10-QPeriod: Q1 FY2018

ALLSTATE CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 1, 2018For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation reported solid financial results for the first quarter of 2018, with net income applicable to common shareholders increasing significantly to $946 million, or $2.63 per diluted share, up from $666 million, or $1.79 per diluted share, in the prior year period. This growth was driven by a substantial improvement in underwriting income within the Allstate Protection segment, largely due to a significant reduction in catastrophe losses compared to the prior year. The company also benefited from a lower effective tax rate resulting from the Tax Cuts and Jobs Act of 2017. The company's investment portfolio showed a slight increase in total value, and shareholders' equity also grew. Allstate continued its capital return initiatives, with common share repurchases and dividend payments. Management highlighted plans to utilize a portion of the tax savings for growth initiatives, employee enhancements, community support, and increased dividends.

Financial Highlights

34 data points
Beta

Revenue

$9.77B

Net Income

$1.01B

10.3% Net Margin

EPS (Diluted)

$2.71

Total Assets

$113.29B

Cash & Equivalents

$450.00M

Free Cash Flow

$564.00M

Financial Statements
Beta
Revenue$9.77B
Interest Expense$83.00M
Net Income$1.01B
EPS (Basic)$2.76
EPS (Diluted)$2.71
Shares Outstanding (Basic)354.10M
Shares Outstanding (Diluted)359.90M

Key Highlights

  • 1Net income applicable to common shareholders increased to $946 million ($2.63/share) from $666 million ($1.79/share) in Q1 2017.
  • 2Allstate Protection segment underwriting income surged to $962 million, a 74.9% increase, primarily driven by lower catastrophe losses and improved claim frequency.
  • 3Total revenues increased to $9.77 billion, up from $9.64 billion in the prior year, supported by higher property-liability premiums and net investment income.
  • 4Net investment income rose by 5.1% to $786 million, boosted by performance-based investments, particularly limited partnerships.
  • 5The company adopted new accounting standards for financial assets and liabilities, impacting the reporting of equity securities and limited partnerships.
  • 6Shareholders' equity increased to $23.28 billion, with book value per diluted common share reaching $58.64.
  • 7Allstate paid $132 million in common stock dividends and continued its share repurchase program.

Frequently Asked Questions

The primary driver for the substantial increase in net income was a significant improvement in the Allstate Protection segment's underwriting income. This was largely due to a considerable reduction in catastrophe losses compared to the first quarter of 2017. Additionally, lower claim frequency and a lower effective tax rate resulting from the Tax Cuts and Jobs Act of 2017 contributed positively to the net income.

Allstate adopted new accounting standards for the recognition and measurement of financial assets and liabilities. This resulted in equity securities being reported at fair value with changes recognized in realized capital gains and losses. Limited partnerships previously accounted for using the cost method are now reported at fair value, with changes recognized in net investment income. These changes, effective January 1, 2018, affect comparability and the presentation of certain investment-related gains and losses.

Catastrophe losses were significantly lower in Q1 2018 compared to Q1 2017, which had higher than historical losses. Allstate manages catastrophe risk through its reinsurance program. The company has substantially completed the placement of its 2018 catastrophe reinsurance program, which includes coverage from both traditional and insurance-linked securities (ILS) markets. This program aims to limit the likelihood of exceeding average annual aggregate catastrophe losses.

Allstate plans to utilize a portion of the benefits from the reduced corporate tax rate for several initiatives. These include accelerating growth initiatives, enhancing employee value propositions, supporting local communities, and increasing its quarterly dividend per common share. The company recorded $43 million in expenses for employee benefits related to the tax reduction, which are expected to recur as compensation costs.