Allstate Reports 2003 Fourth Quarter 71% Increase in Net Income EPS, 22% Increase in Operating Income EPS.To download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. high-resolution high-res·o·lu·tion adj. 1. Relating to an image that has fine detail. 2. a. Of or relating to an output device that produces images that contain a large number of dots per unit of area and are therefore sharp and , print-ready JPEG JPEG in full Joint Photographic Experts Group Standard computer file format for storing graphic images in a compressed form for general use. JPEG images are compressed using a mathematical algorithm. images, click on the thumbnail A miniature representation of a page or image that is used to identify a file by its contents. Clicking the thumbnail opens the file. Thumbnails are an option in file managers, such as Windows Explorer, and they are found in photo editing and graphics program to quickly browse multiple image above. WARNING: these images are very large (800K+) Click here for caption Business Editors MULTIMEDIA AVAILABLE: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4564577 NORTHBROOK Northbrook, village (1990 pop. 32,308), Cook co., NE Ill., a suburb of Chicago; settled 1836. It was incorporated as Shermerville in 1901 and was reincorporated as Northbrook in 1923. , Ill.--(BUSINESS WIRE)--Feb. 4, 2004 Board Approves Quarterly Dividend Increase and $1 billion Addition to Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Program The Allstate This article is about the American insurance company. For the line of automobiles, see Allstate (automobile). The Allstate Corporation NYSE: ALL is the largest publicly held personal lines insurer in the United States. Corporation (NYSE NYSE See: New York Stock Exchange :ALL) today reported for the fourth quarter of 2003:
Consolidated Highlights(1)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- -----------------------------
Change Change
------------- -------------
(in millions,
except per
share
amounts Est. Est.
and ratios) 2003 2002 $ Amt % 2003 2002 $ Amt %
--------------------------- -----------------------------
Consolidated
revenues $8,262 $7,587 $675 8.9 $32,149 $29,579 $2,570 8.7
Net income 761 447 314 70.2 2,705 1,134 1,571 138.5
Net income
per diluted
share 1.08 0.63 0.45 71.4 3.83 1.60 2.23 139.4
Operating
income(1) 752 618 134 21.7 2,662 2,075 587 28.3
Operating
income per
diluted
share(1) 1.06 0.87 0.19 21.8 3.77 2.92 0.85 29.1
Property-
Liability
combined
ratio 92.3 97.8 -- (5.5)pts 94.6 98.9 -- (4.3)pts
Book value
per diluted
share 29.04 24.75 4.29 17.3 29.04 24.75 4.29 17.3
-- Property-Liability premiums written(1) grew 6% over the fourth quarter of 2002. Allstate brand standard auto and homeowners new business premiums written increased 31% and 39%, respectively. -- Property-Liability underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. (1) increased 272% or $353 million in the fourth quarter to $483 million from $130 million in the fourth quarter of 2002 due to higher premiums earned and continued favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. auto and homeowners loss frequencies, partially offset by higher catastrophes. -- Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses in the fourth quarter increased to $412 million compared to $237 million in the fourth quarter of 2002. The impact of catastrophe losses on the combined ratio increased to 6.5 pts from 4.0 pts in the fourth quarter of 2002. -- Allstate Financial had premiums and deposits(1) of $3.30 billion, 20% over the prior year fourth quarter. -- At its February February: see month. 3, 2004 meeting, the Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly dividend of $0.28 per share, which is a 22% increase from the previous quarter. The board also approved a $1 billion increase of the current share repurchase program, which has $350 million remaining. The expanded program is expected to be completed in 2005. -- Allstate's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share guidance(1) for 2004 (assuming the level of average expected catastrophe losses used in pricing for the year) is in the range of $4.30 to $4.55. (1) Measures used in this release that are not based on generally accepted accounting principles ("non-GAAP") are defined and reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure and operating measures are defined in the "Definitions of Non-GAAP and Operating Measures" section of this document. "Allstate had a strong quarter and an outstanding year," said Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Edward M. Liddy Edward M. Liddy is Chairman, President and Chief Executive Officer of The Allstate Corporation. He is currently on the Board of 3M, Goldman Sachs and The Kroger Company. • • . "I am very pleased with our performance in the fourth quarter, which showed good top line growth, strong unit growth for Allstate brand standard auto and homeowners and outstanding bottom line results. "Just as impressive were our results for the entire year. Compared to 2002, net income more than doubled to $2.7 billion, consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues were up almost 9% to $32.1 billion, and operating income was up 28% to $2.7 billion. And looking at our results since becoming a public company more than 10 years ago, 2003 marked a year in which we achieved the second highest net income per diluted share, the largest amount of written premium and the highest operating income (in total dollars and per diluted share), all while experiencing the largest amount of catastrophe losses since 1994, which included the Northridge earthquake The Northridge earthquake occurred on January 17, 1994 at 4:31 AM Pacific Standard Time in the city of Los Angeles, California. The earthquake had a "strong" moment magnitude of 6. . "Despite this year's excellent results, we will not rest on this success. Our goals remain unchanged and our strategy continues to be validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. and well executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. . We are seeking long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , sustainable, profitable growth and 2003 helped us continue the momentum that began more than eight quarters ago. We want to be better and bigger in our protection business and broader in financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and we are very optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our prospects for 2004 and beyond. We have a good record of executing on our strategies and remain focused on underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and pricing discipline as we grow the company," said Liddy. In the quarter, we appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. a new chief marketing officer and launched a new multi-million dollar advertising campaign. Both of these moves are intended to help us grow our business and reach more households. In addition to the investments in advertising, we have invested in our agency force, growing it by 5 percent or some 600 exclusive agencies this year, including approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 200 exclusive financial specialists, thereby increasing our proprietary distribution capacity for financial services products. New business growth in our Allstate brand standard auto and homeowners insurance lines was strong. Standard auto and homeowners new business premiums written increased 31% and 39%, respectively, over the fourth quarter of 2002. In addition, policies in force for these two lines continued a trend that began in the second quarter of 2003 by showing sequential One after the other in some consecutive order such as by name or number. positive unit growth of 1.0% and 1.3%, respectively, compared to the third quarter. "During the quarter, Allstate Protection experienced excellent auto and homeowners loss frequency trends. Catastrophe losses were much higher this quarter, largely as a result of losses suffered by our policyholders in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, due to severe wildfires that struck the area. I am particularly proud of our Allstate agents and claim adjusters and their commitment to restoring the lives of our customers in a state that not only experienced devastating dev·as·tate tr.v. dev·as·tat·ed, dev·as·tat·ing, dev·as·tates 1. To lay waste; destroy. 2. To overwhelm; confound; stun: was devastated by the rude remark. fires, but mudslides and even an earthquake earthquake, trembling or shaking movement of the earth's surface. Most earthquakes are minor tremors. Larger earthquakes usually begin with slight tremors but rapidly take the form of one or more violent shocks, and end in vibrations of gradually diminishing force during the quarter," continued Liddy. In an increasingly competitive environment, Allstate Financial had mixed results in the quarter. Premiums and deposits were up 20 percent and revenues were up 6 percent, while operating income was down 36 percent reflecting the impact of several non-recurring items. To better position itself for the competitive pressures and challenges in the financial services marketplace, Allstate Financial is pursuing a strategy of operational excellence which emphasizes focused product manufacturing for our targeted distribution partners to enable them to serve their clients' financial protection, savings and retirement needs. The results of this concentrated effort started to be realized in the fourth quarter of 2003 as non-deferred operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , net of restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , were flat with the prior year's fourth quarter. In addition, Allstate Financial introduced an innovative and flexible living benefit guarantee on its variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. in January January: see month. 2004. The TrueReturn(SM) Accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. Benefit feature replaced the income benefit previously offered. These initiatives, along with expectations of improving economic conditions, are expected to drive higher revenue and operating income in 2004 and subsequent years. "Overall, I am very optimistic about our ability to continue the momentum we generated over the past two years and believe strongly that we can continue to deliver excellent value to our shareholders. We have added $1 billion to our share repurchase program, significantly increased our dividend, continue to maintain a strong competitive position in all our businesses and we know how to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution . More than ever before, 'You're in good hands with Allstate(R)'," said Liddy.
Consolidated Highlights
Discussion of Results
Three Months Twelve Months for the Three Months
Ended Ended Ended
December 31, December 31, December 31, 2003
-------------- ---------------- ---------------------
($ in millions,
except per share
and return Est. Est.
amounts) 2003 2002 2003 2002
-------------- ----------------
Consolidated
revenues $8,262 $7,587 $32,149 $29,579 Higher premiums
earned in
Property-Liability
and realized
capital gains.
Operating income 752 618 2,662 2,075 Increase of $190 in
Property-Liability
operating income,
partially offset
by decrease of
$57 in Allstate
Financial
operating income.
Realized capital
gains and losses,
after-tax 58 (158) 134 (598) See the Components
of realized
capital gains and
losses (pretax)
table.
(Loss) gain on
disposition of
operations,
after-tax (20) (3) (26) 2 Loss related to
the disposition
of Allstate
Financial's
direct response
distribution
business.
Cumulative effect
of change in
accounting
principle,
after-tax (14) -- (15) (331) Adoption of
Derivatives
Implementation
Group issue B36
related to
modified
coinsurance and
FIN No. 46 for
variable interest
entities.
Net income 761 447 2,705 1,134 Realized capital
gains and higher
operating income.
Net income per
share (diluted) 1.08 0.63 3.83 1.60
Operating income
per share
(diluted) 1.06 0.87 3.77 2.92 Compared to First
Call mean estimate
of $1.04, with a
range of $0.94 to
$1.14.
Weighted average
shares
outstanding
(diluted) 707.2 705.7 706.2 709.9 On a year to
date basis
during 2003,
Allstate
purchased 4.2
million shares
of its stock
for $149.97
million, or an
average cost
per share of
$35.68. These
repurchases
were offset by
shares issued
in connection
with Allstate's
equity incentive
plans.
Return on equity 14.2 6.5 14.2 6.5 See the return on
equity calculation
in the Definitions
of Non-GAAP and
Operating Measures
section of this
document.
Operating income
return on
equity(1) 16.5 13.7 16.5 13.7 See the return on
equity calculation
in the Definitions
of Non-GAAP and
Operating Measures
section of this
document.
Book value per
diluted share 29.04 24.75 29.04 24.75 At December 31,
2003 and 2002, net
unrealized gains
on fixed income
securities, after-
tax, totaling
$2,307 and $2,302,
respectively,
represented $3.26
and $3.27,
respectively, of
book value per
diluted share.
-- Book value per diluted share increased 17.3% compared to December December: see month. 31, 2002. The minimum pension liability adjustment impacted book value per share $0.51 and $1.16 at December 31, 2003 and 2002, respectively. The decline in the minimum pension liability at December 31, 2003 was due to contributions during 2003 totaling $871 million and the impact of market appreciation on the valuation of plan assets. -- The Board of Directors declared a dividend of twenty-eight cents ($0.28) on each outstanding share of stock. This dividend is payable in cash on April 1, 2004 to stockholders of record at the close of business on February 27, 2004.
Property-Liability Highlights
Discussion of
Three Months Twelve Months Results for the
Ended Ended Three Months Ended
December 31, December 31, December 31, 2003
-------------- ---------------- --------------------
($ in millions, Est. Est.
except ratios) 2003 2002 2003 2002
-------------- ----------------
Property-Liability
Premiums
written $6,199 $5,854 $25,187 $23,917 See the Property-
Liability
Premiums
written by
market segment
table and the
Property-Liability
net rate changes
approved table.
Property-Liability
revenues 6,848 6,234 26,642 24,521 Premiums earned
increased $352 or
5.9%.
Underwriting
income 483 130 1,332 263 Higher premiums
earned, continued
favorable auto and
homeowners
frequencies,
partially
offset by higher
catastrophes and
increased
expenses.
See the Allstate
Protection market
segment analysis
tables.
Net investment
income 435 400 1,677 1,656 Higher portfolio
balances due to
positive cash
flows from
operations
and higher
income from
partnerships,
partially offset
by lower yields.
Operating income 680 490 2,327 1,629 Increase of $230 in
underwriting
income, after-tax,
partially offset
by an unfavorable
difference between
years of $70
million related to
favorable,
nonrecurring
adjustments to
prior years' tax
liabilities.
Realized capital
gains and losses,
after-tax 72 (74) 192 (314) See the Components
of realized
capital gains and
losses (pretax)
table.
(Loss) gain on
disposition of
operations,
after-tax -- 1 3 6
Cumulative effect
of change in
accounting
principle,
after-tax -- -- (1) (48)
Net income 752 417 2,521 1,273 Higher operating
income and
realized capital
gains.
Catastrophe losses 412 237 1,489 731 Higher losses due
to California
wildfires.
Ratios:
Property-Liability
combined ratio 92.3 97.8 94.6 98.9
Effect of
Discontinued
Lines and
Coverages 0.1 1.1 2.3 1.0
Allstate
Protection
combined ratio 92.2 96.7 92.3 97.9
Effect of
catastrophe
losses 6.5 4.0 6.0 3.1
-- Allstate brand standard auto and homeowners policies in force (PIF (Program Information File) A data file in Windows 3.x and NT that stores window settings for DOS applications. It allows screen size, fonts and other options to be selected in order to customize the way the DOS app appears under Windows. ) increased 1.0% and 1.3%, respectively, from September September: see month. 30, 2003 levels, resulting in the third consecutive sequential quarterly increase in standard auto PIF and the fifth consecutive sequential quarterly increase in homeowners PIF. Both standard auto and homeowners experienced growth in most states. In total, Allstate brand standard auto, non-standard auto and homeowners PIF increased 0.8% as of December 31, 2003 when compared to December 31, 2002. These results exclude impacts from Allstate Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Allstate Motor Club. -- In addition to higher new business premiums written during the fourth quarter of 2003 compared to the prior year fourth quarter, the retention ratio for the Allstate brand standard auto increased to 90.1 as of December 31, 2003 compared to 88.9 as of December 31, 2002. The retention ratio for Allstate brand homeowners was 87.5 as of December 31, 2003 compared to 87.8 as of December 31, 2002. These results exclude impacts from Allstate Canada.
Allstate Financial Highlights
Discussion of
Three Months Twelve Months Results for the
Ended Ended Three Months Ended
December 31, December 31, December 31, 2003
-------------- ---------------- --------------------
($ in millions) Est. Est.
2003 2002 2003 2002
-------------- ----------------
Premiums and
deposits $3,303 $2,761 $13,095 $11,834 Higher sales of
institutional
products, variable
annuities and life
products,
partially offset
by lower sales of
fixed annuities.
See the Allstate
Financial premiums
and deposits
table.
Allstate Financial
Revenues 1,401 1,325 5,452 4,982 Lower realized
capital losses and
higher net
investment income,
partially offset
by lower premiums
and contract
charges.
Operating income 101 158 449 556 Higher mortality
margin, offset by
a net unfavorable
difference between
years of $49 due
to nonrecurring
adjustments for
prior years' tax
liabilities,
higher
amortization of
DAC on a closed
annuity block of
$10, after-tax and
lower investment
margin.
Realized capital
gains and
losses, after-
tax (11) (92) (53) (287) See the Components
of realized
capital gains and
losses (pretax)
table.
(Loss) gain on
disposition of
operations,
after-tax (20) (4) (29) (4) Loss related to the
disposition of the
direct response
distribution
business.
Cumulative effect
of change in
accounting
principle, after-
tax (17) -- (17) (283) Adoption of
Derivatives
Implementation
Group issue B36
related to
modified
coinsurance and
FIN No. 46 for
variable interest
entities.
Net income (loss) 38 55 305 (22) Lower operating
income, cumulative
effect of change
in accounting
principle and
loss on
disposition of
operations,
partly offset by
lower realized
capital losses.
-- Premiums and deposits for the fourth quarter of 2003 increased 19.6% over the prior year fourth quarter due to strong sales of institutional products, variable annuities and life products, partially offset by lower fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. sales. -- Net cash payments for Allstate Financial's variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. guaranteed minimum death benefits (GMDB GMDB Guaranteed Minimum Death Benefit (insurance) ) were $16 million for the fourth quarter of 2003, net of reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. gains and losses, and other contractual arrangements. This is $6 million less than payments made in the fourth quarter of 2002, and $3 million less than the third quarter of 2003 payments. GMDB values in excess of contractholders' account values, payable if all contractholders were to have died at December 31, 2003, were estimated to be $2.46 billion, net of reinsurance, compared to $3.13 billion at September 30, 2003 and $4.07 billion at December 31, 2002. -- The weighted average interest crediting rate on fixed annuity and interest-sensitive life products in force, excluding market value adjusted annuities, was approximately 70 basis points more than the underlying long-term guaranteed rates on these products.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
($ in millions, except Est. Percent Est. Percent
per share data) 2003 2002(1) Change 2003 2002(1) Change
------ ------- ------- --------
Revenues
Property-liability
insurance premiums $6,302 $5,950 5.9 $24,677 $23,361 5.6
Life and annuity
premiums
and contract charges 594 661 (10.1) 2,304 2,293 0.5
Net investment income 1,275 1,222 4.3 4,972 4,849 2.5
Realized capital gains
and losses 91 (246) 137.0 196 (924) 121.2
------ ------ ------- -------
Total revenues 8,262 7,587 8.9 32,149 29,579 8.7
------ ------ ------- -------
Costs and expenses
Property-liability
insurance
claims and claims
expense 4,248 4,404 (3.5) 17,432 17,657 (1.3)
Life and annuity
contract benefits 471 557 (15.4) 1,851 1,770 4.6
Interest credited to
contractholder funds 466 448 4.0 1,846 1,764 4.6
Amortization of
deferred policy
acquisition costs 1,069 917 16.6 4,058 3,694 9.9
Operating costs and
expenses 804 753 6.8 3,001 2,761 8.7
Restructuring and
related charges 18 24 (25.0) 74 119 (37.8)
Interest expense 71 74 (4.1) 275 278 (1.1)
------ ------ ------- -------
Total costs and
expenses 7,147 7,177 (0.4) 28,537 28,043 1.8
------ ------ ------- -------
(Loss) gain on
disposition of
operations (32) (3) - (41) 4 -
Income from operations
before income
tax expense (benefit),
dividends on preferred
securities and
cumulative effect of
change in accounting
principle, after-tax 1,083 407 166.1 3,571 1,540 131.9
Income tax expense
(benefit) 308 (43) - 846 65 -
------ ------ ------- -------
Income before dividends
on preferred
securities and
cumulative effect of
change in accounting
principle, after-tax 775 450 72.2 2,725 1,475 84.7
Dividends on preferred
securities
of subsidiary trust - (3) 100.0 (5) (10) 50.0
Cumulative effect of
change in accounting
principle, after-tax (14) - - (15) (331) 95.5
------ ------ ------- -------
Net income $ 761 $ 447 70.2 $ 2,705 $ 1,134 138.5
====== ====== ======= =======
Net income per share
- Basic $ 1.08 $ 0.63 $ 3.85 $ 1.60
====== ====== ======= =======
Weighted average shares
- Basic 703.5 702.6 703.5 707.1
====== ====== ======= =======
Net income per share
- Diluted $ 1.08 $ 0.63 $ 3.83 $ 1.60
====== ====== ======= =======
Weighted average shares
- Diluted 707.2 705.7 706.2 709.9
====== ====== ======= =======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
($ in millions, except Est. Percent Est. Percent
per share data) 2003 2002(1) Change 2003 2002(1) Change
------ ------- ------- --------
Contribution to income
Operating income
before the impact of
restructuring and
related charges $ 764 $ 633 20.7 $ 2,710 $ 2,152 25.9
Restructuring and
related charges,
after-tax 12 15 (20.0) 48 77 (37.7)
------ ------ ------- -------
Operating income 752 618 21.7 2,662 2,075 28.3
Realized capital gains
and losses, after-tax 58 (158) 136.7 134 (598) 122.4
DAC amortization
expense on realized
capital gains and
losses, after-tax (10) (2) - (30) (1) -
Reclassification of
periodic settlements
and accruals on
non-hedge derivative
instruments, after-
tax (5) (5) - (15) (3) -
(Loss) gain on
disposition of
operations, after-tax (20) (3) - (26) 2 -
Dividends on preferred
securities of
subsidiary trust - (3) 100.0 (5) (10) 50.0
Cumulative effect of
change in accounting
principle, after-tax (14) - - (15) (331) 95.5
------ ------ ------- -------
Net income $ 761 $ 447 70.2 $ 2,705 $ 1,134 138.5
====== ====== ======= =======
Income per share (Diluted)
Operating income
before the impact of
restructuring and
related charges $ 1.08 $ 0.89 21.3 $ 3.84 $ 3.03 26.7
Restructuring and
related charges,
after-tax 0.02 0.02 - 0.07 0.11 (36.4)
------ ------ ------- -------
Operating income 1.06 0.87 21.8 3.77 2.92 29.1
Realized capital gains
and losses, after-tax 0.09 (0.22) 140.9 0.19 (0.84) 122.6
DAC amortization
expense on realized
capital gains and
losses, after-tax (0.02) - - (0.05) - -
Reclassification of
periodic settlements
and accruals on
non-hedge derivative
instruments, after-
tax (0.01) (0.01) - (0.02) (0.01)(100.0)
(Loss) gain on
disposition of
operations, after-tax (0.03) (0.01) - (0.04) - -
Dividends on preferred
securities of
subsidiary trust - - - - (0.01) 100.0
Cumulative effect of
change in accounting
principle, after-tax (0.01) - - (0.02) (0.46) 95.7
------ ------ ------- -------
Net income $ 1.08 $ 0.63 71.4 $ 3.83 $ 1.60 139.4
====== ====== ======= =======
Book value per share
- Diluted $29.04 $24.75 17.3 $ 29.04 $ 24.75 17.3
====== ====== ======= =======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
THE ALLSTATE CORPORATION
COMPONENTS OF REALIZED CAPITAL GAINS AND LOSSES (PRETAX)
Three Months Ended December 31, 2003 (Est.)
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ 4 $ (4) $ - $ -
Settlements of derivative
instruments 5 (2) - 3
Sales 131 23 - 154
Investment write-downs (29) (34) (3) (66)
---------- ---------- --------- -----
Total $ 111 $ (17) $ (3) $ 91
========== ========== ========= =====
Twelve Months Ended December 31, 2003 (Est.)
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ 10 $ 6 $ - $ 16
Settlements of derivative
instruments 3 18 - 21
Sales 385 71 (3) 453
Investment write-downs (110) (180) (4) (294)
---------- ---------- --------- -----
Total $ 288 $ (85) $ (7) $ 196
========== ========== ========= =====
Three Months Ended December 31, 2002 (1)
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ 8 $ 7 $ - $ 15
Settlements of derivative
instruments (32) 8 - (24)
Sales (20) (10) 12 (18)
Investment write-downs (72) (146) (1) (219)
---------- ---------- --------- -----
Total $ (116) $ (141) $ 11 $(246)
========== ========== ========= =====
Twelve Months Ended December 31, 2002 (1)
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ (24) $ (36) $ - $ (60)
Settlements of derivative
instruments (195) 19 - (176)
Sales (129) (104) 12 (221)
Investment write-downs (148) (311) (8) (467)
---------- ---------- --------- -----
Total $ (496) $ (432) $ 4 $(924)
========== ========== ========= =====
(1) To conform to current period presentations, certain prior period
balances have been reclassified. The reclassifications result in
periodic settlements and accruals on derivative instruments held
for economic hedging purposes but categorized as "non-hedge" for
accounting purposes, being classified consistent with the
corresponding fair value adjustments on such instruments. The
tables above include the following reclassifications:
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Valuation of derivative
instruments $ 7 $ (2) $ 6 $ (22)
Settlements of
derivative instruments 1 10 17 27
--------- --------- --------- ---------
Net impact of
reclassifications
on realized
capital gains and
losses, pretax $ 8 $ 8 $ 23 $ 5
========= ========= ========= =========
The net impact of the reclassifications on realized capital gains and
losses, pretax, are offset by a corresponding change to net investment
income or interest credited to contractholder funds.
THE ALLSTATE CORPORATION
SEGMENT RESULTS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- --------------------
($ in millions) Est. Est.
2003 2002 (1) 2003 2002 (1)
--------- -------- --------- ---------
Property-Liability
Premiums written $ 6,199 $ 5,854 $ 25,187 $ 23,917
========= ======== ========= =========
Premiums earned $ 6,302 $ 5,950 $ 24,677 $ 23,361
Claims and claims expense 4,248 4,404 17,432 17,657
Amortization of deferred
policy acquisition costs 930 817 3,520 3,216
Operating costs and
expenses 629 576 2,326 2,108
Restructuring and related
charges 12 23 67 117
--------- -------- --------- ---------
Underwriting income 483 130 1,332 263
Net investment income 435 400 1,677 1,656
Income tax expense on
operations 238 40 682 290
--------- -------- --------- ---------
Operating income 680 490 2,327 1,629
Realized capital gains
and losses, after-tax 72 (74) 192 (314)
Gain on disposition of
operations, after-tax - 1 3 6
Cumulative effect of
change in accounting
principle, after-tax - - (1) (48)
--------- -------- --------- ---------
Net income $ 752 $ 417 $ 2,521 $ 1,273
========= ======== ========= =========
Catastrophe losses $ 412 $ 237 $ 1,489 $ 731
========= ======== ========= =========
Operating ratios
Claims and claims
expense ratio 67.4 74.0 70.6 75.6
Expense ratio 24.9 23.8 24.0 23.3
--------- -------- --------- ---------
Combined ratio 92.3 97.8 94.6 98.9
========= ======== ========= =========
Effect of catastrophe
losses on combined
ratio 6.5 4.0 6.0 3.1
========= ======== ========= =========
Effect of
restructuring and
related charges on
combined ratio 0.2 0.4 0.3 0.5
========= ======== ========= =========
Effect of Discontinued
Lines and Coverages
on combined ratio 0.1 1.1 2.3 1.0
========= ======== ========= =========
Allstate Financial
Premiums and deposits $ 3,303 $ 2,761 $ 13,095 $ 11,834
========= ======== ========= =========
Investments including
Separate Accounts
assets $ 76,320 $ 66,389 $ 76,320 $ 66,389
========= ======== ========= =========
Premiums and contract
charges $ 594 $ 661 $ 2,304 $ 2,293
Net investment income 824 805 3,233 3,121
Periodic settlements and
accruals on non-hedge
derivative instruments 8 8 23 5
Contract benefits 471 557 1,851 1,770
Interest credited to
contractholder funds 466 448 1,846 1,764
Amortization of deferred
policy acquisition costs 124 96 492 476
Operating costs and
expenses 174 177 672 649
Restructuring and related
charges 6 1 7 2
Income tax expense on
operations 84 37 243 202
--------- -------- --------- ---------
Operating income 101 158 449 556
Realized capital gains
and losses, after-tax (11) (92) (53) (287)
DAC amortization expense
on realized capital
gains and losses, after-
tax (10) (2) (30) (1)
Reclassification of
periodic settlements and
accruals on non-hedge
derivative instruments,
after-tax (5) (5) (15) (3)
Loss on disposition of
operations, after-tax (20) (4) (29) (4)
Cumulative effect of
change in accounting
principle, after-tax (17) - (17) (283)
--------- -------- --------- ---------
Net income (loss) $ 38 $ 55 $ 305 $ (22)
========= ======== ========= =========
Corporate and Other
Net investment income $ 16 $ 17 $ 62 $ 72
Operating costs and
expenses 72 74 278 282
Income tax benefit on
operations (27) (27) (102) (100)
--------- -------- --------- ---------
Operating loss (29) (30) (114) (110)
Realized capital gains
and losses, after-tax (3) 8 (5) 3
Dividends on preferred
securities of subsidiary
trust - (3) (5) (10)
Cumulative effect of
change in accounting
principle, after-tax 3 - 3 -
--------- -------- --------- ---------
Net loss $ (29) $ (25) $ (121) $ (117)
========= ======== ========= =========
Consolidated net income $ 761 $ 447 $ 2,705 $ 1,134
========= ======== ========= =========
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
Est. Percent Est. Percent
($ in millions) 2003 2002 Change 2003 2002 Change
------- ------- -------- --------
Consolidated
Underwriting Summary
Allstate Protection $ 492 $ 196 151.0 $ 1,903 $ 497 -
Discontinued Lines
and Coverages (9) (66) 86.4 (571) (234) (144.0)
------ ------ ------- -------
Underwriting
income $ 483 $ 130 - $ 1,332 $ 263 -
====== ====== ======= =======
Allstate Protection
Underwriting Summary
Premiums written $6,197 $5,854 5.9 $25,175 $23,910 5.3
====== ====== ======= =======
Premiums earned $6,300 $5,948 5.9 $24,664 $23,351 5.6
Claims and claims
expense 4,240 4,342 (2.3) 16,858 17,424 (3.2)
Amortization of
deferred policy
acquisition costs 930 817 13.8 3,520 3,216 9.5
Other costs and
expenses 626 570 9.8 2,316 2,097 10.4
Restructuring and
related charges 12 23 (47.8) 67 117 (42.7)
------ ------ ------- -------
Underwriting
income $ 492 $ 196 151.0 $ 1,903 $ 497 -
====== ====== ======= =======
Catastrophe losses $ 412 $ 237 73.8 $ 1,489 $ 731 103.7
====== ====== ======= =======
Operating ratios
Claims and claims
expense ratio 67.3 73.0 68.4 74.6
Expense ratio 24.9 23.7 23.9 23.3
------ ------ ------- -------
Combined ratio 92.2 96.7 92.3 97.9
====== ====== ======= =======
Effect of
catastrophe losses
on combined ratio 6.5 4.0 6.0 3.1
====== ====== ======= =======
Effect of
restructuring and
related
charges on
combined ratio 0.2 0.4 0.3 0.5
====== ====== ======= =======
Discontinued Lines and
Coverages
Underwriting Summary
Premiums written $ 2 $ - - $ 12 $ 7 71.4
====== ====== ======= =======
Premiums earned $ 2 $ 2 - $ 13 $ 10 30.0
Claims and claims
expense 8 62 (87.1) 574 233 146.4
Other costs and
expenses 3 6 (50.0) 10 11 (9.1)
------ ------ ------- -------
Underwriting loss $ (9) $ (66) 86.4 $ (571) $ (234) (144.0)
====== ====== ======= =======
Effect of
Discontinued Lines
and Coverages
on the Property-
Liability
combined ratio 0.1 1.1 2.3 1.0
====== ====== ======= =======
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
Est. Percent Est. Percent
($ in millions) 2003 2002 Change 2003 2002 Change
------- ------- -------- --------
Allstate Brand
Standard auto $3,416 $3,175 7.6 $13,632 $ 12,825 6.3
Non-standard auto 455 524 (13.2) 1,975 2,337 (15.5)
------ ------ ------- --------
Auto 3,871 3,699 4.6 15,607 15,162 2.9
Involuntary auto 47 55 (14.5) 226 206 9.7
Commercial lines 215 196 9.7 854 776 10.1
Homeowners 1,279 1,173 9.0 5,153 4,653 10.7
Other personal
lines 308 284 8.5 1,313 1,226 7.1
------ ------ ------- --------
5,720 5,407 5.8 23,153 22,023 5.1
Ivantage
Standard auto 277 276 0.4 1,202 1,195 0.6
Non-standard auto 42 34 23.5 170 114 49.1
------ ------ ------- --------
Auto 319 310 2.9 1,372 1,309 4.8
Involuntary auto 10 (1) - 40 4 -
Homeowners 123 116 6.0 510 484 5.4
Other personal
lines 25 22 13.6 100 90 11.1
------ ------ ------- --------
477 447 6.7 2,022 1,887 7.2
------ ------ ------- --------
Allstate Protection 6,197 5,854 5.9 25,175 23,910 5.3
Discontinued Lines
and Coverages 2 - - 12 7 71.4
------ ------ ------- --------
Property-Liability $6,199 $5,854 5.9 $25,187 $ 23,917 5.3
====== ====== ======= ========
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY NET RATE CHANGES APPROVED (1)
Three Months Ended
December 31, 2003
--------------------------
# of Weighted Average
States Rate Change (%)
-------- ----------------
Allstate Brand
Standard auto 3 9.1
Non-standard auto 2 6.1
Homeowners 2 29.7
Ivantage
Standard auto
(Encompass) - -
Non-standard auto
(Deerbrook) 2 10.3
Homeowners (Encompass) - -
Twelve Months Ended
December 31, 2003
--------------------------------------------
Annual Impact
# of Weighted Average of Rate Changes on
States Rate Change(%) Premiums Written(%)
-------- --------------- ------------------
Allstate Brand
Standard auto 25 6.0 4.5
Non-standard auto 13 8.1 5.7
Homeowners (2) 20 1.8 1.2
Ivantage
Standard auto
(Encompass) 40 8.1 9.2
Non-standard auto
(Deerbrook) 14 8.6 7.8
Homeowners (Encompass) 40 11.7 15.3
(1) Rate increases that are indicated based on a loss trend analysis
to achieve a targeted return, will continue to be pursued in all
locations and for all products.
(2) Allstate brand homeowners rate changes include an 8.7% decrease
effective in September in the state of Texas, excluding this
decrease the Allstate brand homeowners weighted average rate
change for the twelve months ended December 31, 2003 was 4.9%.
THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS
Three Months Ended December 31,
------------------------------------------------------
($ in millions) Est. Est. Est. Est.
2003 2002 2003 2002 2003 2002 2003 2002
------- ------- ------- ----- ------ ----- ----- -----
Loss Ratio
Excluding the
Effect of
Catastrophe Expense
Premiums Earned Loss Ratio Losses Ratio
---------------- ------------- ------------ -----------
Allstate Brand
Standard
auto $ 3,446 $ 3,219 69.1 76.9 68.9 76.3
Non-standard
auto 486 569 59.1 69.8 58.6 69.2
------- -------
Auto 3,932 3,788 67.9 75.8 67.7 75.3
Homeowners 1,269 1,136 67.4 62.8 38.7 46.6
Other (1) 595 552 61.7 71.4 56.8 66.8
------- -------
Total
Allstate
brand (2) 5,796 5,476 67.1 72.7 60.2 68.5 24.5 23.0
Ivantage
Standard
auto 301 298 61.5 87.9 61.5 88.3
Non-standard
auto 43 32 88.4 93.8 86.0 93.8
------- -------
Auto 344 330 64.8 88.5 64.5 88.8
Homeowners 127 120 73.2 44.2 66.9 39.2
Other (1) 33 22 100.0 77.3 93.9 72.7
------- -------
Total
Ivantage 504 472 69.2 76.7 67.1 75.4 29.4 31.8
------- -------
Allstate
Protection $ 6,300 $ 5,948 67.3 73.0 60.8 69.0 24.9 23.7
======= =======
Twelve Months Ended December 31,
------------------------------------------------------
($ in millions) Est. Est. Est. Est.
2003 2002 2003 2002 2003 2002 2003 2002
------- ------- ------- ----- ------ ----- ----- -----
Loss Ratio
Excluding the
Effect of
Catastrophe Expense
Premiums Earned Loss Ratio Losses Ratio
---------------- ------------- ------------ -----------
Allstate Brand
Standard
auto $13,406 $12,667 70.1 74.9 68.7 74.2
Non-standard
auto 2,075 2,413 65.6 72.4 64.9 72.1
------- -------
Auto 15,481 15,080 69.5 74.5 68.2 73.9
Homeowners 4,892 4,275 63.2 75.8 41.4 63.8
Other (1) 2,316 2,147 68.1 70.7 62.5 67.4
------- -------
Total
Allstate
brand 22,689 21,502 68.0 74.4 61.8 71.2 23.5 22.5
Ivantage
Standard
auto 1,195 1,194 69.4 79.1 68.7 78.6
Non-standard
auto 163 89 84.7 109.0 84.0 109.0
------- -------
Auto 1,358 1,283 71.2 81.1 70.5 80.7
Homeowners 494 470 76.7 75.1 60.1 64.7
Other (1) 123 96 71.5 40.6 67.5 37.5
------- -------
Total
Ivantage 1,975 1,849 72.6 77.5 67.7 74.4 29.3 32.5
------- -------
Allstate
Protection $24,664 $23,351 68.4 74.6 62.4 71.5 23.9 23.3
======= =======
(1) Other includes involuntary auto, commercial lines and other
personal lines.
(2) Increases in the expense ratio for the three months ended December
31, 2003 compared to the same period in the prior year resulted
from higher agent incentives, charitable contributions, marketing
and employee-related expenses.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
EFFECT OF PRETAX PRIOR YEAR RESERVE REESTIMATES ON THE COMBINED RATIO
Three Months Ended December 31,
---------------------------------------
Effect of Pretax
Reserve Reestimates
Pretax Reserve on the
Reestimates Combined Ratio
------------------- -------------------
($ in millions) Est. 2003 2002 Est. 2003 Change
--------- --------- --------- ---------
Auto $ (44) $ 35 (0.7) (1.3)
Homeowners 30 28 0.5 -
Other (17) 8 (0.3) (0.4)
-------- --------- --------- ---------
Allstate Protection (31) 71 (0.5) (1.7)
Discontinued Lines and
Coverages 8 60 0.1 (0.9)
-------- --------- --------- ---------
Property-Liability $ (23) $ 131 (0.4) (2.5)
======== ========= ========= =========
Allstate Brand $ (45) $ 34 (0.7) (1.3)
Ivantage 14 37 0.2 (0.4)
-------- --------- --------- ---------
Allstate Protection $ (31) $ 71 (0.5) (1.7)
======== ========= ========= =========
Twelve Months Ended December 31,
---------------------------------------
Effect of Pretax
Reserve Reestimates
Pretax Reserve on the
Reestimates Combined Ratio
------------------- -------------------
($ in millions) Est. 2003 2002 Est. 2003 Change
--------- --------- --------- ---------
Auto $ (221) $ 44 (0.9) (1.1)
Homeowners 13 367 0.1 (1.4)
Other 35 43 0.1 (0.1)
-------- --------- --------- ---------
Allstate Protection (173) 454 (0.7) (2.6)
Discontinued Lines and
Coverages 574 231 2.3 1.3
-------- --------- --------- ---------
Property-Liability $ 401 $ 685 1.6 (1.3)
======== ========= ========= =========
Allstate Brand $ (209) $ 386 (0.8) (2.4)
Ivantage 36 68 0.1 (0.2)
-------- --------- --------- ---------
Allstate Protection $ (173) $ 454 (0.7) (2.6)
======== ========= ========= =========
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND DEPOSITS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
Est. Percent Est. Percent
($ in millions) 2003 2002 Change 2003 2002 Change
------- ------- -------- --------
Life Products
Interest-sensitive
life $ 323 $ 243 32.9 $ 1,090 $ 990 10.1
Traditional 105 108 (2.8) 389 396 (1.8)
Other 177 159 11.3 647 586 10.4
------ ------ ------- -------
605 510 18.6 2,126 1,972 7.8
Annuities
Fixed annuities -
deferred 1,083 1,287 (15.9) 4,834 4,457 8.5
Fixed annuities -
immediate 225 298 (24.5) 842 789 6.7
Variable annuities 596 492 21.1 2,151 2,297 (6.4)
------ ------ ------- -------
1,904 2,077 (8.3) 7,827 7,543 3.8
Institutional
Products
Indexed funding
agreements 50 73 (31.5) 440 348 26.4
Funding agreements
backing medium-
term notes 601 - - 2,268 1,462 55.1
Other - 26 (100.0) 7 65 (89.2)
------ ------ ------- -------
651 99 - 2,715 1,875 44.8
Bank Deposits 143 75 90.7 427 444 (3.8)
------ ------ ------- -------
Total $3,303 $2,761 19.6 $13,095 $11,834 10.7
====== ====== ======= =======
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, December 31,
(in millions, except par value data) 2003 (Est.) 2002
------------ -----------
Assets
Investments
Fixed income securities, at fair value
(amortized cost $82,607 and $72,123) $ 87,741 $ 77,152
Equity securities, at fair value (cost
$4,028 and $3,223) 5,288 3,683
Mortgage loans 6,539 6,092
Short-term 1,815 2,215
Other 1,698 1,508
------------ -----------
Total investments 103,081 90,650
Cash 366 462
Premium installment receivables, net 4,386 4,075
Deferred policy acquisition costs 4,842 4,385
Reinsurance recoverables, net 3,121 2,883
Accrued investment income 1,068 946
Property and equipment, net 1,046 989
Goodwill 929 927
Other assets 1,878 984
Separate Accounts 13,425 11,125
------------ -----------
Total assets $ 134,142 $ 117,426
============ ===========
Liabilities
Reserve for property-liability insurance
claims and claims expense $ 17,714 $ 16,690
Reserve for life-contingent contract
benefits 11,020 10,256
Contractholder funds 47,071 40,751
Unearned premiums 9,187 8,578
Claim payments outstanding 698 739
Other liabilities and accrued expenses 8,283 7,150
Deferred income taxes 1,103 259
Short-term debt 3 279
Long-term debt (1) 5,073 3,961
Separate Accounts 13,425 11,125
------------ -----------
Total liabilities 113,577 99,788
------------ -----------
Mandatorily Redeemable Preferred Securities
of Subsidiary Trust - 200
Shareholders' equity
Preferred stock, $1 par value, 25 million
shares authorized, none issued - -
Common stock, $.01 par value, 2.0 billion
shares authorized and 900 million issued,
704 million and 702 million shares
outstanding 9 9
Additional capital paid-in 2,614 2,599
Retained income 21,641 19,584
Deferred compensation expense (194) (178)
Treasury stock, at cost (196 million and
198 million shares) (6,261) (6,309)
Accumulated other comprehensive income:
Unrealized net capital gains and losses
and net gains and losses on
derivative financial instruments 3,125 2,602
Unrealized foreign currency translation
adjustments (10) (49)
Minimum pension liability adjustment (359) (820)
------------ -----------
Total accumulated other
comprehensive income 2,756 1,733
------------ -----------
Total shareholders' equity 20,565 17,438
------------ -----------
Total liabilities and shareholders'
equity $ 134,142 $ 117,426
============ ===========
(1) The adoption of FIN No. 46R caused long-term debt to increase by
$1.04 billion in 2003. Of the increase, $691 million was
recognized in the fourth quarter in connection with the
consolidation of two investment management entities used to hold
assets on behalf of third party investors. The remaining increase
primarily related to the consolidation of an entity used to
acquire a headquarters office building and up to 38 automotive
collision repair stores, and the deconsolidation of an entity used
to issue mandatorily redeemable preferred securities. Although
consolidation was required under FIN No. 46R for the two
investment management entities, Allstate has no direct legal
ownership of the assets consolidated and no obligation to repay
the related notes whose only recourse is to the assets of the
individual investment management entities. Allstate's maximum loss
exposure related to its investment in the two investment
management entities is the current carrying value of its equity
investment, which totaled $12 million at December 31, 2003.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, December 31,
(in millions) 2003 (Est.) 2002 (1)
------------- -------------
Cash flows from operating activities
Net income $ 2,705 $ 1,134
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and other
non-cash items (3) (62)
Realized capital gains and losses (196) 924
Cumulative effect of change in
accounting principle 15 331
Interest credited to contractholder
funds 1,846 1,764
Changes in:
Policy benefit and other
insurance reserves 1,127 331
Unearned premiums 546 617
Deferred policy acquisition
costs (414) (309)
Premium installment
receivables, net (284) (99)
Reinsurance recoverables, net (227) (190)
Income taxes payable 582 66
Other operating assets and
liabilities (6) (89)
------------- -------------
Net cash provided by
operating activities 5,691 4,418
------------- -------------
Cash flows from investing activities
Proceeds from sales
Fixed income securities 20,298 17,700
Equity securities 2,700 3,892
Investment collections
Fixed income securities 6,652 5,447
Mortgage loans 733 603
Investment purchases
Fixed income securities (35,627) (31,553)
Equity securities (3,351) (3,138)
Mortgage loans (1,175) (927)
Change in short-term investments, net 419 (440)
Change in other investments, net (2) 56 (348)
Purchases of property and equipment,
net (169) (239)
------------- -------------
Net cash used in investing
activities (9,464) (9,003)
------------- -------------
Cash flows from financing activities
Change in short-term debt, net (276) 52
Proceeds from issuance of long-term
debt 410 599
Repayment of long-term debt (332) (338)
Contractholder fund deposits 10,373 9,484
Contractholder fund withdrawals (5,794) (4,036)
Dividends paid (633) (582)
Treasury stock purchases (153) (446)
Other 82 51
------------- -------------
Net cash provided by financing
activities 3,677 4,784
------------- -------------
Net (decrease) increase in cash (96) 199
Cash at beginning of year 462 263
------------- -------------
Cash at end of year $ 366 $ 462
============= =============
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
(2) Change in other investments, net includes $46 million of cash held
by the investment management entities included on the Consolidated
Statements of Financial Position due to the initial adoption of
FIN No. 46R. The adoption of FIN 46R also resulted in an increase
to long- term debt and investment assets. However, since these
changes are non-cash items, they had no impact to the Consolidated
Statements of Cash Flows.
Definitions of Non-GAAP and Operating Measures We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following non-GAAP financial measures. Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited. Operating income is income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , excluding: -- realized capital gains and losses, after-tax, except for periodic settlements and accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. on non-hedge derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. instruments which are reported with realized capital gains and losses but included in operating income, -- amortization of deferred policy acquisition costs ("DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter "), to the extent that it resulted from the recognition of realized capital gains and losses, and -- (loss) gain on disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of operations, after-tax. In the fourth quarter of 2003 it was necessary to revise our reconciliation of operating income to reflect the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. in the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge of the periodic settlements and accruals for non-hedge derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. to realized capital gains and losses. With the adoption of Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). Interpretation No. 46 in the third quarter of 2003, the mandatorily Adv. 1. mandatorily - in a manner that cannot be evaded; "the ministry considers that contributions to such a fund should be met from voluntary donations rather than from rates compulsorily levied." compulsorily, obligatorily redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred securities of a subsidiary trust are deconsolidated, dividends on the preferred securities are no longer reported in the consolidated financial statements and the interest on the related junior debentures is prospectively recognized in interest expense and included in operating income. Net income is the GAAP measure that is most directly comparable to operating income. We use operating income to evaluate our results of operations and as an integral component for incentive compensation. It reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses and (loss) gain on disposition of operations. These items may vary significantly between periods and are generally driven by business decisions and economic developments such as market conditions, the timing of which is unrelated to the insurance underwriting process. Moreover, we reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you periodic settlements on non-hedge derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. into operating income to report them in a manner consistent with the economically ec·o·nom·i·cal adj. 1. Prudent and thrifty in management; not wasteful or extravagant. See Synonyms at sparing. 2. Intended to save money, as by efficient operation or elimination of unnecessary features; economic: hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. investment or product attributes (e.g. net investment income and interest credited to contractholder funds) and thereby appropriately reflect trends in product performance. Therefore, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. valuation technique uses operating income as the denominator denominator the bottom line of a fraction; the base population on which population rates such as birth and death rates are calculated. denominator . Operating income should not be considered as a substitute for net income and does not reflect the overall profitability of our business. The following tables reconcile operating income and net income for the three months and twelve months ended December 31, 2003 and 2002.
For the three months ended December 31,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------ ------------ ------------ --------------
($ in millions,
except per Est. Est. Est. Est.
share data) 2003 2002 2003 2002 2003 2002 2003 2002
----- ------ ----- ------ ----- ------ ------- ------
Operating
income $ 680 $ 490 $ 101 $ 158 $ 752 $ 618 $ 1.06 $ 0.87
Realized capital
gains and
losses 111 (116) (17) (141) 91 (246)
Income tax
benefit
(expense) (39) 42 6 49 (33) 88
----- ------ ----- ------ ----- ------
Realized capital
gains and
losses,
after-tax 72 (74) (11) (92) 58 (158) 0.09 (0.22)
DAC amortization
expense on
realized
capital
gains and
losses,
after-tax -- -- (10) (2) (10) (2) (0.02) --
Reclassification
of periodic
settlements
and accruals
on non-hedge
derivative
instruments,
after-tax -- -- (5) (5) (5) (5) (0.01) (0.01)
(Loss) gain on
disposition of
operations,
after-tax -- 1 (20) (4) (20) (3) (0.03) (0.01)
----- ------ ----- ------ ----- ------ ------- ------
Income before
dividends on
preferred
securities and
cumulative
effect of
change in
accounting
principle,
after-tax 752 417 55 55 775 450 1.09 0.63
Dividends on
preferred
securities of
subsidiary
trust,
after-tax -- -- -- -- -- (3) -- --
Cumulative
effect of
change in
accounting
principle,
after-tax -- -- (17) -- (14) -- (0.01) --
----- ------ ----- ------ ----- ------ ------- ------
Net income
(loss) $ 752 $ 417 $ 38 $ 55 $ 761 $ 447 $ 1.08 $ 0.63
===== ====== ===== ====== ===== ====== ======= ======
For the twelve months ended December 31,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------ ------------ ------------ --------------
($ in millions,
except per Est. Est. Est. Est.
share data) 2003 2002 2003 2002 2003 2002 2003 2002
----- ------ ----- ------ ----- ------ ------- ------
Operating
income $2,327 $1,629 $ 449 $ 556 $2,662 $2,075 $ 3.77 $ 2.92
Realized capital
gains and
losses 288 (496) (85) (432) 196 (924)
Income tax
benefit
(expense) (96) 182 32 145 (62) 326
------ ------ ----- ----- ------- ------
Realized capital
gains and
losses,
after-tax 192 (314) (53) (287) 134 (598) 0.19 (0.84)
DAC amortization
expense on
realized
capital
gains and
losses,
after-tax -- -- (30) (1) (30) (1) (0.05) --
Reclassification
of periodic
settlements
and accruals
on non-hedge
derivative
instruments,
after-tax -- -- (15) (3) (15) (3) (0.02) (0.01)
(Loss) gain on
disposition of
operations,
after-tax 3 6 (29) (4) (26) 2 (0.04) --
------ ------ ----- ----- ------- ------ ------ ------
Income before
dividends on
preferred
securities and
cumulative
effect of
change in
accounting
principle,
after-tax 2,522 1,321 322 261 2,725 1,475 3.85 2.07
Dividends on
preferred
securities of
subsidiary
trust,
after-tax -- -- -- -- (5) (10) -- (0.01)
Cumulative
effect of
change
in accounting
principle,
after-tax (1) (48) (17) (283) (15) (331) (0.02) (0.46)
------ ------ ----- ----- ------- ------ ------ ------
Net income
(loss) $2,521 $1,273 $ 305 $ (22) $ 2,705 $1,134 $ 3.83 $ 1.60
====== ====== ===== ===== ======= ====== ====== ======
In this press release, we provide guidance on operating income per diluted share for 2004 (assuming a level of average expected catastrophe losses used in pricing for the year). A reconciliation of this measure to net income is not accessible on a forward-looking basis because it is not possible to provide a reliable forecast of realized capital gains and losses including periodic settlements and accruals on non-hedge derivative instruments, which can vary substantially from one period to another and may have a significant impact on net income. Because a forecast of realized capital gains and losses is not accessible, neither is a forecast of the effects of DAC amortization on realized capital gains and losses nor income taxes. The other reconciling items between operating income and net income on a forward-looking basis are (loss) gain on disposition of operations, after-tax, which we assume to be zero in 2004, and cumulative effect of changes in accounting principle, for which impacts are currently not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. . Underwriting income (loss) is premiums earned, less claims and claims expense ("losses"), amortization of DAC, operating costs operating costs npl → gastos mpl operacionales and expenses and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and related charges as determined using GAAP. Management uses this measure in its evaluation of results of operations to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. the profitability of our Property-Liability insurance operations separately from investment results. It is also an integral component of incentive compensation. We believe it is useful for investors to evaluate the components of income separately and in the aggregate when reviewing our performance. Net income is the most directly comparable GAAP measure. Underwriting income (loss) should not be considered as a substitute for net income and does not reflect the overall profitability of our business. A reconciliation of Property-Liability Underwriting income to net income is provided in the Segment Results table. Operating income return on equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of the beginning and end of the 12-month period shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. after excluding the after-tax effect of unrealized net capital gains. We use it to supplement our evaluation of net income and return on equity. We believe that this measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period: the after-tax effects of realized and unrealized capital gains and losses and the cumulative effect of change in accounting principle. Return on equity is the most directly comparable GAAP measure. The following table shows the two computations.
For the twelve months
($ in millions) ended December 31,
-------------------------
Est. 2003 2002
------------ -----------
Return on equity
Numerator:
Net income $ 2,705 $ 1,134
============ ===========
Denominator:
Beginning shareholders' equity 17,438 17,196
Ending shareholders' equity 20,565 17,438
Average shareholders' equity $ 19,002 $ 17,317
============ ===========
ROE 14.2 6.5
============ ===========
For the twelve months
($ in millions) ended December 31,
-------------------------
Est. 2003 2002
------------ ----------
Operating income return on equity
Numerator:
Operating income $ 2,662 $ 2,075
============ ==========
Denominator:
Beginning shareholders' equity 17,438 17,196
Unrealized net capital gains 2,602 1,789
------------ ----------
Adjusted beginning shareholders'
equity 14,836 15,407
Ending shareholders' equity 20,565 17,438
Unrealized net capital gains 3,125 2,602
------------ ----------
Adjusted ending shareholders'
equity 17,440 14,836
Average shareholders' equity $ 16,138 $ 15,122
============ ==========
Operating income ROE 16.5 13.7
============ ==========
Operating Measures
We believe that investors' understanding of Allstate's performance is
enhanced by our disclosure of the following operating financial
measures. Our method of calculating these measures may differ from
that used by other companies and therefore comparability may be
limited.
Premiums written is the amount of premiums charged for policies issued
during a fiscal period. Premiums earned is a GAAP measure. Premiums
are considered earned and are included in financial results on a
pro-rata basis over the policy period. The portion of premiums written
applicable to the unexpired terms of the policies is recorded as
unearned premiums on our Consolidated Statements of Financial
Position. The following table presents a reconciliation of premiums
written to premiums earned.
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- ---------------------
($ in millions) Est. Est.
2003 2002 2003 2002
---------- -------- --------- ----------
Premiums written $ 6,199 $ 5,854 $ 25,187 $ 23,917
(Increase) decrease in
Unearned Premiums 88 98 (581) (556)
Other 15 (2) 71 --
---------- -------- --------- ----------
Premiums earned $ 6,302 $ 5,950 $ 24,677 $ 23,361
========== ======== ========= ==========
Premiums and deposits is an operating measure that we use to analyze
production trends for Allstate Financial sales. It includes premiums
on insurance policies and annuities and all deposits and other funds
received from customers on deposit-type products including the net new
deposits of Allstate Bank, which we account for under GAAP as
increases to liabilities rather than as revenue.
The following table illustrates where premiums and deposits are
reflected in the consolidated financial statements.
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- --------------------
($ in millions) Est. Est.
2003 2002 2003 2002
--------- -------- --------- ---------
Life and annuity premiums(1) $ 347 $ 431 $ 1,365 $ 1,371
Deposits to contractholder
funds(2) 2,528 2,103 10,373 9,484
Separate accounts and other 428 227 1,357 979
--------- -------- --------- ---------
Total Premiums and deposits $ 3,303 $ 2,761 $ 13,095 $ 11,834
========= ======== ========= =========
(1) Life and annuity contract Annuity Contract The written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any charges in the amount of est. $247 million and $230 million for the three months ended December 31, 2003 and 2002, respectively, and est. $939 million and $922 million for the twelve months ended December 31, 2003 and 2002, respectively, which are also revenues recognized for GAAP, have been excluded from the table above, but are a component of the Consolidated Statements of Operations line item "Life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. premiums and contract charges." (2) Derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. directly from the Consolidated Statements of Cash Flows. New sales of financial products by Allstate exclusive agencies is an operating measure that we use to quantify Quantify - A performance analysis tool from Pure Software. the current year sales of financial products by the Allstate proprietary distribution channel. New sales of financial products by Allstate exclusive agencies includes annual premiums on new insurance policies, initial premiums and deposits on annuities, net new deposits in the Allstate Bank, sales of other company's mutual funds, and excludes renewal premiums. New sales of financial products by Allstate exclusive agencies for the twelve months ended December 31, 2003 and 2002 totaled est. $1.83 billion and $1.61 billion, respectively. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. about our operating income for 2004. These statements are subject to the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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. Weighted average rate changes and the annual impact of rate changes on premiums written in our Property-Liability business may be lower than projected due to a decrease in PIF. Loss costs in our Property-Liability business, including losses due to catastrophes such as hurricanes and earthquakes Earthquakes See also geology. bathyseism an earthquake occurring at very deep levels of the earth. bradyseism the slow upward and downward motion of the earth’s crust. — bradyseismic, adj. , may exceed management's projections. In addition, claim frequency could be higher than expected. Lower interest rates and equity market returns could increase DAC amortization, reduce contract charges, investment margins and the profitability of the Allstate Financial segment. We undertake no obligation to publicly correct or update any forward-looking statements. This press release contains unaudited financial information. The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. . Widely known through the "You're you're Contraction of you are. you're you are you're be In Good Hands With Allstate(R)" slogan A slogan is a memorable motto or phrase used in a political, commercial, religious and other context as a repetitive expression of an idea or purpose. Slogans vary from the written and the visual to the chanted and the vulgar. , Allstate provides insurance products to more than 16 million households and has approximately 12,900 exclusive agencies 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(R). Encompass ENCOMPASS Enhanced Consequence Management Planning and Support System (DARPA) (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, annuity, retirement, banking and investment products through distribution channels that include Allstate agents, independent agents, worksite, financial institutions and broker-dealers. We post an investor supplement on our web site. You can access it by going to allstate.com and clicking on "Investor Relations Investor relations The process by which the corporation communicates with its investors. ." From there, go to the "Quarterly Investor Info INFO Information INFO Information (logging abbreviation) INFO Inform(ed/ation) INFO Ionic Difluoroamino Oxidizer " button. We will post additional information to the supplement over the next 30 days as it becomes available. MULTIMEDIA AVAILABLE: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4564577 |
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