10-QPeriod: Q3 FY2016

ALLSTATE CORP Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 2, 2016For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation's third quarter and year-to-date 2016 results show a mixed performance. While total revenues saw a slight increase, net income applicable to common shareholders declined significantly, impacted by higher catastrophe losses and a decrease in net investment income. The Property-Liability segment, the company's core business, experienced an increase in net income year-over-year for the quarter, but also saw a worsening combined ratio, driven by a substantial rise in catastrophe losses. The Allstate Financial segment reported a considerable drop in net income, largely due to lower net investment income and realized capital losses compared to the previous year. Despite these challenges, book value per diluted common share saw an increase, and the company continued its share repurchase program, demonstrating a commitment to returning capital to shareholders.

Financial Highlights

33 data points
Beta

Revenue

$9.22B

Net Income

$520.00M

5.6% Net Margin

EPS (Diluted)

$1.31

Total Assets

$108.54B

Cash & Equivalents

$389.00M

Free Cash Flow

$1.31B

Financial Statements
Beta
Revenue$9.22B
Interest Expense$73.00M
Net Income$520.00M
EPS (Basic)$1.32
EPS (Diluted)$1.31
Shares Outstanding (Basic)371.50M
Shares Outstanding (Diluted)375.90M

Key Highlights

  • 1Consolidated net income applicable to common shareholders decreased year-over-year for both the third quarter ($491 million vs. $621 million) and the first nine months ($950 million vs. $1.60 billion).
  • 2Property-Liability net income applicable to common shareholders saw an increase in Q3 2016 ($483 million vs. $437 million) but decreased year-to-date ($903 million vs. $1.20 billion).
  • 3The Property-Liability combined ratio deteriorated to 95.5% in Q3 2016 and 98.2% year-to-date, compared to 93.6% and 95.8% respectively in the prior year, driven by a significant increase in catastrophe losses.
  • 4Allstate Financial segment net income applicable to common shareholders declined substantially in both Q3 2016 ($80 million vs. $262 million) and year-to-date ($264 million vs. $624 million), primarily due to lower investment income and realized capital losses.
  • 5Total revenues increased slightly for the quarter ($9.22 billion vs. $9.03 billion) and year-to-date ($27.26 billion vs. $26.96 billion).
  • 6Book value per diluted common share increased to $51.48 as of September 30, 2016, up from $47.54 in the prior year.
  • 7The company's investment portfolio grew to $81.10 billion, but net investment income declined in both Q3 and year-to-date periods.

Frequently Asked Questions

The primary driver for the decline in net income applicable to common shareholders was a significant increase in catastrophe losses, particularly in the Property-Liability segment, which negatively impacted underwriting results. Additionally, lower net investment income and realized capital losses in the Allstate Financial segment contributed to the overall decline.

The Property-Liability segment showed mixed results. While net income applicable to common shareholders increased in the third quarter of 2016 compared to the same period in 2015, the year-to-date net income decreased. The combined ratio worsened due to a substantial increase in catastrophe losses, indicating a higher cost of claims relative to premiums earned.

Allstate's investment portfolio grew, but net investment income declined year-over-year for both the quarter and the year-to-date period. This decrease was attributed to lower fixed income yields and reduced income from limited partnership investments. The company is actively managing its investment portfolio, seeking to enhance returns, but the current environment presents challenges.

Allstate is implementing a multi-faceted approach including pursuing rate increases across various states, adjusting underwriting guidelines in specific segments to manage risk, and reducing expenses. These actions are intended to improve underwriting margins and profitability in response to identified loss trends.