10-QPeriod: Q1 FY2023

ALLSTATE CORP Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 3, 2023For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation (ALL) reported a net loss of $321 million ($1.31 per diluted share) for the first quarter of 2023, a significant reversal from the $650 million net income ($2.25 per diluted share) reported in the same period last year. This decline was primarily driven by a substantial increase in catastrophe losses and higher non-catastrophe losses, particularly in auto insurance, alongside rising claims severity. Despite the net loss, total revenues saw an increase of 11.8% to $13.79 billion, propelled by a 10.9% rise in property and casualty insurance premiums earned. The company is actively pursuing strategies to improve profitability in its Property-Liability segment, including rate increases and expense management. Investment income saw a slight decrease, while gains on investments and derivatives swung from a loss in the prior year to a gain in the current quarter, partially mitigating the overall performance decline.

Financial Highlights

37 data points
Beta

Revenue

$13.79B

Net Income

-$320.00M

-2.3% Net Margin

EPS (Diluted)

$-1.31

Total Assets

$99.63B

Cash & Equivalents

$662.00M

Free Cash Flow

$522.00M

Financial Statements
Beta
Revenue$13.79B
Operating Income-$320.00M
Interest Expense$86.00M
Net Income-$320.00M
EPS (Basic)$-1.31
EPS (Diluted)$-1.31
Shares Outstanding (Basic)263.50M
Shares Outstanding (Diluted)263.50M

Key Highlights

  • 1Reported a net loss of $321 million ($1.31/share) for Q1 2023, a significant decrease from a net income of $650 million ($2.25/share) in Q1 2022.
  • 2Total revenues increased by 11.8% to $13.79 billion, driven by a 10.9% increase in property and casualty insurance premiums earned.
  • 3Catastrophe losses surged to $1.69 billion in Q1 2023, a substantial increase from $462 million in Q1 2022.
  • 4The Allstate Protection segment experienced an underwriting loss of $998 million, compared to an underwriting income of $282 million in the prior year, largely due to increased non-catastrophe and catastrophe losses.
  • 5Auto insurance premiums written increased by 10.4% but policies in force decreased by 1.3%, with a focus on profitability through rate increases and underwriting actions.
  • 6Homeowners insurance premiums written increased by 11.1%, driven by higher average premiums and implemented rate increases, but policy growth is being curtailed in underperforming states.
  • 7The company adopted new accounting guidance for long-duration insurance contracts effective January 1, 2023, which resulted in a $298 million after-tax decrease in equity on the transition date.

Frequently Asked Questions

The primary driver for the decrease in net income was a substantial increase in catastrophe losses, which rose to $1.69 billion in Q1 2023 from $462 million in Q1 2022. Additionally, higher non-catastrophe losses, particularly in auto insurance, and increased claims severity, contributed to the decline.

Allstate is implementing a comprehensive plan to improve auto insurance profitability. This includes broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states, and executing claims operating actions to manage loss costs. Rate increases were implemented for both the Allstate and National General brands.

Allstate adopted new accounting guidance for long-duration insurance contracts effective January 1, 2023. This adoption resulted in a $298 million after-tax decrease in equity on the transition date (January 1, 2021). The changes affect how reserves for future policy benefits and deferred policy acquisition costs are calculated and recognized.

Total investments increased to $63.48 billion. Net investment income decreased slightly to $575 million due to lower performance-based investment results, although this was partially offset by higher market-based income from increased fixed income yields. The company experienced net gains on investments and derivatives of $14 million in Q1 2023, a reversal from a net loss of $267 million in Q1 2022.