10-QPeriod: Q2 FY2016

ALLSTATE CORP Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 3, 2016For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation reported a decrease in net income applicable to common shareholders for the second quarter and first six months of 2016 compared to the same periods in 2015. Net income for Q2 2016 was $242 million ($0.64 per diluted share), down from $326 million ($0.79 per diluted share) in Q2 2015. For the first six months, net income was $459 million ($1.21 per diluted share), a significant drop from $974 million ($2.33 per diluted share) in the prior year's period. This decline was primarily driven by lower net investment income and reduced realized capital gains, compounded by higher catastrophe losses and an increased loss ratio in the Property-Liability segment. Despite these headwinds, total revenues saw a modest increase, supported by growth in Property-Liability insurance premiums earned. The company continued to manage its investment portfolio actively and returned capital to shareholders through share repurchases and dividends.

Financial Highlights

33 data points
Beta

Revenue

$9.16B

Net Income

$271.00M

3.0% Net Margin

EPS (Diluted)

$0.64

Total Assets

$107.28B

Cash & Equivalents

$446.00M

Free Cash Flow

$576.00M

Financial Statements
Beta
Revenue$9.16B
Interest Expense$72.00M
Net Income$271.00M
EPS (Basic)$0.65
EPS (Diluted)$0.64
Shares Outstanding (Basic)373.60M
Shares Outstanding (Diluted)378.10M

Key Highlights

  • 1Consolidated net income applicable to common shareholders decreased to $242 million in Q2 2016 from $326 million in Q2 2015, and to $459 million for the first six months of 2016 from $974 million in the prior year period.
  • 2Property-Liability premiums earned increased by 3.5% in Q2 2016 and 3.8% for the first six months of 2016, reflecting growth in auto and homeowners insurance.
  • 3The Property-Liability combined ratio worsened to 100.8% in Q2 2016 from 100.1% in Q2 2015, and to 99.6% for the first six months of 2016 from 96.9% in the prior year period, largely due to higher catastrophe losses.
  • 4Catastrophe losses significantly increased, impacting the Property-Liability segment, with losses of $961 million in Q2 2016 compared to $797 million in Q2 2015, and $1.79 billion for the first six months of 2016 compared to $1.09 billion in the prior year period.
  • 5Net investment income decreased in both the second quarter and first six months of 2016, attributed to lower fixed income yields and reduced income from limited partnerships.
  • 6The company continued its share repurchase program, completing a $3 billion program and announcing a new $1.5 billion program, while also paying common shareholder dividends.

Frequently Asked Questions

The decrease in net income for the second quarter and first six months of 2016 compared to the prior year periods was primarily driven by higher catastrophe losses impacting the Property-Liability segment, a worsening combined ratio, and lower net investment income. The Allstate Financial segment also saw a decline in net income, largely concentrated in the Annuities business.

Property-Liability premiums earned showed growth, increasing by 3.5% in the second quarter and 3.8% for the first six months of 2016, driven by increases in auto and homeowners insurance. However, the segment's profitability weakened, as indicated by the increase in the combined ratio to 100.8% in Q2 2016 and 99.6% for the first six months of 2016. This was largely due to a significant increase in catastrophe losses.

Allstate continued to return capital to shareholders through dividends and share repurchases. The company paid common shareholder dividends and completed a $3 billion common share repurchase program in April 2016. Additionally, a new $1.5 billion common share repurchase program was authorized in May 2016, with $1.2 billion remaining as of June 30, 2016. An accelerated share repurchase agreement for $350 million was also entered into.

The company's total investments increased to $79.69 billion as of June 30, 2016. However, net investment income decreased by 3.4% in the second quarter and 8.9% for the first six months of 2016 compared to the prior year periods. This decline was mainly attributed to lower yields on fixed income securities and reduced income from limited partnerships, although equity securities and higher fixed income valuations partially offset these effects. The company is also strategically increasing its allocation to performance-based investments.