10-QPeriod: Q2 FY2021

ALLSTATE CORP Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 4, 2021For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

The Allstate Corporation reported a strong second quarter and first half of 2021, driven by significant increases in property and casualty insurance premiums and net investment income. Total revenues rose by 21.6% year-over-year in Q2 to $12.65 billion and by 23.8% in the first six months to $25.10 billion. This growth was largely attributed to the acquisition of National General, which bolstered market share in personal property-liability and enhanced the independent agent distribution platform. Net income applicable to common shareholders increased by 30.3% in Q2 to $1.60 billion, although it saw a substantial decrease of 89.2% in the first six months to $187 million, primarily due to a significant loss from discontinued operations. Despite increased non-catastrophe losses in the Allstate Protection segment, the company benefited from lower Shelter-in-Place Payback expenses and strong performance-based investment income from limited partnerships. Allstate also announced a new $5 billion common share repurchase program, signaling confidence in its financial position and commitment to returning capital to shareholders.

Financial Statements
Beta
Revenue$12.65B
Operating Income$3.84B
Interest Expense$91.00M
Net Income$1.63B
EPS (Basic)$5.34
EPS (Diluted)$5.26
Shares Outstanding (Basic)298.80M
Shares Outstanding (Diluted)303.30M

Key Highlights

  • 1Total revenues increased significantly in Q2 2021 to $12.65 billion and in the first six months to $25.10 billion, driven by higher property and casualty insurance premiums and net investment income.
  • 2Net income applicable to common shareholders increased 30.3% in Q2 2021 to $1.60 billion, but decreased 89.2% in the first six months to $187 million due to losses from discontinued operations.
  • 3The acquisition of National General, completed in January 2021, contributed to a 12.5% increase in Property-Liability premiums written in Q2 and a 13.1% increase in the first six months.
  • 4Net investment income more than tripled in Q2 2021 to $974 million and more than doubled in the first six months to $1.68 billion, largely driven by strong performance from limited partnerships.
  • 5Allstate Protection's underwriting income decreased in Q2 2021 due to higher non-catastrophe losses in auto and home, and increased amortization of deferred policy acquisition costs.
  • 6The company announced a new $5 billion common share repurchase program, indicating confidence in future performance and commitment to shareholder returns.
  • 7Allstate Health and Benefits saw a substantial increase in adjusted net income, primarily due to the integration of National General's group health and individual accident and health business.

Frequently Asked Questions

The primary drivers of revenue growth were a significant increase in property and casualty insurance premiums, largely due to the acquisition of National General, and a substantial rise in net investment income, particularly from performance-based investments in limited partnerships.

The decline in net income for the first six months was primarily due to a large loss from discontinued operations related to the sale of life and annuity businesses, as well as higher non-catastrophe losses in the Allstate Protection segment. These factors were partially offset by improved net investment income and pension remeasurement gains.

The acquisition of National General, completed in January 2021, significantly boosted Allstate's market share in personal property-liability insurance and strengthened its independent agent distribution. This contributed to higher premiums written and earned across various lines of business, particularly in the Allstate Protection segment.

Given the Federal Reserve's maintenance of a low federal funds target range, Allstate anticipates that as market yields remain below the current portfolio yield, the market-based portfolio yield is expected to decline, potentially leading to lower net investment income in future periods. However, performance-based investments, such as limited partnerships, have shown strong recent results.