q3 2008.
  • 5Realized capital losses were $1.29 billion in Q3 2008, a significant swing from the $121 million in gains in Q3 2007.
  • 6Allstate suspended its $2.00 billion share repurchase program to enhance liquidity and capital levels.
  • 7Book value per diluted share decreased 16.0% to $31.44 as of September 30, 2008, compared to September 30, 2007.

Frequently Asked Questions

The primary driver of the significant net loss was a substantial increase in catastrophe losses, driven by Hurricanes Ike and Gustav, which totaled $1.82 billion in the third quarter of 2008. This, combined with lower net investment income and significant realized capital losses, contributed to the net loss.

The company's investment portfolio saw a decline in value, with total investments decreasing to $104.98 billion from $118.98 billion at the end of 2007. Net investment income decreased, and the company experienced significant realized capital losses of $1.29 billion. The company also noted challenges in less liquid asset classes due to market disruptions.

Allstate suspended its $2.00 billion share repurchase program to enhance liquidity and capital levels. The company also took actions to accumulate higher cash and short-term investment positions, reduce its securities lending program, and proactively sell securities that were expected to become less liquid.

The Property-Liability segment reported a net loss of $661 million in the third quarter of 2008, a significant decline from the $935 million net income in the same period of 2007. The combined ratio deteriorated to 112.7% from 91.0%, largely due to increased catastrophe losses and a less favorable impact from prior year reserve reestimates compared to the prior year.