Building higher growth business models
NORTHBROOK, Ill.--(BUSINESS WIRE)-- The Allstate Corporation (NYSE: ALL) today reported financial results for the fourth quarter of 2020.
The Allstate Corporation Consolidated Highlights | |||||||||||||||||
| Three months ended December 31, |
| Twelve months ended December 31, | ||||||||||||||
($ in millions, except per share data and ratios) | 2020 | 2019 | % / pts Change |
| 2020 | 2019 | % / pts Change | ||||||||||
Consolidated revenues | $ | 12,018 |
| $ | 11,472 |
| 4.8 |
|
| $ | 44,791 |
| $ | 44,675 |
| 0.3 |
|
Net income applicable to common shareholders |
| 2,598 |
| 1,707 | 52.2 |
|
|
| 5,461 |
|
| 4,678 |
| 16.7 |
| ||
per diluted common share |
| 8.45 |
|
| 5.23 |
| 61.6 |
|
|
| 17.31 |
|
| 14.03 |
| 23.4 |
|
Adjusted net income* |
| 1,805 |
|
| 1,020 |
| 77.0 |
|
|
| 4,648 |
|
| 3,477 |
| 33.7 |
|
per diluted common share* |
| 5.87 |
|
| 3.13 |
| 87.5 |
|
|
| 14.73 |
|
| 10.43 |
| 41.2 |
|
Return on common shareholders’ equity (trailing twelve months) |
|
|
|
|
| ||||||||||||
Net income applicable to common shareholders |
|
|
|
|
| 21.0 | % |
| 21.7 | % | (0.7 | ) | |||||
Adjusted net income* |
|
|
|
|
| 19.8 | % |
| 16.9 | % | 2.9 |
| |||||
Book value per common share |
|
|
|
|
| 91.50 |
|
| 73.12 |
| 25.1 |
| |||||
Property-Liability combined ratio |
|
|
|
|
|
|
| ||||||||||
Recorded |
| 84.0 |
|
| 88.7 |
| (4.7 | ) |
|
| 87.6 |
|
| 92.0 |
| (4.4 | ) |
Underlying combined ratio* |
| 79.1 |
|
| 84.9 |
| (5.8 | ) |
|
| 79.4 |
|
| 85.0 |
| (5.6 | ) |
Property-Liability insurance premiums earned |
| 8,884 |
|
| 8,873 |
| 0.1 |
|
|
| 35,580 |
|
| 34,843 |
| 2.1 |
|
Catastrophe losses (1) |
| 424 |
|
| 295 |
| 43.7 |
|
|
| 2,811 |
|
| 2,557 |
| 9.9 |
|
Shelter-in-Place Payback expense |
| — |
|
| — |
| NA |
|
| 948 |
|
| — |
| NA | ||
Total policies in force (in thousands) |
|
|
|
|
| 175,911 |
|
| 145,937 |
| 20.5 |
|
* | Measures used in this release that are not based on accounting principles generally accepted in the United States of America (“non-GAAP”) are denoted with an asterisk and defined and reconciled to the most directly comparable GAAP measure in the “Definitions of Non-GAAP Measures” section of this document. | |
(1) | 2020 catastrophe losses are net of approximately $495 million favorable prior year reserve reestimates related to California wildfire subrogation settlements. | |
NA = not applicable |
“Amidst the 2020 pandemic, Allstate served customers well, made progress in building higher growth business models and generated excellent returns for shareholders,” said Tom Wilson, Chair, President and CEO of The Allstate Corporation. “Customers received excellent service, reductions in premiums and greater access to a broad range of protection. Policies in force increased 21% to 176 million and personal property-liability policies in force remained at 34 million as the company transitions Allstate brand distribution to increase growth and lower costs. Total growth and return prospects also improve with the recent acquisition of National General.”
“Financial results and returns to shareholders were also excellent. Net income was $2.6 billion for the quarter and $5.5 billion for the full year. Adjusted net income* was $5.87 per share for the quarter and $14.73 for the year. Insurance underwriting margins continued to be above the prior year, reflecting fewer auto accidents and strong homeowners insurance results. Investment income from performance-based assets exceeded half a billion dollars in the quarter but for the full year was still below prior year due to losses in the first half of the year. Allstate Protection Plans is rapidly growing revenues and profits and expanding its total addressable market. Shareholders benefited from these results, receiving $2.4 billion in cash through dividends and share repurchases,” concluded Wilson.
Full Year 2020 Highlights
_____________ | ||
(1) | A reconciliation of this non-GAAP measure to return on common shareholders’ equity, a GAAP measure, is not possible on a forward-looking basis because it is not possible to provide a reliable forecast for catastrophes or investment income on limited partnership interests, and prior year reserve reestimates are expected to be zero because reserves are determined based on our best estimate of ultimate losses as of the reporting date. |
Fourth Quarter 2020 Results
Property-Liability Results | |||||||||||||
| Three months ended December 31, |
| Twelve months ended December 31, | ||||||||||
($ in millions, except ratios) | 2020 | 2019 | % / pts Change |
| 2020 | 2019 | % / pts Change | ||||||
Premiums written | 8,609 |
| 8,737 |
| (1.5 | )% |
| 35,768 |
| 35,419 |
| 1.0 | % |
Underwriting income | 1,420 |
| 1,000 |
| 42.0 |
|
| 4,422 |
| 2,804 |
| 57.7 |
|
|
|
|
|
|
|
|
| ||||||
Recorded Combined Ratio | 84.0 |
| 88.7 |
| (4.7 | ) |
| 87.6 |
| 92.0 |
| (4.4 | ) |
Allstate Brand Auto | 85.2 |
| 94.1 |
| (8.9 | ) |
| 85.9 |
| 92.9 |
| (7.0 | ) |
Allstate Brand Homeowners | 77.8 |
| 74.3 |
| 3.5 |
|
| 89.8 |
| 87.9 |
| 1.9 |
|
Encompass Brand | 95.0 |
| 93.3 |
| 1.7 |
|
| 92.5 |
| 99.3 |
| (6.8 | ) |
|
|
|
|
|
|
|
| ||||||
Underlying Combined Ratio* | 79.1 |
| 84.9 |
| (5.8 | ) |
| 79.4 |
| 85.0 |
| (5.6 | ) |
Allstate Brand Auto | 84.7 |
| 93.2 |
| (8.5 | ) |
| 85.0 |
| 92.2 |
| (7.2 | ) |
Allstate Brand Homeowners | 60.8 |
| 61.1 |
| (0.3 | ) |
| 61.8 |
| 63.1 |
| (1.3 | ) |
Encompass Brand | 86.4 |
| 88.2 |
| (1.8 | ) |
| 82.9 |
| 88.6 |
| (5.7 | ) |
Allstate Investment Results | |||||||||||||||||
| Three months ended December 31, |
| Twelve months ended December 31, | ||||||||||||||
($ in millions, except ratios) | 2020 | 2019 | $ / pts Change |
| 2020 | 2019 | $ / pts Change | ||||||||||
Net investment income | $ | 1,191 |
| $ | 689 |
| 502 |
|
| $ | 2,853 |
| $ | 3,159 |
| (306 | ) |
Market-based investment income (1) |
| 672 |
|
| 735 |
| (63 | ) |
|
| 2,659 |
|
| 2,886 |
| (227 | ) |
Performance-based investment income (1) |
| 557 |
|
| — |
| 557 |
|
|
| 348 |
|
| 469 |
| (121 | ) |
Realized capital gains (losses) |
| 674 |
|
| 702 |
| (28 | ) |
|
| 1,356 |
|
| 1,885 |
| (529 | ) |
Change in unrealized net capital gains and losses, pre-tax |
| 619 |
|
| (246 | ) | 865 |
|
|
| 2,152 |
|
| 2,711 |
| (559 | ) |
Total return on investment portfolio |
| 2.7 | % |
| 1.3 | % | 1.4 |
|
|
| 7.1 | % |
| 9.2 | % | (2.1 | ) |
(1) | Investment expenses are not allocated between market-based and performance-based portfolios with the exception of investee level expenses. |
Allstate Life, Benefits and Annuities Results | |||||||||||||||||
| Three months ended December 31, |
| Twelve months ended December 31, | ||||||||||||||
($ in millions) | 2020 | 2019 | % Change |
| 2020 | 2019 | % Change | ||||||||||
Premiums and Contract Charges |
|
|
|
|
|
|
| ||||||||||
Allstate Life | $ | 338 |
| $ | 342 |
| (1.2 | )% |
| $ | 1,340 |
| $ | 1,343 |
| (0.2 | )% |
Allstate Benefits |
| 262 |
|
| 282 |
| (7.1 | ) |
|
| 1,094 |
|
| 1,145 |
| (4.5 | ) |
Allstate Annuities |
| 3 |
| 3 | — |
|
|
| 10 |
|
| 13 | (23.1 | ) | |||
Adjusted Net Income (Loss) |
|
|
|
|
|
|
| ||||||||||
Allstate Life | $ | 56 |
| $ | 76 |
| (26.3 | )% |
| $ | 194 |
| $ | 261 |
| (25.7 | )% |
Allstate Benefits |
| 34 |
|
| 16 |
| 112.5 |
|
|
| 96 |
|
| 115 |
| (16.5 | ) |
Allstate Annuities |
| 160 |
|
| (33 | ) | NM |
|
| (53 | ) |
| 10 |
| NM |
NM = not meaningful |
Protection Services Results | |||||||||||||||||||
| Three months ended December 31, |
| Twelve months ended December 31, | ||||||||||||||||
($ in millions) | 2020 | 2019 | % / $ Change |
| 2020 | 2019 | % / $ Change | ||||||||||||
Total Revenues | $ | 518 |
| $ | 434 |
|
| 19.4 | % |
| $ | 1,922 |
| $ | 1,649 |
|
| 16.6 | % |
Allstate Protection Plans |
| 276 |
|
| 189 |
|
| 46.0 |
|
|
| 974 |
|
| 700 |
|
| 39.1 |
|
Allstate Dealer Services |
| 129 |
|
| 121 |
|
| 6.6 |
|
|
| 498 |
|
| 457 |
|
| 9.0 |
|
Allstate Roadside |
| 58 |
|
| 65 |
|
| (10.8 | ) |
|
| 230 |
|
| 279 |
|
| (17.6 | ) |
Arity |
| 26 |
|
| 35 |
|
| (25.7 | ) |
|
| 107 |
|
| 119 |
|
| (10.1 | ) |
Allstate Identity Protection |
| 29 |
|
| 24 |
|
| 20.8 |
|
|
| 113 |
|
| 94 |
|
| 20.2 |
|
Adjusted Net Income (Loss) | $ | 38 |
| $ | 3 |
| $ | 35 |
|
| $ | 153 |
| $ | 38 |
| $ | 115 |
|
Allstate Protection Plans |
| 32 |
|
| 12 |
|
| 20 |
|
|
| 137 |
|
| 60 |
|
| 77 |
|
Allstate Dealer Services |
| 7 |
|
| 7 |
|
| — |
|
|
| 29 |
|
| 26 |
|
| 3 |
|
Allstate Roadside |
| 4 |
|
| (1 | ) |
| 5 |
|
|
| 12 |
|
| (15 | ) |
| 27 |
|
Arity |
| (2 | ) |
| (3 | ) |
| 1 |
|
|
| (11 | ) |
| (7 | ) |
| (4 | ) |
Allstate Identity Protection |
| (3 | ) |
| (12 | ) |
| 9 |
|
|
| (14 | ) |
| (26 | ) |
| 12 |
|
Proactive Capital Management
“Allstate’s returns continue to be among the highest in the insurance industry, with adjusted net income return on equity* of 19.8% in 2020,” said Mario Rizzo, Chief Financial Officer. “Our earnings power and strong capital position provide the financial flexibility to both invest in growth and return cash to our shareholders. We acquired National General for $4 billion while providing $2.4 billion in cash returns to shareholders in 2020 through $668 million in common shareholder dividends and the repurchase of $1.7 billion in common shares, or 5.5% of the common shares outstanding. We expect our long-term adjusted net income return on equity to be between 14% and 17% while generating higher growth in personal property-liability and expanding protection services,” concluded Rizzo.
Visit www.allstateinvestors.com for additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be at 9 a.m. ET on Thursday, February 4. Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.
Forward-Looking Statements
This news release contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward-looking statements are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.
THE ALLSTATE CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
|
|
| ||||||
($ in millions, except par value data)
| December 31, 2020 | December 31, 2019 | ||||||
Assets |
|
| ||||||
Investments: |
|
| ||||||
Fixed income securities, at fair value (amortized cost, net $61,451 and $56,293) | $ | 66,354 |
| $ | 59,044 |
| ||
Equity securities, at fair value (cost $3,853 and $6,568) |
| 4,710 |
|
| 8,162 |
| ||
Mortgage loans, net |
| 4,075 |
|
| 4,817 |
| ||
Limited partnership interests |
| 7,609 |
|
| 8,078 |
| ||
Short-term, at fair value (amortized cost $7,800 and $4,256) |
| 7,800 |
|
| 4,256 |
| ||
Other, net |
| 3,689 |
|
| 4,005 |
| ||
Total investments |
| 94,237 |
|
| 88,362 |
| ||
Cash |
| 377 |
|
| 338 |
| ||
Premium installment receivables, net |
| 6,479 |
|
| 6,472 |
| ||
Deferred policy acquisition costs |
| 4,700 |
|
| 4,699 |
| ||
Reinsurance and indemnification recoverables, net |
| 9,220 |
|
| 9,211 |
| ||
Accrued investment income |
| 600 |
|
| 600 |
| ||
Property and equipment, net |
| 1,057 |
|
| 1,145 |
| ||
Goodwill |
| 2,544 |
|
| 2,545 |
| ||
Other assets, net |
| 3,429 |
|
| 3,534 |
| ||
Separate Accounts |
| 3,344 |
|
| 3,044 |
| ||
Total assets | $ | 125,987 |
| $ | 119,950 |
| ||
Liabilities |
|
| ||||||
Reserve for property and casualty insurance claims and claims expense | $ | 27,610 |
| $ | 27,712 |
| ||
Reserve for life-contingent contract benefits |
| 12,768 |
|
| 12,300 |
| ||
Contractholder funds |
| 17,213 |
|
| 17,692 |
| ||
Unearned premiums |
| 15,949 |
|
| 15,343 |
| ||
Claim payments outstanding |
| 957 |
|
| 929 |
| ||
Deferred income taxes |
| 1,355 |
|
| 1,154 |
| ||
Other liabilities and accrued expenses |
| 8,749 |
|
| 9,147 |
| ||
Long-term debt |
| 7,825 |
|
| 6,631 |
| ||
Separate Accounts |
| 3,344 |
|
| 3,044 |
| ||
Total liabilities |
| 95,770 |
|
| 93,952 |
| ||
Shareholders’ equity |
|
| ||||||
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand and 92.5 thousand shares issued and outstanding, $2,025 and $2,313 aggregate liquidation preference |
| 1,970 |
|
| 2,248 |
| ||
Common stock, $.01 par value, 3.0 billion shares authorized and 900 million issued, 304 million and 319 million shares outstanding |
| 9 |
|
| 9 |
| ||
Additional capital paid-in |
| 3,498 |
|
| 3,463 |
| ||
Retained income |
| 52,767 |
|
| 48,074 |
| ||
Treasury stock, at cost (596 million and 581 million shares) |
| (31,331 | ) |
| (29,746 | ) | ||
Accumulated other comprehensive income: |
|
| ||||||
Unrealized net capital gains and losses on fixed income securities with credit losses |
| — |
|
| 70 |
| ||
Other unrealized net capital gains and losses |
| 3,860 |
|
| 2,094 |
| ||
Unrealized adjustment to DAC, DSI and insurance reserves |
| (680 | ) |
| (277 | ) | ||
Total unrealized net capital gains and losses |
| 3,180 |
|
| 1,887 |
| ||
Unrealized foreign currency translation adjustments |
| (7 | ) |
| (59 | ) | ||
Unamortized pension and other postretirement prior service credit |
| 131 |
|
| 122 |
| ||
Total accumulated other comprehensive income |
| 3,304 |
|
| 1,950 |
| ||
Total shareholders’ equity |
| 30,217 |
|
| 25,998 |
| ||
Total liabilities and shareholders’ equity | $ | 125,987 |
| $ | 119,950 |
|
THE ALLSTATE CORPORATION AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
|
|
|
| |||||||||||||
($ in millions, except per share data) | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Revenues |
|
|
|
|
|
|
| |||||||||
Property and casualty insurance premiums | $ | 9,279 |
|
| $ | 9,194 |
|
| $ | 37,073 |
|
| $ | 36,076 |
| |
Life premiums and contract charges |
| 603 |
|
|
| 627 |
|
|
| 2,444 |
|
|
| 2,501 | ||
Other revenue |
| 271 |
|
|
| 260 |
|
|
| 1,065 |
|
|
| 1,054 |
| |
Net investment income |
| 1,191 |
|
|
| 689 |
|
|
| 2,853 |
|
|
| 3,159 |
| |
Realized capital gains (losses) |
| 674 |
|
|
| 702 |
|
|
| 1,356 |
|
|
| 1,885 |
| |
Total revenues |
| 12,018 |
|
|
| 11,472 |
|
|
| 44,791 |
|
|
| 44,675 |
| |
|
|
|
|
|
|
|
| |||||||||
Costs and expenses |
|
|
|
|
|
|
| |||||||||
Property and casualty insurance claims and claims expense |
| 5,366 |
|
|
| 5,749 |
|
|
| 22,001 |
|
|
| 23,976 |
| |
Shelter-in-Place Payback expense |
| — |
|
|
| — |
|
|
| 948 |
|
|
| — |
| |
Life contract benefits |
| 518 |
|
|
| 518 |
|
|
| 2,243 |
|
|
| 2,039 |
| |
Interest credited to contractholder funds |
| 156 |
|
|
| 153 |
|
|
| 638 |
|
|
| 640 |
| |
Amortization of deferred policy acquisition costs |
| 1,388 |
|
|
| 1,382 |
|
|
| 5,630 |
|
|
| 5,533 |
| |
Operating costs and expenses |
| 1,502 |
|
|
| 1,516 |
|
|
| 5,732 |
|
|
| 5,690 |
| |
Pension and other postretirement remeasurement (gains) losses |
| (371 | ) |
|
| (251 | ) |
|
| (51 | ) |
|
| 114 |
| |
Restructuring and related charges |
| 40 |
|
|
| 14 |
|
|
| 259 |
|
|
| 41 |
| |
Amortization of purchased intangibles |
| 30 |
|
|
| 30 |
|
|
| 118 |
|
|
| 126 |
| |
Impairment of purchased intangibles |
| — |
|
|
| 51 |
|
|
| — |
|
|
| 106 |
| |
Interest expense |
| 80 |
|
|
| 82 |
|
|
| 318 |
|
|
| 327 |
| |
Total costs and expenses |
| 8,709 |
|
|
| 9,244 |
|
|
| 37,836 |
|
|
| 38,592 |
| |
|
|
|
|
|
|
|
| |||||||||
Gain on disposition of operations |
| 1 |
|
|
| 3 |
|
|
| 4 |
|
|
| 6 |
| |
|
|
|
|
|
|
|
| |||||||||
Income from operations before income tax expense |
| 3,310 |
|
|
| 2,231 |
|
|
| 6,959 |
|
|
| 6,089 |
| |
|
|
|
|
|
|
|
| |||||||||
Income tax expense |
| 686 |
|
|
| 458 |
|
|
| 1,383 |
|
|
| 1,242 |
| |
|
|
|
|
|
|
|
| |||||||||
Net income |
| 2,624 |
|
|
| 1,773 |
|
|
| 5,576 |
|
|
| 4,847 |
| |
|
|
|
|
|
|
|
| |||||||||
Preferred stock dividends |
| 26 |
|
|
| 66 |
|
|
| 115 |
|
|
| 169 |
| |
|
|
|
|
|
|
|
| |||||||||
Net income applicable to common shareholders | $ | 2,598 |
|
| $ | 1,707 |
|
| $ | 5,461 |
|
| $ | 4,678 |
| |
|
|
|
|
|
|
|
| |||||||||
Earnings per common share: |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
Net income applicable to common shareholders per common share – Basic | $ | 8.54 |
|
| $ | 5.32 |
|
| $ | 17.53 |
|
| $ | 14.25 |
| |
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares – Basic |
| 304.3 |
|
|
| 320.7 |
|
|
| 311.6 |
|
|
| 328.2 |
| |
|
|
|
|
|
|
|
| |||||||||
Net income applicable to common shareholders per common share – Diluted | $ | 8.45 |
|
| $ | 5.23 |
|
| $ | 17.31 |
|
| $ | 14.03 |
| |
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares – Diluted |
| 307.6 |
|
|
| 326.3 |
|
|
| 315.5 |
|
|
| 333.5 |
|
Definitions of Non-GAAP Measures
We believe that investors’ understanding of Allstate’s performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Adjusted net income is net income applicable to common shareholders, excluding:
Net income applicable to common shareholders is the GAAP measure that is most directly comparable to adjusted net income.
We use adjusted net income as an important measure to evaluate our results of operations. We believe that the measure provides investors with a valuable measure of the company’s ongoing performance because it reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses, pension and other postretirement remeasurement gains and losses, valuation changes on embedded derivatives that are not hedged, business combination expenses and the amortization or impairment of purchased intangibles, gain (loss) on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items. Realized capital gains and losses, pension and other postretirement remeasurement gains and losses, valuation changes on embedded derivatives that are not hedged and gain (loss) on disposition of operations may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to the insurance underwriting process. Consistent with our intent to protect results or earn additional income, adjusted net income includes periodic settlements and accruals on certain derivative instruments that are reported in realized capital gains and losses because they do not qualify for hedge accounting or are not designated as hedges for accounting purposes. These instruments are used for economic hedges and to replicate fixed income securities, and by including them in adjusted net income, we are appropriately reflecting their trends in our performance and in a manner consistent with the economically hedged investments, product attributes (e.g. net investment income and interest credited to contractholder funds) or replicated investments. Business combination expenses are excluded because they are non-recurring in nature and the amortization or impairment of purchased intangibles is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, adjusted net income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine adjusted net income is the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Adjusted net income is used by management along with the other components of net income applicable to common shareholders to assess our performance. We use adjusted measures of adjusted net income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income applicable to common shareholders, adjusted net income and their components separately and in the aggregate when reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management’s performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses adjusted net income as the denominator. Adjusted net income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business.
The following tables reconcile net income applicable to common shareholders and adjusted net income. Taxes on adjustments to reconcile net income applicable to common shareholders and adjusted net income generally use a 21% effective tax rate and are reported net of income taxes as the reconciling adjustment.
($ in millions, except per share data) | Three months ended December 31, | |||||||||||||||
| Consolidated |
| Per diluted common share | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Net income applicable to common shareholders | $ | 2,598 |
|
| $ | 1,707 |
|
| $ | 8.45 |
|
| $ | 5.23 |
| |
Realized capital (gains) losses, after-tax |
| (529 | ) |
|
| (553 | ) |
|
| (1.72 | ) |
|
| (1.69 | ) | |
Pension and other postretirement remeasurement (gains) losses, after-tax |
| (292 | ) |
|
| (199 | ) |
|
| (0.95 | ) |
|
| (0.61 | ) | |
Curtailment (gains) losses, after-tax |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Valuation changes on embedded derivatives that are not hedged, after-tax |
| 9 |
|
|
| — |
|
|
| 0.03 |
|
|
| — |
| |
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax |
| (4 | ) |
|
| 3 |
|
|
| (0.02 | ) |
|
| 0.01 |
| |
Business combination expenses and the amortization of purchased intangibles, after-tax |
| 24 |
|
|
| 24 |
|
|
| 0.08 |
|
|
| 0.07 |
| |
Impairment of purchased intangibles, after-tax |
| — |
|
|
| 40 |
|
|
| — |
|
|
| 0.12 |
| |
Gain on disposition of operations, after-tax |
| (1 | ) |
|
| (2 | ) |
|
| — |
|
|
| — |
| |
Adjusted net income* | $ | 1,805 |
|
| $ | 1,020 |
|
| $ | 5.87 |
|
| $ | 3.13 |
| |
|
|
|
|
|
|
|
| |||||||||
| Twelve months ended December 31, | |||||||||||||||
| Consolidated |
| Per diluted common share | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Net income applicable to common shareholders | $ | 5,461 |
|
| $ | 4,678 |
|
| $ | 17.31 |
|
| $ | 14.03 |
| |
Realized capital (gains) losses, after-tax |
| (1,063 | ) |
|
| (1,488 | ) |
|
| (3.37 | ) |
|
| (4.46 | ) | |
Pension and other postretirement remeasurement (gains) losses, after-tax |
| (39 | ) |
|
| 90 |
|
|
| (0.12 | ) |
|
| 0.27 |
| |
Curtailment (gains) losses, after-tax |
| (7 | ) |
|
| — |
|
|
| (0.02 | ) |
|
| — |
| |
Valuation changes on embedded derivatives that are not hedged, after-tax |
| 36 |
|
|
| 15 |
|
|
| 0.11 |
|
|
| 0.05 |
| |
DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax |
| (8 | ) |
|
| 5 |
|
|
| (0.03 | ) |
|
| 0.01 |
| |
Premium deficiency for immediate annuities, after-tax |
| 178 |
|
|
| — |
|
|
| 0.56 |
|
|
| — |
| |
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax |
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (0.01 | ) | |
Business combination expenses and the amortization of purchased intangibles, after-tax |
| 93 |
|
|
| 100 |
|
|
| 0.30 |
|
|
| 0.30 |
| |
Impairment of purchased intangibles, after-tax |
| — |
|
|
| 83 |
|
|
| — |
|
|
| 0.25 |
| |
Gain on disposition of operations, after-tax |
| (3 | ) |
|
| (4 | ) |
|
| (0.01 | ) |
|
| (0.01 | ) | |
Adjusted net income* | $ | 4,648 |
|
| $ | 3,477 |
|
| $ | 14.73 |
|
| $ | 10.43 |
|
Adjusted net income return on common shareholders’ equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month adjusted net income by the average of common shareholders’ equity at the beginning and at the end of the 12-months, after excluding the effect of unrealized net capital gains and losses. Return on common shareholders’ equity is the most directly comparable GAAP measure. We use adjusted net income as the numerator for the same reasons we use adjusted net income, as discussed above. We use average common shareholders’ equity excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily attributable to the company’s earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income applicable to common shareholders and return on common shareholders’ equity because it excludes the effect of items that tend to be highly variable from period to period. We believe that this measure is useful to investors and that it provides a valuable tool for investors when considered along with return on common shareholders’ equity because it eliminates the after-tax effects of realized and unrealized net capital gains and losses that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by management. In addition, it eliminates non-recurring items that are not indicative of our ongoing business or economic trends. A byproduct of excluding the items noted above to determine adjusted net income return on common shareholders’ equity from return on common shareholders’ equity is the transparency and understanding of their significance to return on common shareholders’ equity variability and profitability while recognizing these or similar items may recur in subsequent periods. We use adjusted measures of adjusted net income return on common shareholders’ equity in incentive compensation. Therefore, we believe it is useful for investors to have adjusted net income return on common shareholders’ equity and return on common shareholders’ equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income return on common shareholders’ equity results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management’s utilization of capital. We also provide it to facilitate a comparison to our long-term adjusted net income return on common shareholders’ equity goal. Adjusted net income return on common shareholders’ equity should not be considered a substitute for return on common shareholders’ equity and does not reflect the overall profitability of our business.
The following tables reconcile return on common shareholders’ equity and adjusted net income return on common shareholders’ equity.
($ in millions) | For the twelve months ended December 31, | |||||||
| 2020 |
| 2019 | |||||
Return on commonshareholders’ equity |
|
|
| |||||
Numerator: |
|
|
| |||||
Net incomeapplicable to common shareholders | $ | 5,461 |
|
| $ | 4,678 |
| |
Denominator: |
|
|
| |||||
Beginning commonshareholders’ equity (1) | $ | 23,750 |
|
| $ | 19,382 |
| |
Ending commonshareholders’ equity (1) |
| 28,247 |
|
|
| 23,750 |
| |
Average commonshareholders’ equity | $ | 25,999 |
|
| $ | 21,566 |
| |
Return on common shareholders’ equity |
| 21.0 | % |
|
| 21.7 | % | |
($ in millions) | For the twelve months ended December 31, | |||||||
| 2020 |
| 2019 | |||||
Adjusted net income return on common shareholders’ equity |
|
|
| |||||
Numerator: |
|
|
| |||||
Adjusted net income * | $ | 4,648 |
|
| $ | 3,477 |
| |
|
|
|
| |||||
Denominator: |
|
|
| |||||
Beginning commonshareholders’ equity (1) | $ | 23,750 |
|
| $ | 19,382 |
| |
Less: Unrealized net capital gains and losses |
| 1,887 |
|
|
| (2 | ) | |
Adjusted beginning commonshareholders’ equity |
| 21,863 |
|
|
| 19,384 |
| |
|
|
|
| |||||
Ending commonshareholders’ equity (1) |
| 28,247 |
|
|
| 23,750 |
| |
Less: Unrealized net capital gains and losses |
| 3,180 |
|
|
| 1,887 |
| |
Adjusted ending commonshareholders’ equity |
| 25,067 |
|
|
| 21,863 |
| |
Average adjusted commonshareholders’ equity | $ | 23,465 |
|
| $ | 20,624 |
| |
Adjusted net income return on common shareholders’ equity * |
| 19.8 | % |
|
| 16.9 | % |
_____________ | ||
(1) | Excludes equity related to preferred stock of $1,970 million as of December 31, 2020, $2,248 million as of December 31, 2019 and $1,930 million as of December 31, 2018. |
Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization or impairment of purchased intangibles (“underlying combined ratio”) is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of catastrophes on the combined ratio, the effect of prior year non-catastrophe reserve reestimates on the combined ratio, and the effect of amortization or impairment of purchased intangibles on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our Property-Liability business that may be obscured by catastrophe losses, prior year reserve reestimates and amortization or impairment of purchased intangibles. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves, which could increase or decrease current year net income. Amortization or impairment of purchased intangibles relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide it to facilitate a comparison to our outlook on the underlying combined ratio. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business.
The following tables reconcile the respective combined ratio to the underlying combined ratio. Underwriting margin is calculated as 100% minus the combined ratio.
Property-Liability | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Combined ratio | 84.0 |
|
| 88.7 |
|
| 87.6 |
|
| 92.0 |
| |
Effect of catastrophe losses | (4.8 | ) |
| (3.3 | ) |
| (7.9 | ) |
| (7.3 | ) | |
Effect of prior year non-catastrophe reserve reestimates | — |
|
| 0.1 |
|
| (0.2 | ) |
| 0.4 |
| |
Effect of amortization of purchased intangibles | (0.1 | ) |
| — |
|
| (0.1 | ) |
| — |
| |
Effect of impairment of purchased intangibles | — |
|
| (0.6 | ) |
| — |
|
| (0.1 | ) | |
Underlying combined ratio* | 79.1 |
|
| 84.9 |
|
| 79.4 |
|
| 85.0 |
| |
|
|
|
|
|
|
|
| |||||
Effect of prior year catastrophe reserve reestimates | — |
|
| (0.1 | ) |
| (1.4 | ) |
| 0.1 |
| |
Allstate brand - Total | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Combined ratio | 83.7 |
|
| 88.5 |
|
| 87.0 |
|
| 91.4 |
| |
Effect of catastrophe losses | (4.7 | ) |
| (3.3 | ) |
| (7.9 | ) |
| (7.2 | ) | |
Effect of prior year non-catastrophe reserve reestimates | — |
|
| 0.2 |
|
| 0.2 |
|
| 0.8 |
| |
Effect of amortization of purchased intangibles | (0.1 | ) |
| — |
|
| — |
|
| — |
| |
Effect of impairment of purchased intangibles | — |
|
| (0.6 | ) |
| — |
|
| (0.2 | ) | |
Underlying combined ratio* | 78.9 |
|
| 84.8 |
|
| 79.3 |
|
| 84.8 |
| |
|
|
|
|
|
|
|
| |||||
Effect of prior year catastrophe reserve reestimates | — |
|
| — |
|
| (1.3 | ) |
| 0.1 |
| |
Allstate brand - Auto Insurance | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Combined ratio | 85.2 |
|
| 94.1 |
|
| 85.9 |
|
| 92.9 |
| |
Effect of catastrophe losses | (0.6 | ) |
| (0.1 | ) |
| (1.2 | ) |
| (1.7 | ) | |
Effect of prior year non-catastrophe reserve reestimates | 0.1 |
|
| — |
|
| 0.3 |
|
| 1.2 |
| |
Effect of impairment of purchased intangibles | — |
|
| (0.8 | ) |
| — |
|
| (0.2 | ) | |
Underlying combined ratio* | 84.7 |
|
| 93.2 |
|
| 85.0 |
|
| 92.2 |
| |
|
|
|
|
|
|
|
| |||||
Effect of prior year catastrophe reserve reestimates | (0.1 | ) |
| (0.2 | ) |
| (0.2 | ) |
| (0.1 | ) | |
Allstate brand - Homeowners Insurance | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Combined ratio | 77.8 |
|
| 74.3 |
|
| 89.8 |
|
| 87.9 |
| |
Effect of catastrophe losses | (16.9 | ) |
| (13.3 | ) |
| (28.2 | ) |
| (24.8 | ) | |
Effect of prior year non-catastrophe reserve reestimates | (0.1 | ) |
| 0.1 |
|
| 0.2 |
|
| — |
| |
Underlying combined ratio* | 60.8 |
|
| 61.1 |
|
| 61.8 |
|
| 63.1 |
| |
|
|
|
|
|
|
|
| |||||
Effect of prior year catastrophe reserve reestimates | (0.2 | ) |
| 0.4 |
|
| (4.9 | ) |
| 0.7 |
| |
Encompass brand - Total | Three months ended December 31, |
| Twelve months ended December 31, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Combined ratio | 95.0 |
|
| 93.3 |
|
| 92.5 |
|
| 99.3 |
| |
Effect of catastrophe losses | (7.8 | ) |
| (4.7 | ) |
| (9.5 | ) |
| (11.3 | ) | |
Effect of prior year non-catastrophe reserve reestimates | (0.8 | ) |
| (0.4 | ) |
| (0.1 | ) |
| 0.6 |
| |
Underlying combined ratio* | 86.4 |
|
| 88.2 |
|
| 82.9 |
|
| 88.6 |
| |
|
|
|
|
|
|
|
| |||||
Effect of prior year catastrophe reserve reestimates | 0.8 |
|
| (0.4 | ) |
| (4.3 | ) |
| 0.9 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210203006010/en/
Greg Burns Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
Source: The Allstate Corporation