ALLSTATE CORP Quarterly Report for Q3 Ended Sep 30, 2019

Summary

The Allstate Corporation's third quarter 2019 filing shows a mixed financial performance. While total revenues saw a notable increase driven by higher net realized capital gains and premium growth across several segments, net income applicable to common shareholders experienced a slight decrease compared to the prior year. This dip in net income was primarily attributed to increased pension and other postretirement remeasurement losses, higher catastrophe-related claims in the Allstate Protection segment, and increased amortization of deferred policy acquisition costs. However, the company's property-liability combined ratio improved, indicating better underwriting profitability. Key segments like Allstate Protection and Service Businesses demonstrated growth in premiums and adjusted net income, respectively. The company also strengthened its capital position through preferred stock issuance and senior note issuance, while continuing its common share repurchase program. Investors should note the impact of new accounting standards for leases and pension plans, as well as the ongoing evaluation of future accounting standard changes. The company's financial health appears solid, with a significant increase in shareholders' equity, largely due to favorable investment performance and net income. The Allstate Protection segment, which is the core of the business, showed improved underwriting income year-over-year in the third quarter, driven by higher premiums and lower catastrophe losses. This segment's performance is crucial for overall profitability. While life and annuity segments experienced some pressures, particularly from amortization of acquisition costs and updated actuarial assumptions, the company's diversified business model and focus on capital management provide a degree of resilience. The company also highlighted its exposure to California wildfire claims through a settlement agreement with PG&E, though the recovery amount is currently indeterminate.

Key Highlights

• 1Total revenues increased by 5.8% to $11.07 billion in Q3 2019 and by 9.5% to $33.20 billion in the first nine months of 2019, driven by higher net realized capital gains and premium growth.
• 2Net income applicable to common shareholders decreased by 5.6% to $889 million in Q3 2019 compared to Q3 2018, primarily due to higher pension remeasurement losses and increased claims expenses.
• 3The Allstate Protection segment's underwriting income increased by 42.4% to $836 million in Q3 2019, benefiting from higher premiums, lower catastrophe losses, and favorable prior-year reserve reestimates.
• 4Net investment income increased by 4.3% in Q3 2019, primarily due to higher income from market-based portfolios.
• 5Shareholders' equity grew to $26.14 billion as of September 30, 2019, an increase from $21.31 billion as of December 31, 2018, largely due to increased unrealized capital gains and net income.
• 6The company issued $1.15 billion of preferred stock and $500 million of senior notes during the first nine months of 2019, strengthening its capital structure.
• 7Allstate is one of the insurers party to a $11 billion settlement agreement with PG&E for wildfire subrogation claims, though the recovery amount is currently undetermined.

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