NORTHBROOK, Ill., April 17 /PRNewswire-FirstCall/ -- The Allstate
Corporation (NYSE: ALL) today reported net income of $426 million for the
first quarter of 2002 on revenue growth of 2.3% compared to the first quarter
of 2001. Operating income was $488 million ($0.68 per diluted share) for the
first quarter of 2002, compared to $552 million ($0.76 per diluted share) for
the first quarter of 2001. Net income per diluted share was $0.60 for the
first quarter of 2002 compared to $0.68 per diluted share for the first
quarter of 2001. Operating income is defined as net income before after-tax
effects of realized capital gains and losses, gain on disposition of
operations, dividends on preferred securities of subsidiary trusts and the
cumulative effect of changes in accounting principle.
"Our results this quarter are early confirmation that our performance
improvement strategies are working," said chairman, president and CEO Edward
M. Liddy. "Despite being down from the first quarter of 2001, this quarter's
earnings per share amount reflects a sequential improvement from the last few
quarters resulting in part from favorable weather during the quarter, but also
from the significant actions we are taking to improve profitability.
"Our top line growth clearly reflects the rate actions we have taken in
numerous states, offset somewhat by administrative and risk management actions
targeted to improve profitability in several significant states such as
California and Florida.
"Our personal lines business benefited from generally mild weather in the
quarter. We estimate that weather-related losses, as compared to the prior
year level, had a favorable impact on our combined ratio of approximately 2.6
points, which equates to a $0.14 impact on operating earnings per share.
"However, we continue to see cost pressures and as a result strengthened
our reserve position by $148 million after tax ($0.21 per diluted share) for
upward development of prior year claims, primarily in homeowners.
"While homeowners claim frequencies are showing signs of improvement,
claim severities continue to challenge us, particularly in Texas where mold
claims still play a prominent role in our loss trends. Nonetheless, we remain
on track to return this line to profitability by mid-2003.
"We saw 6.8% growth in written premium for the Allstate brand standard
auto line in the quarter over the prior year first quarter. Our response to
the Allstate standard auto frequency trends is beginning to have an impact.
Increased rate activity and targeted underwriting programs in specific states
are showing good results. In this line, the loss ratio for the quarter was
74.4 and we expect that ratio to improve in the second half of 2002.
"Allstate Financial's operating income was up 12.6% for the first quarter
of 2002 compared to the first quarter of 2001, which is a result of a change
in accounting eliminating the amortization of goodwill and favorable mortality
margins. We saw sales growth in our fixed annuity and life insurance products
but a lackluster stock market continued to depress variable annuity sales.
Workplace sales increased more than 27% over prior year to $37 million as
expansion and production growth was experienced in both the Allstate and
independent agencies channels. Bank channel sales continued to shift to a
broader range of investment-oriented products. Overall, statutory premiums
and deposits were 5.5% below the first quarter of 2001 but 17.3% over the
fourth quarter of 2001.
"We continue to make progress in transforming The Allstate Corporation to
a personal financial services company. We now have 6,250 exclusive agents,
60% more than the first quarter of 2001, licensed to sell products such as
variable annuities, variable life insurance and non-proprietary mutual funds.
Issued premium and deposits from these exclusive agencies in the first quarter
of 2002 are more than two times what they were in the first quarter of 2001.
This increase is primarily due to larger annuity and bank deposits and non-
proprietary mutual fund sales. Allstate Bank is now rolled out to Allstate
agencies in 47 states and is available in all 50 states via the Internet.
"We remain comfortable with prior guidance indicating that operating
income per diluted share in 2002 will be in the range between $2.50 and $2.70
(excluding restructuring charges). And as the pricing and underwriting
actions we have been taking work through a full renewal cycle, we believe our
results will continue to improve over prior year quarters, particularly in the
last half of 2002."
Consolidated Highlights
Quarter Ended March 31
($ in millions, except per-share amounts) Est. 2002 2001 Change
$ $ %
Consolidated Revenues 7,298 7,131 2.3
Operating Income Before Restructuring
Charges After-tax 501 557 (10.1)
Operating Income Per Share (Diluted)
Before Restructuring Charges After-tax 0.70 0.76 (7.9)
Restructuring Charges After-tax 13 5 160.0
Operating Income 488 552 (11.6)
Operating Income Per Share (Diluted) 0.68 0.76 (10.5)
Realized Capital Gains (Losses) After-tax (64) (33) 93.9
Gain on Disposition of Operations After-tax 5 -- --
Dividends on Preferred Securities of
Subsidiary Trusts After-tax (3) (10) (70.0)
Cumulative Effect of a Change in
Accounting Principle After-tax -- (9) --
Net Income 426 500 (14.8)
Net Income Per Share (Diluted) 0.60 0.68 (11.8)
Weighted Average Shares Outstanding
(Diluted) 713.8 730.3 (2.3)
* The increase in first quarter 2002 consolidated revenues was due to
increased Property-Liability premiums earned, partially offset by lower
investment income as compared to the same quarter in the prior year.
* The consolidated operating income decline in the first quarter of 2002
when compared to the prior year first quarter was due to:
-- increased loss costs in Property-Liability
-- increased restructuring expenses and
-- decreased Property-Liability net investment income
These factors were partly offset by:
-- increased Property-Liability premiums earned
-- increased Allstate Financial operating income and
-- a change in accounting eliminating the amortization of goodwill.
* Restructuring expenses incurred during the first quarter of 2002 totaled
$20 million, or $13 million after-tax and $0.02 per diluted share.
These expenses related to the previously announced realignment of
the company's claim offices, Customer Information Centers and other
back-office operations.
* During the first quarter of 2002, Allstate purchased 2.4 million shares
of its stock at an average cost per share of $35.64 for an overall cost
of $85 million. The total cost of shares repurchased under its current
$500 million repurchase program through March 31, 2002 is $139 million.
The company intends to complete this repurchase program by December 31,
2002.
* The components of pre-tax realized capital gains (losses) were:
Est. Quarter Ended
March 31, 2002
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of derivative
securities $5 $(10) $-- $(5)
Portfolio trading (2) (51) (1) (54)
Investment write-downs (18) (26) -- (44)
Realized Capital Gains
(Losses) $(15) $(87) $(1) $(103)
Quarter Ended
March 31, 2001
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
Valuation of derivative
securities $(37) $(53) $-- $(90)
Portfolio trading 87 5 2 94
Investment write-downs (23) (32) -- (55)
Realized Capital Gains
(Losses) $27 $(80) $2 $(51)
* The 2001 net income includes a $9 million after-tax effect related to
the adoption of Statements of Financial Accounting Standard Nos. 133 and
138. These statements comprise a single, integrated accounting
framework for derivative instruments and hedging activities, including
specific methodologies for the valuation of derivative
securities.
Property-Liability Business
Property-Liability Highlights
Quarter Ended March 31
($ in millions, except ratios) Est. 2002 2001 Change
$ $ %
Property-Liability Premiums Written 5,716 5,440 5.1
Property-Liability Revenues 6,088 5,946 2.4
Operating Income before Restructuring
Charges After-tax 387 449 (13.8)
Restructuring Charges After-tax 13 4 --
Operating Income 374 445 (16.0)
Realized Capital Gains (Losses) After-tax (12) 17 (170.6)
Gain on Disposition of Operations After-tax 5 -- --
Cumulative Effect of a Change in Accounting
Principle After-tax -- (3) --
Net Income 367 459 (20.0)
Catastrophe Losses 110 82 34.1
Combined Ratio before impacts of Catastrophe
Losses and Restructuring Charges 96.9 96.4 0.5
Impact of Catastrophe Losses 1.9 1.5 0.4
Impact of Restructuring Charges 0.4 0.1 0.3
Combined Ratio 99.2 98.0 1.2
* Factors contributing to Property-Liability premium written growth in the
first quarter of 2002 as compared to the same quarter in the prior year
included:
-- a 5.5% increase in Allstate brand premiums written
* 6.8% increase in standard auto
* 15.9% increase in homeowners
These increases were partly offset by profit improvement actions
causing:
* a 10.4% decrease in Allstate brand non-standard auto premium
written
* a 0.5% decrease in Ivantage premiums written
* During the first quarter of 2002 the following net rate changes have
been approved for Property-Liability:
Quarter Ended
March 31, 2002
# of Weighted Average
States Rate Change (%)
Allstate brand
Standard Auto 19 7.4
Non-standard Auto 23 10.5
Homeowners 23 19.8
Ivantage brand
Standard Auto (Encompass) 12 5.1
Non-standard Auto (Deerbrook) 9 11.6
Homeowners (Encompass) 12 17.6
* Factors contributing to the increased Property-Liability loss costs in
the first quarter of 2002 when compared to the prior year first quarter
include:
-- Reserve strengthening for upward development of prior year claims:
----Loss Ratio Impact---
$ in Mil. Ratio
Pr. Yr. Variance
Auto 87 1.5 2.8
Homeowner 125 2.2 2.2
Other Lines 15 .3 0
Total 227 4.0 5.0
These factors were partially offset by:
-- improved auto frequency
-- favorable weather-related losses
-- Incurred losses related to mold claims in Texas were $119 million
compared to $7 million in the first quarter of 2001.
Strengthening of prior year reserves noted above that was related
to mold losses in Texas totaled $70 million.
* Factors contributing to the decline in Property-Liability net investment
income in the first quarter of 2002 when compared to the same quarter in
the prior year include:
-- lower income from partnership interests
-- lower portfolio yields
However, Property-Liability investment balances have increased in the
first quarter of 2002 compared to December 31, 2001 levels.
Allstate Financial Business
Allstate Financial Highlights
Quarter Ended March 31
($ in millions) Est. 2002 2001 Change
$ $ %
Statutory Premiums and Deposits** 2,710 2,867 (5.5)
Allstate Financial GAAP Revenues 1,194 1,161 2.8
Operating Income before Restructuring
Charges After-tax 143 128 11.7
Restructuring Charges After-tax -- 1 --
Operating Income 143 127 12.6
Realized Capital Gains (Losses) After-tax (52) (52) --
Cumulative Effect of a Change in
Accounting Principle After-tax -- (6) --
Net Income 91 69 31.9
Investments including Separate Accounts 61,662 56,625 8.9
** Statutory premiums and deposits is a measure used by Allstate
management to analyze sales trends. Statutory premiums and deposits
includes premiums and annuity considerations 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 treated as liabilities.
* Factors contributing to the decline in Allstate Financial statutory
premiums and deposits during the first quarter of 2002 as compared to
the same quarter in the prior year included:
-- a decrease in retail sales of variable annuities primarily due to
equity market volatility.
This decrease was partly offset by:
-- growth in fixed annuity sales
-- growth in the sale of life products
* Factors contributing to the growth in Allstate Financial operating
income in the first quarter of 2002 when compared to the same quarter in
the prior year included:
-- an improved mortality margin
-- a change in accounting eliminating the amortization of goodwill
This press release contains forward-looking statements about the
profitability of Allstate's homeowners line of business, our loss ratio for
Allstate standard auto, our operating income for 2002, restructuring charges
and rate changes in our Property-Liability business. 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. 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, as we increase prices
and modify our underwriting practices. Investment income may not meet
management's projections due to poor stock market performance. 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. 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 included in the tables above allows
for additional analysis of results of operations. The net effects of realized
capital gains and losses have been excluded 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
14 million households and has approximately 13,000 exclusive agents 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.
Encompass(sm) and Deerbrook(sm) 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 web site and
will be updated periodically over the next 10 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. Later
this month, a Form 10 will be filed with the SEC for Allstate Life Insurance
Company, which intends to sell registered products. At that time, the
investor supplement will contain additional information on Allstate
Financial's operations which will then be updated quarterly.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
Est. Percent
($ in millions except per share data) 2002 2001 Change
Revenues
Property-liability insurance premiums $5,704 $5,453 4.6
Life and annuity premiums
and contract charges 538 509 5.7
Net investment income 1,159 1,220 (5.0)
Realized capital gains and losses (103) (51) 102.0
Total revenues 7,298 7,131 2.3
Costs and expenses
Property-liability insurance
claims and claims expense 4,369 4,070 7.3
Life and annuity contract benefits 805 798 0.9
Amortization of deferred policy
acquisition costs 885 847 4.5
Operating costs and expenses 640 659 (2.9)
Amortization of goodwill - 13 -
Restructuring and related charges 20 8 150.0
Interest expense 69 62 11.3
Total costs and expenses 6,788 6,457 5.1
Gain on disposition of operations 7 - -
Income from operations before income
tax expense, dividends on preferred
securities and cumulative effect of change
in accounting principle, after-tax 517 674 (23.3)
Income tax expense 88 155 (43.2)
Income before dividends on preferred
securities and cumulative effect of
change in accounting principle, after-tax 429 519 (17.3)
Dividends on preferred securities
of subsidiary trusts (3) (10) (70.0)
Cumulative effect of change in
accounting principle, after-tax - (9) -
Net income $426 $500 (14.8)
Net income per share - Basic $0.60 $0.69
Weighted average shares - Basic 711.7 726.6
Net income per share - Diluted $0.60 $0.68
Weighted average shares - Diluted 713.8 730.3
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
Three Months Ended
March 31,
($ in millions except per share data) Est. Percent
2002 2001 Change
Contribution to income
Operating income $488 $552 (11.6)
Realized capital gains and losses (64) (33) 93.9
Gain on disposition of operations 5 - -
Dividends on preferred securities
of subsidiary trusts (3) (10) (70.0)
Cumulative effect of change in
accounting principle - (9) -
Net income $426 $500 (14.8)
Operating income before the impact of
restructuring and related charges $501 $557 (10.1)
Income per share (Diluted)
Operating income $0.68 $0.76 (10.5)
Realized capital gains and losses (0.09) (0.05) 80.0
Gain on disposition of operations 0.01 - -
Dividends on preferred securities
of subsidiary trusts - (0.02) -
Cumulative effect of change in
accounting principle - (0.01) -
Net income $0.60 $0.68 (11.8)
Operating income before the impact of
restructuring and related charges $0.70 $0.76 (7.9)
Book value per share - Diluted $24.12 $24.08
THE ALLSTATE CORPORATION
SUPPLEMENTARY INFORMATION
Three Months Ended
March 31,
Est.
($ in millions) 2002 2001
Property-Liability
Premiums written $5,716 $5,440
Premiums earned $5,704 $5,453
Claims and claims expense 4,369 4,070
Operating costs and expenses 1,272 1,260
Amortization of goodwill - 5
Restructuring and related charges 20 7
Underwriting income 43 111
Net investment income 399 466
Income tax expense on operations 68 132
Operating income 374 445
Realized capital gains and losses, after-tax (12) 17
Gain on disposition of operations, after-tax 5 -
Cumulative effect of change in accounting
principle, after-tax - (3)
Net income $367 $459
Catastrophe losses $110 $82
Operating ratios
Claims and claims expense ratio 76.6 74.7
Expense ratio 22.6 23.3
Combined ratio 99.2 98.0
Effect of catastrophe losses
on combined ratio 1.9 1.5
Effect of restructuring and related
charges on combined ratio 0.4 0.1
Allstate Financial
Statutory premiums and deposits $2,710 $2,867
Investments including
Separate Account assets $61,662 $56,625
Premiums and contract charges $538 $509
Net investment income 743 732
Contract benefits 805 798
Operating costs and expenses 258 245
Amortization of goodwill - 8
Restructuring and related charges - 1
Income tax expense on operations 75 62
Operating income 143 127
Realized capital gains and losses, after-tax (52) (52)
Cumulative effect of change in accounting
principle, after-tax - (6)
Net income $91 $69
Corporate and Other
Net investment income $17 $22
Operating costs and expenses 70 63
Income tax benefit on operations (24) (21)
Operating loss (29) (20)
Realized capital gains and losses, after-tax - 2
Dividends on preferred securities
of subsidiary trusts (3) (10)
Net loss $(32) $(28)
THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS
Three Months Ended
($ in millions) March 31,
Est. Percent
2002 2001 Change
Consolidated Underwriting Summary
PP&C $47 $115 (59.1)
Discontinued lines and coverages (4) (4) -
Underwriting income $43 $111 (61.3)
PP&C Underwriting Summary
Premiums written $5,713 $5,441 5.0
Premiums earned $5,701 $5,453 4.5
Claims and claims expense 4,366 4,067 7.4
Other costs and expenses 1,268 1,259 0.7
Amortization of goodwill - 5 -
Restructuring and related charges 20 7 185.7
Underwriting income $47 $115 (59.1)
Catastrophe losses $110 $82 34.1
Operating ratios
Claims and claims expense ratio 76.6 74.6
Expense ratio 22.6 23.3
Combined ratio 99.2 97.9
Effect of catastrophe losses
on combined ratio 1.9 1.5
Effect of restructuring and related
charges on combined ratio 0.4 0.1
Discontinued Lines and Coverages
Underwriting Summary
Premiums written $3 $(1) -
Premiums earned $3 $- -
Claims and claims expense 3 3 -
Other costs and expenses 4 1 -
Underwriting loss $(4) $(4) -
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT
($ in millions)
Three Months Ended
March 31,
Est. Percent
2002 2001 Change
ALLSTATE-BRAND
Standard auto $3,195 $2,992 6.8
Non-standard auto 627 700 (10.4)
Involuntary auto 50 33 51.5
Commercial lines 188 179 5.0
Homeowners 942 813 15.9
Other personal lines 278 289 (3.8)
5,280 5,006 5.5
IVANTAGE
Standard auto 286 287 (0.3)
Non-standard auto 19 13 46.2
Involuntary auto - 8 -
Homeowners 108 99 9.1
Other personal lines 20 28 (28.6)
433 435 (0.5)
PERSONAL PROPERTY AND CASUALTY 5,713 5,441 5.0
DISCONTINUED LINES AND COVERAGES 3 (1) -
PROPERTY-LIABILITY $5,716 $5,440 5.1
THE ALLSTATE CORPORATION
PERSONAL PROPERTY AND CASUALTY MARKET SEGMENT ANALYSIS
($ in millions)
Three Months Ended March 31,
Est. Est.
2002 2001 2002 2001
Premiums Earned Loss Ratio
ALLSTATE-BRAND
Standard auto $3,094 $2,870 74.4 71.3
Non-standard auto 625 692 75.5 82.4
Homeowners 1,007 919 85.0 78.6
Other (A) 522 491 77.0 74.7
Total Allstate-Brand 5,248 4,972 76.8 74.5
IVANTAGE
Standard auto 300 316 77.0 76.3
Non-standard auto 13 18 92.3 100.0
Homeowners 116 118 81.0 82.2
Other (A) 24 29 (12.5) 24.1
Total Ivantage 453 481 73.7 75.5
PP&C $5,701 $5,453 76.6 74.6
Three Months Ended March 31,
Est. Est.
2002 2001 2002 2001
Loss Ratio
Excluding
the Effects
of CAT
Losses Expense Ratio
ALLSTATE-BRAND
Standard auto 73.9 71.3
Non-standard auto 75.4 82.4
Homeowners 76.7 71.6
Other (A) 76.2 72.7
Total Allstate-Brand 74.8 73.0 21.8 22.6
IVANTAGE
Standard auto 77.3 76.3
Non-standard auto 92.3 100.0
Homeowners 75.0 76.3
Other (A) (12.5) 20.7
Total Ivantage 72.4 73.8 31.3 30.6
PP&C 74.7 73.1 22.6 23.3
(A) Other includes involuntary auto, commercial lines and other personal
lines.
SOURCE The Allstate Corporation
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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 The Allstate
Corporation
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