10-QPeriod: Q1 FY2017

ALLSTATE CORP Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation reported a significant increase in net income for the first quarter of 2017 compared to the same period in 2016. Net income applicable to common shareholders surged to $666 million, or $1.79 per diluted share, from $217 million, or $0.57 per diluted share, in the prior year. This strong performance was primarily driven by the Property-Liability segment, which saw a substantial improvement in its combined ratio to 93.6 from 98.4, largely due to lower catastrophe losses and favorable prior year reserve reestimates. The company also reported an increase in total revenues to $9.43 billion, up from $8.87 billion in the prior year, supported by growth in property-liability premiums and improved investment income. During the quarter, Allstate acquired SquareTrade for $1.4 billion, a strategic move to expand its product offerings. While investments saw a slight decrease, net investment income rose, and realized capital gains replaced prior year losses. Overall, the results reflect a positive operational turnaround and strategic growth initiatives.

Financial Highlights

34 data points
Beta

Revenue

$9.64B

Net Income

$695.00M

7.2% Net Margin

EPS (Diluted)

$1.79

Total Assets

$110.24B

Cash & Equivalents

$442.00M

Free Cash Flow

$783.00M

Financial Statements
Beta
Revenue$9.64B
Interest Expense$85.00M
Net Income$695.00M
EPS (Basic)$1.82
EPS (Diluted)$1.79
Shares Outstanding (Basic)365.70M
Shares Outstanding (Diluted)371.30M

Key Highlights

  • 1Consolidated net income applicable to common shareholders increased to $666 million ($1.79 per diluted share) from $217 million ($0.57 per diluted share) in Q1 2016.
  • 2Property-Liability segment net income improved significantly to $652 million, driven by a lower combined ratio of 93.6 (vs. 98.4 in Q1 2016).
  • 3Total revenues grew to $9.43 billion from $8.87 billion year-over-year.
  • 4Property-Liability insurance premiums earned increased by 3.1% to $7.96 billion.
  • 5The company completed the acquisition of SquareTrade for $1.4 billion on January 3, 2017, to broaden its product offerings.
  • 6Net investment income increased by 2.3% to $748 million.
  • 7Shareholders' equity increased to $21.16 billion as of March 31, 2017.

Frequently Asked Questions

The primary driver of the significant increase in net income was the strong performance of the Property-Liability segment, specifically the Allstate Protection brand. This was largely due to a lower combined ratio (93.6 vs. 98.4), attributed to a combination of lower catastrophe losses, fewer claims overall, and favorable prior year reserve reestimates, alongside increased earned premiums.

The acquisition of SquareTrade for $1.4 billion in cash on January 3, 2017, contributed $59 million in premiums earned and $81 million in premiums written to the Allstate Protection segment in the first quarter of 2017. It also resulted in $1.08 billion in goodwill and $555 million in other intangible assets. The acquisition is expected to broaden Allstate's product offerings.

The total investment portfolio was $81.14 billion as of March 31, 2017, a slight decrease from $81.80 billion at the end of 2016. Net investment income increased by 2.3% to $748 million, driven by higher equity income and improved yields on fixed income securities. The company also recorded net realized capital gains of $134 million, a reversal from net realized capital losses in the prior year's quarter.

The company expressed confidence in future premium growth. For auto insurance, Allstate is implementing rate actions in underperforming markets and growth plans in profitable areas. For homeowners insurance, strategies include underwriting discipline, risk management, and product enhancements. Growth actions are also being pursued across various brands like Allstate, Esurance, and Encompass, with a focus on leveraging data analytics and expanding distribution.