10-QPeriod: Q2 FY2010

ALLSTATE CORP Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 4, 2010For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation's Q2 2010 results show a significant decline in net income compared to the prior year's second quarter, primarily driven by a substantial increase in net realized capital losses. While property-liability insurance operations saw an improved combined ratio and underwriting income, the financial services segment reported a net loss. The company experienced a decrease in total revenues and a slight reduction in property-liability premiums earned year-over-year. However, book value per diluted share increased, and return on equity improved substantially compared to the previous year, indicating a potential recovery in shareholder value despite the immediate earnings dip. Investors should monitor the performance of the Allstate Financial segment and the impact of realized capital losses. For the six-month period, net income showed a strong increase compared to the same period in 2009, driven by a significant reduction in other-than-temporary impairment losses and a shift from realized capital losses to gains, alongside improved property-liability underwriting results. Allstate Financial continued to report a net loss, albeit reduced from the prior year. The company's investment portfolio remained substantial, with a focus on managing interest rate and credit risks. Shareholders' equity saw an increase, and the company maintained a solid liquidity position. The company is also navigating ongoing legal proceedings and market conduct examinations.

Financial Highlights

35 data points
Beta

Revenue

$7.66B

Net Income

$145.00M

1.9% Net Margin

EPS (Diluted)

$0.27

Total Assets

$130.81B

Cash & Equivalents

$711.00M

Free Cash Flow

$1.08B

Financial Statements
Beta
Revenue$7.66B
Interest Expense$92.00M
Net Income$145.00M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Basic)540.70M
Shares Outstanding (Diluted)543.00M

Key Highlights

  • 1Consolidated net income decreased to $145 million in Q2 2010 from $389 million in Q2 2009, but increased to $265 million for the first six months of 2010 from $115 million in the same period of 2009.
  • 2The Property-Liability combined ratio improved to 96.8% in Q2 2010 from 100.0% in Q2 2009, indicating better underwriting profitability.
  • 3Net realized capital losses were $451 million in Q2 2010, a significant shift from net realized capital gains of $328 million in Q2 2009.
  • 4Allstate Financial reported a net loss of $107 million in Q2 2010, a deterioration from a net income of $19 million in Q2 2009.
  • 5Total revenues decreased to $7.66 billion in Q2 2010 from $8.49 billion in Q2 2009.
  • 6Book value per diluted share increased by 19.3% year-over-year to $33.24 as of June 30, 2010.
  • 7The company's investment portfolio remained robust at approximately $99.94 billion as of June 30, 2010.

Frequently Asked Questions

The primary driver for the decrease in net income during the second quarter of 2010 compared to the prior year quarter was a significant increase in net realized capital losses, which totaled $451 million in Q2 2010, a substantial shift from net realized capital gains of $328 million in Q2 2009. This was partially offset by improved underwriting results in the property-liability segment.

The Allstate Financial segment reported a net loss of $107 million for the second quarter of 2010, a decline from a net income of $19 million in the second quarter of 2009. This deterioration was mainly due to higher life and annuity contract benefits and net realized capital losses, which more than offset increased premiums and contract charges.

The company's investment portfolio remained substantial at nearly $100 billion as of June 30, 2010. Management is focused on managing interest rate, equity, and credit risks, and has taken actions to reduce exposure in certain areas like municipal bonds and commercial real estate. They continue to monitor investments in European economies under stress and maintain hedging strategies to mitigate interest rate and equity risks. The company also reported a significant improvement in unrealized net capital gains for the fixed income portfolio.

The improvement in the property-liability combined ratio to 96.8% in Q2 2010 from 100.0% in Q2 2009 indicates that the company is generating underwriting profit. This improvement was driven by lower catastrophe losses and favorable prior year reserve reestimates, particularly in the homeowners segment, which more than offset increases in claim frequency.