NORTHBROOK, Ill., Feb. 5 /PRNewswire-FirstCall/ -- The Allstate
Corporation (NYSE: ALL) today reported for the fourth quarter of 2002:
-- Net income of $447 million ($.63 per diluted share); up 69% from Q4
2001
-- Operating income of $618 million ($0.87 per diluted share); up 100%
from Q4 2001
-- Operating income, excluding restructuring charges, of $633 million
($0.89 per diluted share); up 67% from Q4 2001.
Operating income is defined as net income before the after-tax effects of
realized capital gains and losses, gain (loss) on disposition of operations,
dividends on preferred securities of subsidiary trust and the cumulative
effect of a change in accounting principle. A reconciliation of operating
income to net income is provided in the following schedules.
"Our results this quarter cap a year in which Allstate demonstrated its
ability to focus on superior execution and deliver value. We are pleased with
our very good performance for this quarter and for the entire year. The
actions we took to improve our underwriting performance resulted in an
improvement in the loss ratios despite increasing prior year reserves. Our
constant focus on expenses also resulted in a lower expense ratio for the
year. Allstate Financial had increased operating income for the year despite
a very difficult economic environment. We will build on this success as we
drive toward consistent earnings growth year after year," said Chairman,
President and CEO Edward M. Liddy.
For the year 2002, Allstate reported:
-- Net income of $1.13 billion ($1.60 per diluted share) compared to
2001 net income of $1.16 billion ($1.60 per diluted share).
-- Operating income of $2.08 billion ($2.92 per diluted share) in 2002
compared to $1.49 billion ($2.06 per diluted share) in 2001.
-- Operating income excluding restructuring charges of $2.15 billion
($3.03 per diluted share) compared to $1.58 billion ($2.18 per
diluted share) in 2001.
"While we took some rate increases in the fourth quarter, the need for
rate actions abated somewhat in the second half of 2002 as rates taken earlier
in the year proved to be adequate. Our philosophy on rates is simple: in all
locations and for all products, we will seek or take the rates that are
indicated based on our loss trend analysis to achieve our targeted return on
investment.
"Auto frequencies continued to trend favorably in the quarter while
severities increased modestly, similar to experience during the year.
Catastrophe losses experienced in the fourth quarter were in line with our
expectations, but substantially higher than the fourth quarter of 2001 and the
third quarter of 2002.
"The Texas water and mold related loss trends that have been so
problematic in previous quarters continue to improve each quarter as policies
are renewed using the new policy form that limits the remediation of mold
resulting from a covered water loss.
"Allstate Financial's statutory premiums and deposits of $2.76 billion in
the fourth quarter were very strong, 19.5% over the fourth quarter for prior
year primarily driven by sales in our innovative Allstate(R) Treasury-Linked
Annuity product, with renewal interest rates tied to rate changes on the
5-year Treasury note.
"We continue to make good progress on our strategy to become broader in
financial services as our Allstate agencies and exclusive financial
specialists sold more than $1.61 billion of new issued premiums and deposits
in 2002 -- more than the prior three calendar years combined.
"The year was not without challenges. The investment world experienced
issues of credit quality, declining interest rates and a third consecutive
year of declining equity markets. Market-specific issues such as medical
inflation and mold, as well as adverse developments in asbestos,
environmental, and other mass torts, caused us to strengthen reserves. But we
aggressively addressed these challenges, better positioning us to pursue our
profitable growth goals. We close 2002 with a very strong balance sheet.
"Looking to 2003, we anticipate that operating income per diluted share
will be in the range of $3.20 to $3.40 (excluding restructuring charges and
assuming the level of average expected catastrophe losses used in pricing).
"With our pricing philosophy in place ensuring that rates in most
locations for the Allstate brand remain at our approximate return targets, our
emphasis in 2003 will be on growing units profitably. Our expectation is that
our improved profit position in standard auto and homeowners combined with
more modest rate increases will allow us to pursue a broader marketing
approach in most of the U.S. and will result in sequential unit growth in
standard auto and homeowners in the second half of 2003. Due to concerns
about sustained profitability in certain large markets, we expect a continued
decline in non-standard auto units.
"For Ivantage, we expect continual improvement in the combined ratio over
the course of 2003. Given a more stable investment climate, Allstate
Financial operating earnings are expected to continue to grow moderately."
Summary of results for the quarter and twelve months ended December 31, 2002:
Consolidated Highlights
Quarter Ended Twelve Months Ended
December 31 December 31
($ in millions,
except per
share amounts) Est. Est.
2002 2001 Change 2002 2001 Change
$ $ % $ $ %
Consolidated
Revenues 7,587 7,358 3.1 29,579 28,865 2.5
Operating Income
Before
Restructuring
Charges After-tax 633 379 67.0 2,152 1,576 36.5
Operating Income
Per Share
(Diluted) Before
Restructuring
Charges After-tax 0.89 0.53 67.9 3.03 2.18 39.0
Restructuring
Charges After-tax 15 70 (78.6) 77 84 (8.3)
Operating Income 618 309 100.0 2,075 1,492 39.1
Operating Income
Per Share
(Diluted) 0.87 0.43 102.3 2.92 2.06 41.7
Realized Capital
(Losses) Gains
After-tax (165) (29) -- (602) (240) 150.8
Gain (Loss) on
Disposition of
Operations
After-tax (3) -- -- 2 (40) (105.0)
Dividends on
Preferred
Securities of
Subsidiary
Trust(s)
After-tax (3) (16) (81.3) (10) (45) (77.8)
Cumulative Effect
of a Change in
Accounting
Principle
After-tax -- -- -- (331) (9) --
Net Income 447 264 69.3 1,134 1,158 (2.1)
Net Income per
share (Diluted) 0.63 0.37 70.3 1.60 1.60 --
Weighted Average
Shares
Outstanding
(Diluted) 705.7 714.7 (1.3) 709.9 723.3 (1.9)
Book value per
share (Diluted) 24.75 24.08 2.8 24.75 24.08 2.8
The increase in fourth quarter 2002 consolidated revenues when compared to
the prior year fourth quarter was due to:
-- increased Property-Liability premiums earned
-- increased Allstate Financial life and annuity premiums and contract
charges
These factors were partly offset by:
-- higher realized capital losses
The consolidated operating income increase in the fourth quarter of 2002
when compared to the prior year quarter was due to:
-- increased Property-Liability premiums earned
-- improved Property-Liability loss frequencies
-- positive impact of an adjustment for prior year tax liabilities
-- increased Allstate Financial investment margin
These factors were partly offset by:
-- higher severity of Property-Liability claims
-- higher Property-Liability catastrophe losses
-- reserve strengthening for Discontinued Lines and Coverages
-- lower Allstate Financial mortality margin
The consolidated operating income increase for the twelve months of 2002
when compared to the prior year was due to:
-- increased Property-Liability premiums earned
-- improved Property-Liability loss frequencies
-- lower catastrophe losses
-- positive impact of an adjustment for prior year tax liabilities
-- increased Allstate Financial investment margin
These factors were partly offset by:
-- higher severity of Property-Liability claims
-- strengthening for prior year reserves
-- accelerated amortization of deferred acquisition costs (DAC
unlocking)
Restructuring expenses incurred during the fourth quarter of 2002 totaled
$24 million, or $15 million after-tax and $.02 per diluted share after-tax.
Restructuring expenses for the 2002 year totaled $119 million, or $77 million
after-tax and $0.11 per diluted share after-tax. These expenses related to
the previously announced realignment of the company's claim offices, Customer
Information Centers and other back-office operations and a non-cash charge
resulting from pension benefit payments made to agents in connection with the
re-organization of employee agents to a single exclusive agency independent
contractor program announced in 1999.
During the fourth quarter of 2002, Allstate purchased 2.0 million shares
of its stock for $73 million, or an average cost per share of $37.10.
Purchases during the fourth quarter of 2002 completed the $500 million
repurchase program that commenced in September of 2001. Allstate announced on
February 4, 2003 that a new repurchase program had been approved for
$500 million, which is expected to be completed by December 31, 2005.
The components of pre-tax realized capital gains (losses) were:
Est. Quarter Ended
December 31, 2002
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of
derivative instruments $8 $8 $-- $16
Sales (52) (11) 12 (51)
Investment write-downs (72) (146) (1) (219)
Realized Capital
Gains (Losses) $(116) $(149) $11 $(254)
Quarter Ended
December 31, 2001
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of
derivative instruments $12 $20 $-- $32
Sales 23 8 1 32
Investment write-downs (40) (56) -- (96)
Realized Capital
Gains (Losses) $(5) $(28) $1 $(32)
Est. Twelve Months Ended
December 31, 2002
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of
derivative instruments $(24) $(24) $-- $(48)
Sales (324) (102) 12 (414)
Investment write-downs (148) (311) (8) (467)
Realized Capital
Gains (Losses) $(496) $(437) $4 $(929)
Twelve Months Ended
December 31, 2001
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of
derivative instruments $(59) $(64) $-- $(123)
Sales 51 (11) 2 42
Investment write-downs (125) (152) -- (277)
Realized Capital
Gains (Losses) $(133) $(227) $2 $(358)
An interest rate futures program is used to manage the Property-Liability
interest rate risk exposure relative to its duration target. During 2002, a
short futures position was in place that reduced the Property-Liability
portfolio duration by as much as 0.3, and produced a pre-tax realized capital
loss of $32 million in the fourth quarter and $195 million for the year.
These pre-tax realized capital losses are included in the preceding table as
"Sales."
As a component of the overall interest rate risk management, pre-tax
realized losses on this program are most appropriately considered in
conjunction with the pre-tax unrealized gains on the Property-Liability fixed
income portfolio. These gains totaled $1.76 billion at December 31, 2002, a
decline of $250 million since September 30, 2002 and an increase of
$913 million since December 31, 2001. Viewed in the aggregate, these results
best reflect the full impact of the decline in rates on portfolio values and
the overall balance sheet. The interest rate futures program performed as
expected given the decline in interest rates during 2002 and contributed to
the management of interest rate exposure.
During the fourth quarter of 2002, U.S. credit market conditions continued
to deteriorate causing both weakened corporate credit and reduced market
liquidity. Allstate had pre-tax realized capital losses related to investment
write-downs of $219 million in the fourth quarter and $467 million for the
year, or approximately 0.5% of the average total investments during the year.
During the fourth quarter, Allstate had write-downs on approximately 137
issuers, or an estimated 1.8% of the total number of issuers in the entire
portfolio, of which approximately half were equity securities and half were
fixed income securities. One write-down totaled $43 million, but no other
write-down of a specific issuer was greater than $15 million. Approximately
half of the write-downs in the fourth quarter were related to the utility,
transportation and oil and gas industries, with the balance spread across
multiple sectors.
Property-Liability Business
Property-Liability Highlights
Quarter Ended Twelve Months Ended
December 31 December 31
($ in millions,
except ratios) Est. Est.
2002 2001 Change 2002 2001 Change
$ $ % $ $ %
Property-Liability
Premiums Written 5,854 5,595 4.6 23,917 22,609 5.8
Property-Liability
Revenues 6,234 6,050 3.0 24,521 23,809 3.0
Operating Income
before
Restructuring
Charges 505 252 100.4 1,705 1,131 50.8
Restructuring
Charges
After-tax 15 69 (78.3) 76 79 (3.8)
Operating Income 490 183 167.8 1,629 1,052 54.8
Realized Capital
(Losses) Gains
After-tax (74) (4) -- (314) (83) --
Gain (Loss) on
Disposition of
Operations
After-tax 1 -- -- 6 (40) (115.0)
Cumulative Effect of
a Change in
Accounting
Principle
After-tax -- -- -- (48) (3) --
Net Income 417 179 133.0 1,273 926 37.5
Catastrophe Losses 237 133 78.2 731 894 (18.2)
Combined Ratio
before impacts of
catastrophes and
restructuring
charges 93.4 100.2 (6.8)pts 95.3 98.4 (3.1)pts
Impact of
catastrophes 4.0 2.4 1.6 pts 3.1 4.0 (0.9)pts
Impact of
restructuring
charges 0.4 1.9 (1.5)pts 0.5 0.5 -- pts
Combined Ratio 97.8 104.5 (6.7)pts 98.9 102.9 (4.0)pts
Property-Liability premium written growth in the fourth quarter of 2002 as
compared to the same quarter in the prior year included:
A 4.4% increase in Allstate brand premiums written, comprised of:
-- 3.6% increase in standard auto
-- 12.4% decrease in non-standard auto
-- 17.2% increase in homeowners
A 7.7 % increase in Ivantage premiums written, comprised of:
-- 1.5% increase in Encompass standard auto
-- 183.3% increase in Deerbrook non-standard auto to $34 million
-- 7.4% increase in Encompass homeowners
This growth was impacted by:
-- increased premium rates during 2002
-- declines in the number of policies in force, principally non-
standard auto
-- a processing slow-down following September 11, 2001 increasing
written premium in the fourth quarter of 2001 by an estimated 0.4%
The following net rate changes have been approved for Property-Liability:
Quarter Ended Twelve Months Ended
December 31, 2002 December 31, 2002
Weighted Weighted
# of States Average # of States Average
Rate Rate
Change Change
(%) (%)
Allstate brand
Standard Auto 12 4.4 39 6.4
Non-standard Auto 8 14.0 38 11.1
Homeowners 8 9.9 44 17.1
Ivantage
Standard Auto
(Encompass) 5 4.8 34 6.4
Non-standard
Auto (Deerbrook) 10 7.0 22 9.1
Homeowners (Encompass) 3 14.7 35 13.9
Factors contributing to the increase in Property-Liability operating
income in the fourth quarter of 2002 when compared to the same quarter in the
prior year were:
-- increased premiums earned
-- improved loss frequencies
-- a lower level of strengthening of Allstate Protection prior year
reserves
-- positive impact of an adjustment for prior year tax liabilities
totaling $75 million
These factors were offset by:
-- increased severity of claims
-- increased catastrophe losses
-- reserve strengthening for Discontinued Lines and Coverages
Factors contributing to the increase in Property-Liability operating
income in the twelve months of 2002 when compared to the prior year were:
-- increased premiums earned
-- improved loss frequencies
-- lower catastrophe losses
-- positive impact of an adjustment for prior year tax liabilities
totaling $93 million
These factors were offset by:
-- increased severity of claims
-- increased prior year reserves
-- lower investment income
Factors contributing to decreased Property-Liability claims and claims
expenses in the fourth quarter of 2002 when compared to the prior year quarter
include:
-- improved auto and homeowners loss frequencies
-- lower level of strengthening of Allstate Protection prior year
reserves
Partly offset by:
-- higher severity of current year claims
-- increased catastrophe losses
-- reserve strengthening for Discontinued Lines and Coverages
Estimated Strengthening of Prior Year Reserves
(pre-tax $ in
millions, except
ratios) Quarter Ended Twelve Months Ended
December 31 December 31
Loss Ratio Loss Ratio
Variance Variance
2002 to 2001 2002 to 2001
Auto $35 0.6 (2.2)pts $44 0.2 0.6 pts
Homeowners 28 0.5 0.3 pts 367 1.5 (0.3)pts
Other 8 0.1 (0.7)pts 43 0.2 0.2 pts
Total Allstate
Protection $71 1.2 (2.6)pts $454 1.9 0.5 pts
Discontinued Lines
and Coverages 60 1.0 0.8 pts 231 1.0 0.9 pts
Total Property-
Liability $131 2.2 (1.8)pts $685 2.9 1.4 pts
Allstate brand $34 0.6 (2.5)pts $386 1.6 0.6 pts
Ivantage 37 0.6 (0.2)pts 68 0.3 (0.1)pts
Total Allstate
Protection $71 1.2 (2.7)pts $454 1.9 0.5 pts
Reserves for prior year homeowners claims were increased in the fourth
quarter primarily due to $20 million of additional reserves for the settlement
of losses remaining from the 1994 Northridge earthquake. Increases in the
year 2002 were primarily due to the emergence of greater than anticipated late
reported claims and severity development, including losses on mold claims in
the state of Texas.
Incurred losses related to mold claims in Texas, have been:
($ in millions) 2002 2001
First Quarter $119 $7
Second Quarter 103 25
Third Quarter 90 74
Fourth Quarter 14 78
Year to Date $326 $ 184
Reserve for prior year Discontinued Lines and Coverages claims increased
in the fourth quarter primarily due to adverse development of losses related
to other mass torts, while increases in the year 2002 primarily were due to
development of asbestos losses.
Allstate's net asbestos reserves by type of exposure are shown in the
following table:
($ in millions)
December 31, 2002 December 31, 2001
Number of Asbestos % of Asbestos % of
Active Reserves Asbestos Reserves Asbestos
Policyholders Reserves Reserves
Direct
policyholders
-Primary 40 $8 1% $4 1%
-Excess 240 95 15 83 12
Total direct
policyholders 280 103 16% 87 13%
Assumed
reinsurance 173 27 168 25
Incurred but not
reported claims
("IBNR") 359 57 420 62
Total 280 $635 100% $675 100%
Reserve
additions $121 $94
Survival ratio
-Current year 4.0 11.1
-Three year
average 5.1 7.6
Survival ratio
excluding
commutations,
policy buy-backs
and settlement
agreements
-Current year 10.3 14.7
-Three year
average 12.5 15.4
Allstate conducts an annual review in the third quarter of each year to
evaluate and establish asbestos reserves. Using established industry and
actuarial best practices, this detailed and comprehensive ground up
methodology determines reserves based on assessments of the characteristics of
exposure (e.g. claim activity, potential liability, jurisdiction, products
versus non-products exposure) presented by individual policyholders, which
assumes no change in the legal, legislative or economic environment.
Approximately 14% of direct policyholders have primary policies and 86% have
excess coverage that involves coverage for specific layers of protection above
retained exposures and other insurance plans. During the last three years, 96
primary and excess policyholders reported new claims, and 100 policyholders
were closed, reducing the number of active policyholders by 4. Reserves for
assumed reinsurance are established for generally small participations in
other insurer's reinsurance programs. IBNR reserves are estimated to provide
for upward development of known claims, and reporting of additional claims due
to current and new policyholders and exposures. Reserves recoverable from
reinsurers are estimated to be approximately 30% of gross estimated losses,
after reduction for known reinsurer insolvencies.
The survival ratios shown in the table above are defined as the ratios of
reserves to asbestos payments for the specified periods. Survival ratios are
a commonly used, but imprecise measure of reserve adequacy. The adjusted
survival ratios shown in the table above exclude the effects of previously
executed commutations, policy buy-backs and settlement agreements and, as
such, are a more representative prospective measure of current reserve
adequacy. Allstate's adjusted survival ratios, which exceed 12 years, are
indicative of a strong reserve position. A one-point increase in the
three-year average adjusted survival ratio at December 31, 2002 would require
an after-tax addition to reserves of approximately $31 million.
Allstate Financial Business
Allstate Financial Highlights
Quarter Ended Twelve Months Ended
December 31 December 31
Est. Est.
2002 2001 Change 2002 2001 Change
($ in millions) $ $ % $ $ %
Statutory
Premiums and
Deposits* 2,761 2,311 19.5 11,834 10,605 11.6
Allstate Financial
GAAP Revenues 1,325 1,287 3.0 4,982 4,971 0.2
Operating Income
before
Restructuring
Charges 158 148 6.8 557 532 4.7
Restructuring
Charges
After-tax -- 1 (100.0) 1 5 (80.0)
Operating Income 158 147 7.5 556 527 5.5
Realized Capital
(Losses) Gains
After-tax (99) (25) -- (291) (158) 84.2
Gain (Loss) on
Disposition of
Operations
After-tax (4) -- -- (4) -- --
Cumulative Effect
of a Change in
Accounting
Principle
After-tax -- -- -- (283) (6) --
Net Income 55 122 (54.9) (22) 363 (106.1)
Investments
including
Separate
Accounts 66,389 59,653 11.3 66,389 59,653 11.3
*Statutory premiums and deposits is an operating measure used by Allstate
management to analyze sales trends. Statutory premiums and deposits includes
premiums on insurance policies and premiums and deposits on annuities
determined in conformity with statutory accounting practices prescribed or
permitted by the insurance regulatory authorities of the states in which the
Company's insurance subsidiaries are domiciled, and all other funds received
from customers on deposit-type products which are accounted for as
liabilities, including the net new deposits of Allstate Bank.
Factors contributing to the increase in Allstate Financial statutory
premiums and deposits during the fourth quarter of 2002 as compared to the
same quarter in the prior year included:
-- an increase in the retail sales of fixed annuities, particularly the
Allstate(R) Treasury-Linked Annuity
-- an increase in sales of structured and immediate annuities
-- growth in deposits of Allstate Bank
This increase was partly offset by:
-- a decrease in institutional funding agreement sales, as a result of
unfavorable market conditions
-- a decrease in retail sales of variable annuities
Factors contributing to the increase in Allstate Financial operating
income in the fourth quarter of 2002 when compared to the same quarter in the
prior year were:
-- increased life premiums
-- increased investment margin
-- positive impact of an adjustment for prior year tax liabilities
totaling $26 million
These factors were partially offset by:
-- higher operating costs and expenses driven by technology investments
and marketing costs
-- decreased mortality margin
Factors contributing to the increase in Allstate Financial operating
income in the twelve months of 2002 when compared to the prior year were:
-- increased investment margin
-- increased premiums and contract charges
-- positive impact of an adjustment for prior year tax liabilities
totaling $38 million
These factors were offset by:
-- higher operating costs and expenses
-- accelerated amortization of deferred policy acquisition costs (DAC
unlocking) totaling $42 million after-tax
Allstate Financial new issued premiums and deposits sold through Allstate
agencies totaled $1.61 billion for the 2002 year, compared to $702 million in
2001. New issued premium and deposits is an operating measure used to analyze
sales trends and includes annual premium on new insurance policies, initial
premiums and deposits in annuities, deposits in the Allstate Bank, and
deposits in non-proprietary mutual funds.
Allstate Financial's variable annuity guaranteed minimum death benefits
("GMDB") value in excess of the account value, payable only if all contract
holders were to have died as of December 31, 2002, is estimated to be
$3.82 billion, net of reinsurance and other contractual arrangements, a
decline from the September 30, 2002 level of $4.23 billion. Net cash payments
for GMDBs were $17 million and $58 million for the fourth quarter of 2002 and
the year, respectively, net of reinsurance, hedging gains and losses, and
other contractual arrangements.
The weighted average interest crediting rate on retail fixed annuity and
interest sensitive life products in force, excluding market value adjusted
annuities, is approximately 140 basis points more than the underlying long
term guaranteed rates on these products.
This press release contains forward-looking statements about the company's
operating income for 2003, Allstate Financial operating income, rate changes
in our Property-Liability business and reserves. These statements are subject
to the Private Securities Litigation Reform Act of 1995 and are based on
management's estimates, assumptions and projections. Actual results may
differ materially from those projected in the forward-looking statements for a
variety of reasons. Projected weighted average rate changes in our Property-
Liability business may be lower than projected due to a decrease in the number
of policies in force. Loss costs in our Property-Liability business,
including losses due to catastrophes such as hurricanes and earthquakes, may
exceed management's projections. Competitive pressures could lead to sales of
Property-Liability products, including private passenger auto and homeowners
insurance, that are lower than projected by management, due to our increased
prices and our modified underwriting practices. Investment income may not
meet management's projections due to poor stock market performance or lower
returns on the fixed income portfolio due to worsening credit conditions.
Continuing low interest rates and depressed equity markets could increase DAC
amortization, reduce contract charges, the deferred acquisition cost asset,
investment margins and the profitability of the Allstate Financial segment.
Readers are encouraged to review the other risk factors facing Allstate that
we disclose in our current, quarterly and annual reports to the Securities and
Exchange Commission on Forms 8-K, 10-Q and 10-K. We undertake no obligation
to publicly correct or update any forward-looking statements. This press
release contains unaudited financial information.
The supplemental operating information provided allows for additional
analysis of results of operations. The after-tax effects of realized capital
gains and losses, gain (loss) on disposition of operations, dividends on
preferred securities of subsidiary trust and the cumulative effect of a change
in accounting principle have been excluded from operating income due to the
volatility between periods and because such data is often excluded when
evaluating the overall financial performance of insurers. After-tax realized
capital gains and losses are presented net of the effects of Allstate
Financial's deferred policy acquisition cost amortization to the extent that
such effects resulted from the recognition of realized capital gains and
losses. Operating income should not be considered as a substitute for any
generally accepted accounting principles (GAAP) measure of performance. The
method of calculating operating income may be different from the method used
by other companies and therefore comparability may be limited.
The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held
personal lines insurer. Widely known through the "You're In Good Hands With
Allstate(R)" slogan, Allstate provides insurance products to more than
16 million households and has approximately 12,500 exclusive agents and
financial specialists in the U.S. and Canada. Customers can access Allstate
products and services through Allstate agents, or in select states at
allstate.com and 1-800-Allstate(sm). Encompass(sm) and Deerbrook(R) Insurance
brand property and casualty products are sold exclusively through independent
agents. Allstate Financial Group includes the businesses that provide life
insurance, retirement and investment products, through Allstate agents,
workplace marketing, independent agents, banks and securities firms.
The Allstate Corporation prepares an interim investor supplement,
containing standard information that is not totally available at the time of
the earnings release. The supplement is posted to the company's website and
will be updated periodically over the next 30 days, and can be accessed by
going to the Allstate web site at allstate.com and clicking on "About
Allstate." From there, go to the "Find Financial Information" button.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
Est. Percent
($ in millions except per share data) 2002 2001 Change
Revenues
Property-liability insurance premiums $ 5,950 $ 5,644 5.4
Life and annuity premiums
and contract charges 661 565 17.0
Net investment income 1,230 1,181 4.1
Realized capital gains and losses (254) (32) -
Total revenues 7,587 7,358 3.1
Costs and expenses
Property-liability insurance
claims and claims expense 4,404 4,439 (0.8)
Life and annuity contract benefits 557 401 38.9
Interest credited to contractholder
funds 448 441 1.6
Amortization of deferred policy
acquisition costs 917 896 2.3
Operating costs and expenses 753 703 7.1
Amortization of goodwill - 14 (100.0)
Restructuring and related charges 24 107 (77.6)
Interest expense 74 62 19.4
Total costs and expenses 7,177 7,063 1.6
Loss on disposition of
operations (3) - -
Income from operations before income
tax (benefit) expense, dividends on
preferred securities and cumulative
effect of change in accounting
principle, after-tax 407 295 38.0
Income tax (benefit) expense (43) 15 -
Income before dividends on preferred
securities and cumulative effect of
change in accounting principle,
after-tax 450 280 60.7
Dividends on preferred securities
of subsidiary trusts (3) (16) (81.3)
Cumulative effect of change in
accounting principle, after-tax - - -
Net income $ 447 $ 264 69.3
Net income per share - Basic $ 0.63 $ 0.37 70.3
Weighted average shares - Basic 702.6 712.7
Net income per share - Diluted $ 0.63 $ 0.37 70.3
Weighted average shares - Diluted 705.7 714.7
Twelve Months Ended
December 31,
Est. Percent
($ in millions except per share data) 2002 2001 Change
Revenues
Property-liability insurance premiums $ 23,361 $ 22,197 5.2
Life and annuity premiums
and contract charges 2,293 2,230 2.8
Net investment income 4,854 4,796 1.2
Realized capital gains and losses (929) (358) 159.5
Total revenues 29,579 28,865 2.5
Costs and expenses
Property-liability insurance
claims and claims expense 17,657 17,532 0.7
Life and annuity contract benefits 1,770 1,671 5.9
Interest credited to contractholder
funds 1,764 1,733 1.8
Amortization of deferred policy
acquisition costs 3,694 3,462 6.7
Operating costs and expenses 2,761 2,688 2.7
Amortization of goodwill - 54 (100.0)
Restructuring and related charges 119 129 (7.8)
Interest expense 278 248 12.1
Total costs and expenses 28,043 27,517 1.9
Gain (loss) on disposition of
operations 4 (63) (106.3)
Income from operations before income
tax expense, dividends on preferred
securities and cumulative effect
of change in accounting principle,
after-tax 1,540 1,285 19.8
Income tax expense 65 73 (11.0)
Income before dividends on preferred
securities and cumulative effect of
change in accounting principle,
after-tax 1,475 1,212 21.7
Dividends on preferred securities
of subsidiary trusts (10) (45) (77.8)
Cumulative effect of change in
accounting principle, after-tax (331) (9) -
Net income $ 1,134 $ 1,158 (2.1)
Net income per share - Basic $ 1.60 $ 1.61 (0.6)
Weighted average shares - Basic 707.1 720.2
Net income per share - Diluted $ 1.60 $ 1.60 -
Weighted average shares - Diluted 709.9 723.3
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
Three Months Ended
December 31,
($ in millions except per share data) Est. Percent
2002 2001 Change
Contribution to income
Operating income $ 618 $ 309 100.0
Realized capital gains and losses (165) (29) -
Loss on disposition of
operations (3) - -
Dividends on preferred securities
of subsidiary trusts (3) (16) (81.3)
Cumulative effect of change in
accounting principle - - -
Net income $ 447 $ 264 69.3
Operating income before the impact of
restructuring and related charges $ 633 $ 379 67.0
Income per share (Diluted)
Operating income $ 0.87 $ 0.43 102.3
Realized capital gains and losses (0.23) (0.04) -
Loss on disposition of
operations (0.01) - -
Dividends on preferred securities
of subsidiary trusts - (0.02) (100.0)
Cumulative effect of change in
accounting principle - - -
Net income $ 0.63 $ 0.37 70.3
Operating income before the impact of
restructuring and related charges $ 0.89 $ 0.53 67.9
Book value per share - Diluted $ 24.75 $ 24.08 2.8
Twelve Months Ended
December 31,
($ in millions except per share data) Est. Percent
2002 2001 Change
Contribution to income
Operating income $ 2,075 $ 1,492 39.1
Realized capital gains and losses (602) (240) 150.8
Gain (loss) on disposition of
operations 2 (40) (105.0)
Dividends on preferred securities
of subsidiary trusts (10) (45) (77.8)
Cumulative effect of change in
accounting principle (331) (9) -
Net income $ 1,134 $ 1,158 (2.1)
Operating income before the impact of
restructuring and related charges $ 2,152 $ 1,576 36.5
Income per share (Diluted)
Operating income $ 2.92 $ 2.06 41.7
Realized capital gains and losses (0.85) (0.33) 157.6
Gain (loss) on disposition of
operations - (0.06) (100.0)
Dividends on preferred securities
of subsidiary trusts (0.01) (0.06) (83.3)
Cumulative effect of change in
accounting principle (0.46) (0.01) -
Net income $ 1.60 $ 1.60 -
Operating income before the impact of
restructuring and related charges $ 3.03 $ 2.18 39.0
Book value per share - Diluted $ 24.75 $ 24.08 2.8
THE ALLSTATE CORPORATION
SUPPLEMENTARY INFORMATION
Three Months Ended
December 31,
Est.
($ in millions except ratios) 2002 2001
Property-Liability
Premiums written $ 5,854 $ 5,595
Premiums earned $ 5,950 $ 5,644
Claims and claims expense 4,404 4,439
Amortization of deferred policy
acquisition costs 817 775
Operating costs and expenses 576 572
Amortization of goodwill - 5
Restructuring and related charges 23 105
Underwriting income (loss) 130 (252)
Net investment income 400 411
Income tax expense (benefit) on
operations 40 (24)
Operating income 490 183
Realized capital gains and losses,
after-tax (74) (4)
Gain on disposition of operations,
after-tax 1 -
Cumulative effect of change in
accounting principle, after-tax - -
Net income $ 417 $ 179
Catastrophe losses $ 237 $ 133
Operating ratios
Claims and claims expense ratio 74.0 78.7
Expense ratio 23.8 25.8
Combined ratio 97.8 104.5
Effect of catastrophe losses on
combined ratio 4.0 2.4
Effect of restructuring and related
charges on combined ratio 0.4 1.9
Effect of Discontinued Lines and
Coverages on combined ratio 1.1 0.2
Allstate Financial
Statutory premiums and deposits $ 2,761 $ 2,311
Investments including
Separate Account assets $ 66,389 $ 59,653
Premiums and contract charges $ 661 $ 565
Net investment income 813 750
Contract benefits 557 401
Interest credited to contractholder funds 448 441
Amortization of deferred policy
acquisition costs 96 112
Operating costs and expenses 177 128
Amortization of goodwill - 7
Restructuring and related charges 1 2
Income tax expense on operations 37 77
Operating income 158 147
Realized capital gains and losses,
after-tax (99) (25)
Loss on disposition of operations,
after-tax (4) -
Cumulative effect of change in accounting
principle, after-tax - -
Net income $ 55 $ 122
Corporate and Other
Net investment income $ 17 $ 20
Operating costs and expenses 74 65
Amortization of goodwill - 2
Income tax benefit on operations (27) (26)
Operating loss (30) (21)
Realized capital gains and losses,
after-tax 8 -
Dividends on preferred securities
of subsidiary trusts (3) (16)
Net loss $ (25) $ (37)
Twelve Months Ended
December 31,
Est.
($ in millions except ratios) 2002 2001
Property-Liability
Premiums written $ 23,917 $ 22,609
Premiums earned $ 23,361 $ 22,197
Claims and claims expense 17,657 17,532
Amortization of deferred policy
acquisition costs 3,216 3,060
Operating costs and expenses 2,108 2,114
Amortization of goodwill - 21
Restructuring and related charges 117 121
Underwriting income (loss) 263 (651)
Net investment income 1,656 1,745
Income tax expense on operations 290 42
Operating income 1,629 1,052
Realized capital gains and losses,
after-tax (314) (83)
Gain (loss) on disposition of operations,
after-tax 6 (40)
Cumulative effect of change in
accounting principle, after-tax (48) (3)
Net income $ 1,273 $ 926
Catastrophe losses $ 731 $ 894
Operating ratios
Claims and claims expense ratio 75.6 79.0
Expense ratio 23.3 23.9
Combined ratio 98.9 102.9
Effect of catastrophe losses on
combined ratio 3.1 4.0
Effect of restructuring and related
charges on combined ratio 0.5 0.5
Effect of Discontinued Lines and
Coverages on combined ratio 1.0 0.1
Allstate Financial
Statutory premiums and deposits $ 11,834 $ 10,605
Investments including
Separate Account assets $ 66,389 $ 59,653
Premiums and contract charges $ 2,293 $ 2,230
Net investment income 3,126 2,968
Contract benefits 1,770 1,671
Interest credited to contractholder funds 1,764 1,733
Amortization of deferred policy
acquisition costs 476 385
Operating costs and expenses 649 567
Amortization of goodwill - 29
Restructuring and related charges 2 8
Income tax expense on operations 202 278
Operating income 556 527
Realized capital gains and losses,
after-tax (291) (158)
Loss on disposition of operations,
after-tax (4) -
Cumulative effect of change in accounting
principle, after-tax (283) (6)
Net (loss) income $ (22) $ 363
Corporate and Other
Net investment income $ 72 $ 83
Operating costs and expenses 282 255
Amortization of goodwill - 4
Income tax benefit on operations (100) (89)
Operating loss (110) (87)
Realized capital gains and losses,
after-tax 3 1
Dividends on preferred securities
of subsidiary trusts (10) (45)
Net loss $ (117) $ (131)
THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS
Three Months Ended
($ in millions except ratios) December 31,
Est. Percent
2002 2001 Change
Consolidated Underwriting Summary
Allstate Protection $ 196 $ (241) (181.3)
Discontinued lines and coverages (66) (11) -
Underwriting income (loss) $ 130 $ (252) (151.6)
Allstate Protection Underwriting
Summary
Premiums written $ 5,854 $ 5,595 4.6
Premiums earned $ 5,948 $ 5,640 5.5
Claims and claims expense 4,342 4,430 (2.0)
Amortization of deferred policy
acquisition costs 817 775 5.4
Other costs and expenses 570 567 0.5
Amortization of goodwill - 5 (100.0)
Restructuring and related charges 23 104 (77.9)
Underwriting income (loss) $ 196 $ (241) (181.3)
Catastrophe losses $ 237 $ 133 78.2
Operating ratios
Claims and claims expense ratio 73.0 78.6
Expense ratio 23.7 25.7
Combined ratio 96.7 104.3
Effect of catastrophe losses
on combined ratio 4.0 2.4
Effect of restructuring and related
charges on combined ratio 0.4 1.8
Discontinued Lines and Coverages
Underwriting Summary
Premiums written $ - $ - -
Premiums earned $ 2 $ 4 (50.0)
Claims and claims expense 62 9 -
Other costs and expenses 6 5 20.0
Restructuring and related charges - 1 (100.0)
Underwriting loss $ (66) $ (11) -
Twelve Months Ended
($ in millions except ratios) December 31,
Est. Percent
2002 2001 Change
Consolidated Underwriting Summary
Allstate Protection $ 497 $ (627) (179.3)
Discontinued lines and coverages (234) (24) -
Underwriting income (loss) $ 263 $ (651) (140.4)
Allstate Protection Underwriting
Summary
Premiums written $ 23,910 $ 22,601 5.8
Premiums earned $ 23,351 $ 22,182 5.3
Claims and claims expense 17,424 17,506 (0.5)
Amortization of deferred policy
acquisition costs 3,216 3,060 5.1
Other costs and expenses 2,097 2,102 (0.2)
Amortization of goodwill - 21 (100.0)
Restructuring and related charges 117 120 (2.5)
Underwriting income (loss) $ 497 $ (627) (179.3)
Catastrophe losses $ 731 $ 894 (18.2)
Operating ratios
Claims and claims expense ratio 74.6 78.9
Expense ratio 23.3 23.9
Combined ratio 97.9 102.8
Effect of catastrophe losses
on combined ratio 3.1 4.0
Effect of restructuring and related
charges on combined ratio 0.5 0.5
Discontinued Lines and Coverages
Underwriting Summary
Premiums written $ 7 $ 8 (12.5)
Premiums earned $ 10 $ 15 (33.3)
Claims and claims expense 233 26 -
Other costs and expenses 11 12 (8.3)
Restructuring and related charges - 1 (100.0)
Underwriting loss $ (234) $ (24) -
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT
Three Months Ended
December 31,
Est. Percent
($ in millions) 2002 2001 Change
ALLSTATE-BRAND
Standard auto $ 3,175 $ 3,064 3.6
Non-standard auto 524 598 (12.4)
Involuntary auto 55 54 1.9
Commercial lines 196 185 5.9
Homeowners 1,173 1,001 17.2
Other personal lines 284 278 2.2
5,407 5,180 4.4
IVANTAGE
Standard auto 276 272 1.5
Non-standard auto 34 12 183.3
Involuntary auto (1) 2 (150.0)
Homeowners 116 108 7.4
Other personal lines 22 21 4.8
447 415 7.7
ALLSTATE PROTECTION 5,854 5,595 4.6
DISCONTINUED LINES
AND COVERAGES - - -
PROPERTY-LIABILITY $ 5,854 $ 5,595 4.6
Twelve Months Ended
December 31,
Est. Percent
($ in millions) 2002 2001 Change
ALLSTATE-BRAND
Standard auto $ 12,825 $ 12,115 5.9
Non-standard auto 2,337 2,625 (11.0)
Involuntary auto 206 171 20.5
Commercial lines 776 725 7.0
Homeowners 4,653 3,943 18.0
Other personal lines 1,226 1,217 0.7
22,023 20,796 5.9
IVANTAGE
Standard auto 1,195 1,190 0.4
Non-standard auto 114 46 147.8
Involuntary auto 4 17 (76.5)
Homeowners 484 456 6.1
Other personal lines 90 96 (6.3)
1,887 1,805 4.5
ALLSTATE PROTECTION 23,910 22,601 5.8
DISCONTINUED LINES
AND COVERAGES 7 8 (12.5)
PROPERTY-LIABILITY $ 23,917 $ 22,609 5.8
THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS
Three Months Ended December 31,
Est. Est. Est. Est.
($ in 2002 2001 2002 2001 2002 2001 2002 2001
millions)
Loss Ratio
Excluding the
Effect of Expense
Premiums Earned Loss Ratio CAT Losses Ratio
$ $
ALLSTATE-
BRAND
Standard
auto 3,219 3,038 76.9 80.0 76.3 79.8
Non-std.
auto 569 640 69.8 81.7 69.2 81.7
Homeowners 1,136 978 62.8 66.3 46.6 54.2
Other 552 541 71.4 73.4 66.8 74.5
Total 5,476 5,197 72.7 76.9 68.5 74.7 23.0 25.2
IVANTAGE
Standard
auto 298 299 87.9 100.0 88.3 99.3
Non-std.
auto 32 11 93.8 100.0 93.8 100.0
Homeowners 120 115 44.2 86.1 39.2 80.0
Other 22 18 77.3 122.2 72.7 94.4
Total 472 443 76.7 97.3 75.4 94.1 31.8 31.4
ALLSTATE
PROTECTION 5,948 5,640 73.0 78.6 69.0 76.2 23.7 25.7
Twelve Months Ended December 31,
Est. Est. Est. Est.
($ in 2002 2001 2002 2001 2002 2001 2002 2001
millions)
Loss Ratio
Excluding the
Effect of Expense
Premiums Earned Loss Ratio CAT Losses Ratio
$ $
ALLSTATE-
BRAND
Standard
auto 12,667 11,846 74.9 75.4 74.2 74.3
Non-std.
auto 2,413 2,689 72.4 83.0 72.1 82.3
Homeowners 4,275 3,799 75.8 85.3 63.8 70.1
Other 2,147 2,027 70.7 75.0 67.4 71.3
Total 21,502 20,361 74.4 78.2 71.2 74.3 22.5 23.2
IVANTAGE
Standard
auto 1,194 1,209 79.1 86.4 78.6 85.4
Non-std.
auto 89 53 109.0 81.1 109.0 81.1
Homeowners 470 460 75.1 82.8 64.7 69.1
Other 96 99 40.6 109.1 37.5 101.0
Total 1,849 1,821 77.5 86.6 74.4 82.0 32.5 31.5
ALLSTATE
PROTECTION 23,351 22,182 74.6 78.9 71.5 74.9 23.3 23.9
SOURCE Allstate Corporation
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Related links:
http://www.allstate.com
Company News On-Call:
http://www.prnewswire.com/comp/109885.html
CONTACT:
Media Relations, Michael Trevino,
+1-847-402-5600, or Investor Relations, Robert Block, Larry
Moews, or Phil Dorn, +1-847-402-2800, all of Allstate Corporation
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