10-QPeriod: Q1 FY2020

ALLSTATE CORP Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 5, 2020For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

For the first quarter of 2020, The Allstate Corporation reported a significant decrease in net income attributable to common shareholders, falling to $513 million from $1,261 million in the prior year's first quarter. This decline was primarily driven by a substantial swing from net realized capital gains to net realized capital losses, coupled with lower net investment income and increased pension and other postretirement remeasurement losses. Despite these headwinds, the Property-Liability segment, particularly Allstate Protection, demonstrated strong underwriting performance with a substantial increase in underwriting income, benefiting from lower catastrophe losses and increased premiums earned, though partially offset by a "Shelter-in-Place Payback" expense. The company also highlighted its proactive measures and strong liquidity position in managing the ongoing impacts of the COVID-19 pandemic. Total revenues decreased by 8.3% year-over-year, largely due to the aforementioned shift in investment gains/losses and a drop in net investment income. The company's "Transformative Growth Plan" remains a focus, including the integration of Esurance into the Allstate brand later in 2020. Allstate is actively managing its investment portfolio in response to market volatility and has affirmed its commitment to supporting customers through various payment relief options and services during the pandemic.

Financial Highlights

35 data points
Beta

Revenue

$9.87B

Net Income

$549.00M

5.6% Net Margin

EPS (Diluted)

$1.59

Total Assets

$116.11B

Cash & Equivalents

$280.00M

Free Cash Flow

$962.00M

Financial Statements
Beta
Revenue$9.87B
Operating Income$837.00M
Interest Expense$81.00M
Net Income$549.00M
EPS (Basic)$1.62
EPS (Diluted)$1.59
Shares Outstanding (Basic)317.40M
Shares Outstanding (Diluted)322.40M

Key Highlights

  • 1Net income applicable to common shareholders decreased by 59.3% to $513 million in Q1 2020, compared to $1,261 million in Q1 2019.
  • 2Total revenues decreased by 8.3% to $10,076 million in Q1 2020 from $10,990 million in Q1 2019, primarily due to lower net investment income and a swing from realized capital gains to losses.
  • 3Allstate Protection underwriting income surged by 91.7% to $1,348 million in Q1 2020 from $703 million in Q1 2019, driven by lower catastrophe losses and increased premiums.
  • 4Catastrophe losses were significantly lower, totaling $211 million in Q1 2020, down from $680 million in Q1 2019.
  • 5Net investment income decreased by 35.0% to $421 million in Q1 2020, mainly due to lower income from performance-based investments.
  • 6Shareholders' equity decreased to $24.17 billion as of March 31, 2020, from $25.99 billion as of December 31, 2019, impacted by lower unrealized gains and share repurchases.
  • 7The company announced a 'Shelter-in-Place Payback' of over $600 million to customers due to reduced auto accidents, with $210 million accrued in Q1 2020.

Frequently Asked Questions

The primary reason for the significant decrease in net income was a substantial swing from net realized capital gains in the first quarter of 2019 to net realized capital losses in the first quarter of 2020. Additionally, lower net investment income and increased pension and other postretirement remeasurement losses also contributed to the decline.

The COVID-19 pandemic, and related government measures, caused material disruptions. For Allstate, this included a significant decline in auto accident frequency, leading to favorable underwriting results in auto insurance, for which the company announced a 'Shelter-in-Place Payback' to customers. However, the pandemic also created market volatility, adversely impacting investment valuations and potentially leading to higher expected credit losses and increased unemployment which could affect other business segments.

The Allstate Protection segment, particularly the Allstate Protection brand, saw a significant increase in underwriting income driven by a substantial reduction in catastrophe losses compared to the prior year. Additionally, increased premiums earned and a decline in auto non-catastrophe losses contributed positively, although this was partially offset by the 'Shelter-in-Place Payback' expense.

Allstate is proactively managing its investment portfolio in response to market volatility. In February 2020, the company reduced its equity exposure by approximately $4 billion, primarily by selling public equity securities and reinvesting proceeds into investment-grade fixed income securities. They are also closely monitoring fixed income securities in impacted sectors and the potential impact on their municipal bond portfolio.