Allstate Reports 2004 Second Quarter; 75% Increase in Net Income EPS; 73% Increase in Operating Income EPS; Increase of 2004 Guidance.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. -- 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 second quarter of 2004:
Consolidated Highlights(1)
Three Months Ended June 30,
----------------------------
Change
--------------
(in millions, except per share amounts Est.
and ratios) 2004 2003 $ Amt %
------ ------ ----- -------
Consolidated revenues $8,304 $7,899 $405 5.1
Net income 1,034 588 446 75.9
Net income per diluted share 1.47 0.84 0.63 75.0
Operating income(1) 1,036 599 437 73.0
Operating income per diluted share(1) 1.47 0.85 0.62 72.9
Property-Liability combined ratio 86.3 97.1 -- (10.8)
pts
Book value per diluted share 29.55 27.33 2.22 8.1
Operating income return on equity(1) 20.0 15.4 -- 4.6
pts
--Property-Liability premiums written(1) grew 5.0% over the second quarter of 2003, driven largely by an increase in policies in force. Growth in policies in force for the core Allstate brand standard auto and homeowners accelerated to 4.9% and 5.7%, respectively, from the second quarter of 2003 and total Allstate brand policies in force increased 3.3%. Allstate brand standard auto and homeowners new business premiums written increased 29.9% and 31.6%, respectively, and retention for these lines increased by 1.1 pts and 0.9 pts, with premiums written growing 5.7% and 9.2%, 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 to $888 million from $181 million in the second quarter of 2003 due to higher premiums earned, continued favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. auto and homeowners loss frequencies, lower catastrophes and net favorable prior year reserve re-estimates of $77 million. The combined ratio decreased 10.8 points to 86.3 in the second quarter of 2004. --Catastrophe losses in the second quarter decreased to $248 million compared to $566 million in the second quarter of 2003. The impact of catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses on the combined ratio was 3.8 pts as compared to 9.2 pts in the second quarter of 2003. --Allstate Financial had premiums and deposits(1) of $4.28 billion, a 30.0% increase over the second quarter of 2003. Its 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. (1) was $126 million compared to $131 million in the second quarter of 2003. --Allstate's annual operating income 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 remainder of the year) is in the range of $5.40 to $5.65, compared to the range previously announced in the first quarter of $4.80 to $5.10. (1) Measures used in this release that are not based on generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("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. "We have turned in another truly outstanding quarter," 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. • • . "Overall our accelerating unit growth and impressive combined ratio give us confidence that we are firmly on track with the execution of our business strategy. "The company's book value per diluted share, an important measure and an indication of the value created for shareholders, finished the quarter at $29.55, up 8.1% as compared to the end of the second quarter of 2003. When we exclude the impact of unrealized net capital gains on fixed income securities(1), the book value per share grew 20% from the second quarter of 2003 and 7.6% from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2003. Our operating return on equity was an outstanding 20% in the quarter. "In our Property-Liability business, elements of our strategy include using our sophisticated 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 approach to find an attractive price for customers offering high lifetime value. The strategy also calls for strengthening our partnership with the Allstate agencies and our distribution system, delivering excellent customer service throughout all stages of the customer experience, and accelerating our marketing presence in those areas where we are looking to grow. All the evidence demonstrates that we are delivering on our strategy. "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. ) grew 4.9% and 5.7% respectively, as compared to the second quarter of 2003 and premiums written grew 5.7% and 9.2%, respectively, in an atmosphere of moderating pricing actions throughout the industry. This growth came less from rate actions than has been the case in the recent past, and more from unit growth. "We remain highly competitive for the market segments that we are most interested in pursuing and our current pricing indications show our rate levels should continue to produce at or above target returns in substantially all of our markets. We remain disciplined about closely monitoring loss cost trends and reacting as needed as needed prn. See prn order. . Our strategic risk management (SRM (1) (Storage Resource Management) The management of the storage resources in an organization in order to avoid duplication of files and to determine space utilization across all servers. ) underwriting and pricing process has played a major role in creating this favorable position Noun 1. favorable position - the quality of being at a competitive advantage favourable position, superiority advantage, vantage - the quality of having a superior or more favorable position; "the experience gave him the advantage over me" by contributing to an improvement in claim frequencies. SRM is working just as we expected and generating the results we anticipated allowing us to attract and retain more customers using segmented pricing -- an ideal combination and a significant advantage in today's marketplace. "We are very encouraged that, in addition to the continued strength in securing new business, our retention ratio for Allstate brand standard auto improved 1.1 points to 91% in the quarter, a level in the range of our historical highs. The retention rates for our homeowners business also increased almost a full point in the quarter to 88%. This reflects the efforts of our distribution and claims networks to make sure that Allstate customers receive among the very best service in the insurance business. This combination of gaining new customers and earning the loyalty of our existing ones shows we are winning in the marketplace, and bodes well for continued acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. in our growth. "In the quarter, we incurred lower catastrophe losses and saw a continuation continuation - continuation passing style of favorable claim frequencies for auto and homeowners. The favorable reserve re-estimates of $395 million for Allstate Protection reflect lower actual claim frequency and severity trends than anticipated in previous estimates. A $318 million unfavorable reserve re-estimate occurred for Discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: Lines and Coverages -- primarily related to a $216 million re-estimate of asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. IBNR IBNR Incurred But Not Reported IBNR Interesting But Not Relevant reserves," continued Liddy. "At Allstate Financial, we continue to make progress on our strategic direction. Our strategy is to be focused on operational excellence while emphasizing product manufacturing for targeted distribution partners. New business continues to be strong as premiums and deposits increased by $988 million or 30% in the quarter compared to the prior year second quarter. It was another strong quarter for our institutional medium-term note Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. program as we issued $1.5 billion in funding agreements Funding Agreement Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a predetermined period of time. Notes: Funding agreements are marketed to mutual fund companies and municipal reinvestments. in the quarter, including the $800 million inaugural offering from our newly registered core notes program. New sales of financial products by Allstate exclusive agencies increased 23% to $518 million compared to the second quarter of 2003. Operating income for Allstate Financial was down slightly in the quarter," said Liddy "principally because of 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 loss experience on certain credit insurance policies. As broad economic conditions continue to improve and as interest rates gradually grad·u·al adj. Advancing or progressing by regular or continuous degrees: gradual erosion; a gradual slope. n. Roman Catholic Church 1. rise, we anticipate a favorable overall impact on Allstate Financial's operating income in the second half of 2004. "In February February: see month. of this year, we announced a $1 billion increase in our 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, which brought the total authorization The right or permission to use a system resource; the process of granting access. See access control. up to $1.5 billion for completion in 2005. In the first half of 2004, we have repurchased $567 million in shares of Allstate stock, of which $400 million or 8.9 million shares were acquired in the second quarter. "Lastly, we are increasing our operating income per diluted share guidance for 2004 to a range of $5.40 to $5.65 (assuming the level of average expected catastrophe losses used in pricing for the remainder of the year)."
Consolidated Highlights
Discussion of
Results for the
Three Months Ended Six Months Ended Three Months Ended
June 30, June 30, June 30, 2004
------------------ ---------------- ------------------
(In millions,
except per
share and Est. Est.
return amounts) 2004 2003 2004 2003
--------- -------- ------- --------
Consolidated $8,304 $7,899 $16,615 $15,760 Higher premiums
revenues earned in
Property-
Liability, higher
net investment
income and higher
realized capital
gains.
Operating income 1,036 599 2,056 1,272 An increase in
operating income
of $440 for
Property-
Liability.
Realized capital 23 (3) 143 3 See the Components
gains and of realized
losses, capital gains and
after-tax losses (pretax)
table.
(Loss) / Gain on
disposition of
operations,
after-tax (15) 2 (17) 2
Cumulative
effect of
change in
accounting
principle,
after-tax -- -- (175) --
Net income 1,034 588 1,983 1,253 Higher operating
income for
Property-
Liability.
Net income per
share (diluted) 1.47 0.84 2.81 1.78
Operating income 1.47 0.85 2.91 1.80 Compared to First
per share Call mean
(diluted) estimate of
$1.15, with a
range of $1.03 to
$1.26.
Net shares 695.1 703.9 695.1 703.9 During the second
outstanding quarter of 2004,
Allstate
purchased 8.9
million shares of
its stock for
$399.55 million,
leaving $783
million remaining
in the current
$1.5 billion
program. Net
shares
outstanding at
December 31, 2003
were 704.0.
Weighted average
shares
outstanding
(diluted) 704.5 706.6 706.8 705.9
Return on equity 17.2 10.7 17.2 10.7 See the return on
equity
calculation in
the Definitions
of Non-GAAP and
Operating
Measures section
of this document.
Operating income 20.0 15.4 20.0 15.4 See the return on
return on equity
equity calculation in
the Definitions
of Non-GAAP and
Operating
Measures section
of this document.
Book value per 29.55 27.33 29.55 27.33 At June 30, 2004
diluted share and 2003, net
unrealized gains
on fixed income
securities,
after-tax,
totaling $1,271
and $2,975,
respectively,
represented $1.81
and $4.21,
respectively, of
book value per
diluted share.
--Book value per diluted share increased 8.1% compared to June June: see month. 30, 2003 and 1.8% compared to December December: see month. 31, 2003. Book value per diluted share excluding the net impact of unrealized net capital gains on fixed income securities increased 20.0% to $27.74 at June 30, 2004 compared to June 30, 2003, and 7.6% compared to December 31, 2003.
Property-Liability Highlights
Discussion of
Results for the
Three Months Ended Six Months Ended Three Months Ended
June 30, June 30, June 30, 2004
------------------ ---------------- ------------------
($ in millions, Est. Est.
except ratios) 2004 2003 2004 2003
--------- -------- ------- --------
Property- $6,741 $6,422 $13,074 $12,359 See the Property-
Liability Liability
premiums premiums written
written by market segment
table.
Property- 7,012 6,594 13,998 13,038 Premiums earned
Liability increased $314 or
revenues 5.1%.
Underwriting 888 181 1,753 594 Higher premiums
income earned, continued
favorable auto
and homeowners
loss frequencies,
lower
catastrophes and
net favorable
prior year
reserve re-
estimates. See
the Allstate
Protection market
segment analysis
table.
Net investment 443 417 867 825 Higher portfolio
income balances due to
positive cash
flows from
operations,
partially offset
by lower yields.
Operating income 936 496 1,848 1,114 Increase of $457
in underwriting
income, after-
tax.
Realized capital 71 23 203 50 See the Components
gains and of realized
losses, capital gains and
after-tax losses (pretax)
table.
Net income 1,007 521 2,051 1,166 Higher operating
income and
realized capital
gains.
Catastrophe
losses 248 566 350 699
Ratios:
Property-
Liability
combined ratio 86.3 97.1 86.3 95.1
Effect of
Discontinued
Lines and
Coverages 5.0 0.9 2.5 0.7
Allstate
Protection
combined ratio 81.3 96.2 83.8 94.4
Effect of
catastrophe
losses 3.8 9.2 2.7 5.8
--Allstate brand standard auto and homeowners policies in force (PIF) increased 4.9% and 5.7%, respectively, from June 30, 2003 levels compared to increases of 3.6% and 4.6%, respectively, in the first quarter of 2004 over the first quarter of 2003. Both standard auto and homeowners experienced growth in most states. 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 . --In addition to higher new business premiums written during the second quarter of 2004 compared to the prior year second quarter, the retention ratio for Allstate brand standard auto and homeowners increased to 91.0 and 88.2, respectively, in the second quarter of 2004. These results exclude impacts from Allstate Canada. --Prior year net favorable reserve re-estimates totaled $77 million, resulting from a $395 million favorable re-estimate for Allstate Protection, partially offset by a $318 million unfavorable re-estimate for Discontinued Lines and Coverages. The Allstate Protection net reserve re-estimates reflect lower actual claim severity and frequency trends than anticipated in previous estimates. See the Discontinued Lines and Coverages section of this document for more details on the reserve re-estimate in that segment.
Allstate Financial Highlights
Discussion of
Results for the
Three Months Ended Six Months Ended Three Months Ended
June 30, June 30, June 30, 2004
------------------ ---------------- ------------------
($ in millions) Est. Est.
2004 2003 2004 2003
--------- -------- ------- --------
Premiums and $4,284 $3,296 $7,739 $5,792 Higher sales of
deposits funding
agreements, fixed
annuities and
life products,
partially offset
by lower variable
annuity sales.
See the Allstate
Financial
premiums and
deposits table.
Allstate 1,276 1,291 2,570 2,693 Higher net
Financial investment income
revenues and contract
charges, offset
by lower direct
response
premiums, and
higher realized
capital losses.
Operating income 126 131 258 213 Higher gross
margin offset by
the disposition
of the majority
of our direct
response
distribution
business and
increased
amortization of
DAC and DSI.
Realized capital (43) (25) (57) (46) See the Components
gains and of realized
losses, capital gains and
after-tax losses (pretax)
table.
Loss on (15) -- (17) -- Tax charges
disposition of related to
operations, expected sale of
after-tax a company and
losses on the
expected
disposition of
direct response
long-term care,
and the
disposition of
the majority of
Allstate
Financial's
direct response
distribution
business.
Cumulative -- -- (175) --
effect of
change in
accounting
principle,
after-tax
Net income 58 98 (15) 148 Higher realized
(loss) capital losses,
loss related to
the disposition
of operations and
lower operating
income.
--Total investments for the second quarter of 2004 increased 9.2% over the prior year second quarter due to equity market improvements and strong sales. This increase was negatively impacted by a decline in the net unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on fixed income securities from $4.47 billion at June 30, 2003 to $2.06 billion at June 30, 2004. --The weighted average interest crediting rate on 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. and interest-sensitive life products in force, excluding market value adjusted annuities, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 45 basis points more than the underlying 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. guaranteed rates on these products for the quarter ended June 30, 2004. --Operating income of the Allstate Financial direct response distribution business was $3 million lower in the second quarter of 2004 than the second quarter of 2003 due to the 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 the majority of that business. This included reductions in total revenues of $58 million, operating costs operating costs npl → gastos mpl operacionales and expenses of $15 million and amortization of deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) of $9 million. The revenue decrease also contributed to a decline in the benefit margin related to the disposition of this business of $29 million in the second quarter of 2004 when compared to the second quarter of 2003. --In the second quarter of 2004, Allstate Financial incurred a $10 million charge, after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , related to loss experience on certain credit insurance policies and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. for the consolidation of two servicing centers.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ----------------
($ in millions,
except per Est. Percent Est. Percent
share data) 2004 2003(1) Change 2004 2003(1) Change
------ ------- -------- ------- ------- --------
Revenues
Property-
liability
insurance
premiums $ 6,460 $ 6,146 5.1 $12,831 $12,145 5.6
Life and annuity
premiums and
contract charges 504 533 (5.4) 1,000 1,172 (14.7)
Net investment
income 1,299 1,229 5.7 2,573 2,451 5.0
Realized capital
gains and losses 41 (9) - 211 (8) -
------ ------- ------- -------
Total revenues 8,304 7,899 5.1 16,615 15,760 5.4
------ ------- ------- -------
Costs and expenses
Property-
liability
insurance
claims and
claims expense 4,021 4,527 (11.2) 8,007 8,678 (7.7)
Life and annuity
contract benefits 378 426 (11.3) 773 956 (19.1)
Interest credited
to contractholder
funds 480 460 4.3 950 913 4.1
Amortization of
deferred policy
acquisition
costs 1,072 961 11.6 2,127 1,974 7.8
Operating costs
and expenses 770 728 5.8 1,503 1,481 1.5
Restructuring
and related
charges 16 14 14.3 27 37 (27.0)
Interest expense 73 67 9.0 147 134 9.7
------- ------- ------- -------
Total costs
and expenses 6,810 7,183 (5.2) 13,534 14,173 (4.5)
------- ------- ------- -------
(Loss) gain on
disposition of
operations (8) 3 - (11) 3 -
Income from
operations
before income
tax expense,
dividends on
preferred
securities and
cumulative
effect of change
in accounting
principle,
after-tax 1,486 719 106.7 3,070 1,590 93.1
Income tax
expense 452 129 - 912 332 174.7
------- ------- ------- -------
Income before
dividends on
preferred
securities and
cumulative
effect of change
in accounting
principle,
after-tax 1,034 590 75.3 2,158 1,258 71.5
Dividends on
preferred
securities
of subsidiary
trust - (2) 100.0 - (5) 100.0
Cumulative
effect of change
in accounting
principle,
after-tax - - - (175) - -
------- ------- ------- -------
Net income $ 1,034 $ 588 75.9 $ 1,983 $ 1,253 58.3
======= ======= ======= =======
Net income per
share - Basic $ 1.47 $ 0.84 $ 2.82 $ 1.78
======= ======= ======= =======
Weighted average
shares - Basic 700.0 704.0 702.3 703.7
======= ======= ======= =======
Net income per
share -
Diluted $ 1.47 $ 0.84 $ 2.81 $ 1.78
======= ======= ======= =======
Weighted average
shares -
Diluted 704.5 706.6 706.8 705.9
======= ======= ======= =======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
($ in millions,
except per share Est. Percent Est. Percent
data) 2004 2003(1) Change 2004 2003(1) Change
------ ------- -------- ------ ------- --------
Contribution to
income
Operating income
before the
impact of
restructuring
and related
charges $1,047 $ 608 72.2 $2,074 $1,296 60.0
Restructuring and
related charges,
after-tax 11 9 22.2 18 24 (25.0)
------ ------- ------ -------
Operating income 1,036 599 73.0 2,056 1,272 61.6
Realized capital
gains and losses,
after-tax 23 (3) - 143 3 -
DAC and DSI
amortization
relating to
realized capital
gains and losses,
after-tax (2) (3) (7) 57.1 (13) (16) 18.8
Reclassification
of periodic
settlements and
accruals on non-hedge
derivative
instruments,
after-tax (7) (1) - (11) (3) -
(Loss) gain on
disposition of
operations,
after-tax (15) 2 - (17) 2 -
Dividends on
preferred
securities of
subsidiary trust - (2) 100.0 - (5) 100.0
Cumulative effect
of change in
accounting
principle,
after-tax - - - (175) - -
------ ------ ------ ------
Net income $1,034 $ 588 75.9 $1,983 $1,253 58.3
====== ====== ====== ======
Income per share (Diluted)
Operating income
before the impact
of restructuring
and related
charges $ 1.48 $ 0.85 74.1 $ 2.93 $ 1.83 60.1
Restructuring and
related charges,
after-tax 0.01 - - 0.02 0.03 (33.3)
------ ------- ------ -------
Operating income 1.47 0.85 72.9 2.91 1.80 61.7
Realized capital
gains and losses,
after-tax 0.03 - - 0.20 - -
DAC and DSI
amortization
relating to
realized capital
gains and losses,
after-tax (2) (0.01) (0.01) - (0.02) (0.02) -
Reclassification
of periodic
settlements
and accruals on
non-hedge
derivative
instruments,
after-tax - - - (0.01) - -
Loss on
disposition of
operations,
after-tax (0.02) - - (0.02) - -
Cumulative effect
of change in
accounting
principle,
after-tax - - - (0.25) - -
------ ------ ------ -------
Net income $ 1.47 $ 0.84 75.0 $ 2.81 $ 1.78 57.9
====== ====== ====== ======
Book value per
share - Diluted $ 29.55 $ 27.33 8.1 $ 29.55 $ 27.33 8.1
====== ====== ====== ======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
(2) Includes amortization expense on deferred policy acquisition
costs ("DAC") and deferred sales inducements ("DSI") relating to
realized capital gains and losses.
THE ALLSTATE CORPORATION
COMPONENTS OF REALIZED CAPITAL GAINS AND LOSSES (PRETAX)
Three Months Ended June 30, 2004 (Est.)
--------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
--------- ---------- --------- -------
Valuation of derivative
instruments $ 8 $ (10) $ - $ (2)
Settlements of derivative
instruments (4) 8 - 4
Dispositions 113 (48)(2) (6) 59
Investment write-downs (8) (11) (1) (20)
--------- ---------- --------- -------
Total $ 109 $ (61) $ (7) $ 41
========= ========== ========= =======
Six Months Ended June 30, 2004 (Est.)
--------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
--------- ---------- --------- -------
Valuation of derivative
instruments $ (3) $ (26) $ (1) $ (30)
Settlements of derivative
instruments (15) - (1) (16)
Dispositions 333 (12) (2) 319
Investment write-downs (15) (46) (1) (62)
--------- ---------- --------- -------
Total $ 300 $ (84) $ (5) $ 211
========= ========== ========= =======
Three Months Ended June 30, 2003 (1)
--------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
--------- ---------- --------- -------
Valuation of derivative
instruments $ 11 $ (19) $ - $ (8)
Settlements of derivative
instruments - - - -
Dispositions 68 41 (1) 108
Investment write-downs (48) (61) - (109)
--------- ---------- --------- -------
Total $ 31 $ (39) $ (1) $ (9)
========= ========== ========= =======
Six Months Ended June 30, 2003 (1)
--------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
--------- ---------- --------- -------
Valuation of derivative
instruments $ 5 $ (25) $ - $ (20)
Settlements of derivative
instruments 8 6 - 14
Dispositions 128 64 (1) 191
Investment write-downs (73) (120) - (193)
--------- ---------- --------- -------
Total $ 68 $ (75) $ (1) $ (8)
========= ========== ========= =======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
(2) Proceeds from dispositions of investments were reinvested in
higher yielding securities.
THE ALLSTATE CORPORATION
SEGMENT RESULTS
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
($ in millions) Est. Est.
2004 2003(1) 2004 2003(1)
------- ------- ------- -------
Property-Liability
Premiums written $ 6,741 $ 6,422 $13,074 $12,359
======= ======= ======= =======
Premiums earned $ 6,460 $ 6,146 $12,831 $12,145
Claims and claims expense 4,021 4,527 8,007 8,678
Amortization of deferred policy
acquisition costs 949 858 1,873 1,685
Operating costs and expenses 590 566 1,175 1,151
Restructuring and related charges 12 14 23 37
------- ------- ------- -------
Underwriting income 888 181 1,753 594
------- ------- ------- -------
Net investment income 443 417 867 825
Income tax expense on operations 395 102 772 305
------- ------- ------- -------
Operating income 936 496 1,848 1,114
Realized capital gains and
losses, after-tax 71 23 203 50
Gain on disposition of
operations, after-tax - 2 - 2
------- ------- ------- -------
Net income $ 1,007 $ 521 $ 2,051 $ 1,166
======= ======= ======= =======
Catastrophe losses $ 248 $ 566 $ 350 $ 699
======= ======= ======= =======
Operating ratios
Claims and claims expense
ratio 62.3 73.7 62.4 71.4
Expense ratio 24.0 23.4 23.9 23.7
------- ------- ------- -------
Combined ratio 86.3 97.1 86.3 95.1
======= ======= ======= =======
Effect of catastrophe losses
on combined ratio 3.8 9.2 2.7 5.8
======= ======= ======= =======
Effect of restructuring and
related charges on combined
ratio 0.2 0.2 0.2 0.3
======= ======= ======= =======
Effect of Discontinued Lines
and Coverages on combined
ratio 5.0 0.9 2.5 0.7
======= ======= ======= =======
Allstate Financial
Premiums and deposits $ 4,284 $ 3,296 $ 7,739 $ 5,792
======= ======= ======= =======
Investments including Separate
Accounts assets $80,734 $73,336 $80,734 $73,336
======= ======= ======= =======
Premiums and contract charges $ 504 $ 533 $ 1,000 $ 1,172
Net investment income 833 797 1,654 1,596
Periodic settlements and accruals
on non-hedge derivative
instruments 12 2 18 5
Contract benefits 378 426 773 956
Interest credited to
contractholder funds 478 460 947 913
Amortization of deferred policy
acquisition costs 120 92 237 264
Operating costs and expenses 177 161 322 329
Restructuring and related charges 4 - 4 -
Income tax expense on operations 66 62 131 98
------- ------- ------- -------
Operating income 126 131 258 213
Realized capital gains and
losses, after-tax (43) (25) (57) (46)
DAC and DSI amortization relating
to realized capital gains and
losses, after-tax (2) (3) (7) (13) (16)
Reclassification of periodic
settlements and accruals on non-
hedge derivative instruments,
after-tax (7) (1) (11) (3)
Loss on disposition of
operations, after-tax (15) - (17) -
Cumulative effect of change in
accounting principle, after-tax - - (175) -
------- ------- ------- -------
Net income (loss) $ 58 $ 98 $ (15) $ 148
======= ======= ======= =======
Corporate and Other
Net investment income $ 23 $ 15 $ 52 $ 30
Operating costs and expenses 76 68 153 135
Income tax benefit on operations (27) (25) (51) (50)
------- ------- ------- -------
Operating loss (26) (28) (50) (55)
Realized capital gains and
losses, after-tax (5) (1) (3) (1)
Dividends on preferred securities
of subsidiary trust - (2) - (5)
------- ------- ------- -------
Net loss $ (31) $ (31) $ (53) $ (61)
======= ======= ======= =======
Consolidated net income $ 1,034 $ 588 $ 1,983 $ 1,253
======= ======= ======= =======
(1) To conform to current period presentations, certain prior period
balances have been reclassified.
(2) Includes amortization expense on deferred policy acquisition
costs ("DAC") and deferred sales inducements ("DSI") relating to
realized capital gains and losses.
THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- ----------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
------ ------ ------- ------- ------- -------
Consolidated
Underwriting Summary
Allstate
Protection $ 1,207 $ 234 - $ 2,077 $ 685 -
Discontinued Lines
and Coverages (319) (53) - (324) (91) -
------- ------- ------- -------
Underwriting
income $ 888 $ 181 - $ 1,753 $ 594 195.1
======= ======= ======= =======
Allstate Protection
Underwriting Summary
Premiums written $ 6,740 $ 6,415 5.1 $13,072 $12,351 5.8
======= ======= ======= =======
Premiums earned $ 6,458 $ 6,139 5.2 $12,828 $12,136 5.7
Claims and claims
expense 3,703 4,469 (17.1) 7,685 8,582 (10.5)
Amortization of
deferred policy
acquisition costs 948 858 10.5 1,872 1,685 11.1
Other costs and
expenses 588 564 4.3 1,171 1,147 2.1
Restructuring and
related charges 12 14 (14.3) 23 37 (37.8)
------- ------- ------- -------
Underwriting
income $ 1,207 $ 234 - $ 2,077 $ 685 -
======= ======= ======= =======
Catastrophe losses $ 248 $ 566 (56.2) $ 350 $ 699 (49.9)
======= ======= ======== =======
Operating ratios
Claims and claims
expense ratio 57.3 72.8 59.9 70.7
Expense ratio 24.0 23.4 23.9 23.7
------ ------ ------- -------
Combined ratio 81.3 96.2 83.8 94.4
====== ====== ======= =======
Effect of catastrophe
losses on combined
ratio 3.8 9.2 2.7 5.8
====== ====== ======= =======
Effect of
restructuring and
related charges on
combined ratio 0.2 0.2 0.2 0.3
====== ====== ======= =======
Discontinued Lines
and Coverages
Underwriting Summary
Premiums written $ 1 $ 7 (85.7) $ 2 $ 8 (75.0)
====== ====== ====== ======
Premiums earned $ 2 $ 7 (71.4) $ 3 $ 9 (66.7)
Claims and claims
expense 318 58 - 322 96 -
Other costs and
expenses 3 2 50.0 5 4 25.0
------ ------ ------- -------
Underwriting
loss $ (319) $ (53) - $ (324) $ (91) -
====== ====== ======= =======
Effect of
Discontinued Lines
and Coverages
on the Property-
Liability
combined ratio 5.0 0.9 2.5 0.7
====== ====== ======= =======
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- ---------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
------ ------ ------- ------- ------- -------
Allstate Brand
Standard auto $ 3,548 $ 3,357 5.7 $ 7,155 $ 6,701 6.8
Non-standard auto 454 498 (8.8) 927 1,029 (9.9)
------ ------ ------- -------
Auto 4,002 3,855 3.8 8,082 7,730 4.6
Involuntary auto 78 69 13.0 138 119 16.0
Commercial lines 243 223 9.0 472 429 10.0
Homeowners 1,491 1,365 9.2 2,652 2,407 10.2
Other personal
lines 374 357 4.8 698 655 6.6
------ ------ ------- -------
6,188 5,869 5.4 12,042 11,340 6.2
Ivantage
Standard auto 325 325 - 605 610 (0.8)
Non-standard auto 39 45 (13.3) 82 86 (4.7)
------ ------ ------- -------
Auto 364 370 (1.6) 687 696 (1.3)
Involuntary auto 11 11 - 23 20 15.0
Homeowners 147 138 6.5 266 248 7.3
Other personal
lines 30 27 11.1 54 47 14.9
------ ------ ------- -------
552 546 1.1 1,030 1,011 1.9
------ ------ ------- -------
Allstate Protection 6,740 6,415 5.1 13,072 12,351 5.8
Discontinued Lines
and Coverages 1 7 (85.7) 2 8 (75.0)
------ ------ ------- -------
Property-Liability
(1) $ 6,741 $ 6,422 5.0 $13,074 $12,359 5.8
====== ====== ======= =======
Allstate Protection
Standard auto $ 3,873 $ 3,682 5.2 $ 7,760 $ 7,311 6.1
Non-standard auto 493 543 (9.2) 1,009 1,115 (9.5)
------ ------ ------- -------
Auto 4,366 4,225 3.3 8,769 8,426 4.1
Involuntary auto 89 80 11.3 161 139 15.8
Commercial lines 243 223 9.0 472 429 10.0
Homeowners 1,638 1,503 9.0 2,918 2,655 9.9
Other personal
lines 404 384 5.2 752 702 7.1
------ ------ ------- -------
$ 6,740 $ 6,415 5.1 $13,072 $12,351 5.8
====== ====== ======= =======
(1) For the three months ended June 30, 2004, growth of
Property-Liability premiums written was negatively impacted by
0.5% due to accruals for Texas rate refunds and reinsurance
transactions in the current and prior year. In addition, growth of
Property-Liability premiums earned was negatively impacted by 0.6%
for these same reasons.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY NET RATE CHANGES APPROVED (1)
Three Months Ended June 30, 2004
----------------------------------------
Annual Impact
of Rate
Changes on
Weighted State Specific
Number of Average Rate Premiums
States Change (%) Written (%)
--------- ------------- --------------
Allstate Brand
Standard auto 8 0.3 2.4
Non-standard auto 1 0.2 1.0
Homeowners 2 - (1.7)
Ivantage
Standard auto (Encompass) 5 0.7 3.8
Non-standard auto
(Deerbrook) - - -
Homeowners (Encompass) 7 2.7 9.9
Six Months Ended June 30, 2004
----------------------------------------
Annual Impact
of Rate
Changes on
Weighted State Specific
Number of Average Rate Premiums
States Change (%) Written (%)
--------- ------------- --------------
Allstate Brand
Standard auto 13 0.3 2.0
Non-standard auto 3 1.4 4.6
Homeowners 5 0.1 1.2
Ivantage
Standard auto (Encompass) 13 1.4 3.5
Non-standard auto
(Deerbrook) 6 1.5 4.1
Homeowners (Encompass) 15 4.1 8.6
(1) Rate increases that are indicated based on a loss trend analysis
to achieve a targeted return, will continue to be pursued in all
locations and for all products.
THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS
Three Months Ended June 30,
----------------------------------------------------
($ in millions) Est. Est. Est. Est.
2004 2003 2004 2003 2004 2003 2004 2003
------- ------- ----- ----- ------ ----- ----- -----
Loss Ratio
Excluding the
Effect of
Catastrophe Expense
Premiums Earned Loss Ratio Losses Ratio
--------------- ----------- ------------ -----------
Allstate Brand
Standard
auto $ 3,547 $ 3,328 60.6 74.1 59.0 69.7 24.1 23.6
Non-
standard
auto 466 534 52.4 71.9 51.3 70.0 19.9 19.5
------- -------
Auto 4,013 3,862 59.7 73.8 58.1 69.7 23.6 23.0
Homeowners 1,319 1,207 47.0 68.8 35.9 42.3 21.6 21.3
Other (1) 619 579 59.6 71.7 56.9 62.5 27.0 25.4
------- -------
Total
Allstate
brand 5,951 5,648 56.9 72.5 53.0 63.2 23.5 22.9
Ivantage
Standard
auto 300 299 54.3 73.9 52.7 72.2 29.3 29.4
Non-
standard
auto 42 40 76.2 82.5 76.2 82.5 23.8 30.0
------- -------
Auto 342 339 57.0 74.9 55.6 73.5 28.7 29.5
Homeowners 130 122 69.2 85.2 58.5 59.8 30.0 31.2
Other (1) 35 30 97.2 53.3 94.3 46.7 31.4 20.0
------- -------
Total
Ivantage 507 491 62.9 76.2 59.0 68.4 29.2 29.3
------- -------
Allstate
Protection $ 6,458 $ 6,139 57.3 72.8 53.5 63.6 24.0 23.4
======= =======
Six Months Ended June 30,
----------------------------------------------------
($ in millions) Est. Est. Est. Est.
2004 2003 2004 2003 2004 2003 2004 2003
------- ------- ----- ----- ------ ----- ----- -----
Loss Ratio
Excluding
the Effect of
Catastrophe Expense
Premiums Earned Loss Ratio Losses Ratio
--------------- ----------- ------------ -----------
Allstate Brand
Standard
auto $ 7,033 $ 6,568 63.7 72.8 63.1 70.6 23.8 23.5
Non-
standard
auto 940 1,082 57.4 73.6 56.8 72.6 19.8 19.5
------- -------
Auto 7,973 7,650 63.0 72.9 62.3 70.9 23.3 23.0
Homeowners 2,619 2,381 47.8 62.8 38.6 44.9 22.1 22.2
Other (1) 1,223 1,135 61.3 69.9 58.9 64.0 26.9 25.9
------- -------
Total
Allstate
brand 11,815 11,166 59.4 70.5 56.7 64.7 23.5 23.1
Ivantage
Standard
auto 600 595 61.5 73.8 60.7 72.9 29.3 29.9
Non-
standard
auto 85 76 77.6 82.9 77.6 82.9 25.9 30.3
------- -------
Auto 685 671 63.5 74.8 62.8 74.1 28.9 30.0
Homeowners 258 243 63.6 74.9 55.0 57.6 30.2 31.3
Other (1) 70 56 91.4 53.6 88.6 48.2 30.0 23.2
------- -------
Total
Ivantage 1,013 970 65.5 73.6 62.6 68.5 29.3 29.9
------- -------
Allstate
Protection $12,828 $12,136 59.9 70.7 57.2 64.9 23.9 23.7
======= =======
(1) Other includes involuntary auto, commercial lines and other
personal lines.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
EFFECT OF PRETAX PRIOR YEAR RESERVE RE-ESTIMATES ON THE COMBINED RATIO
Three Months Ended June 30,
--------------------------------------
Effect of Pretax
Reserve
Re-estimates
Pretax on the
Reserve Re-estimates Combined Ratio
------------------- -----------------
Est. Est.
($ in millions) 2004 2003 2004 2003
--------- -------- -------- --------
Auto $ (310) $ (6) (4.8) (0.1)
Homeowners (105) 1 (1.6) -
Other 20 (4) 0.3 -
--------- -------- -------- --------
Allstate Protection (395) (9) (6.1) (0.1)
Discontinued Lines and
Coverages 318 57 4.9 0.9
--------- -------- -------- --------
Property-Liability $ (77) $ 48 (1.2) 0.8
========= ======== ======== ========
Allstate Brand $ (397) $ (27) (6.1) (0.4)
Ivantage 2 18 - 0.3
--------- -------- -------- --------
Allstate Protection $ (395) $ (9) (6.1) (0.1)
========= ======== ======== ========
Six Months Ended June 30,
--------------------------------------
Effect of Pretax
Reserve
Re-estimates
Pretax on the
Reserve Re-estimates Combined Ratio
------------------- -----------------
Est. Est.
($ in millions) 2004 2003 2004 2003
--------- -------- -------- --------
Auto $ (357) $ (38) (2.8) (0.3)
Homeowners (107) 15 (0.8) 0.1
Other 17 21 0.1 0.2
--------- -------- -------- --------
Allstate Protection (447) (2) (3.5) -
Discontinued Lines and
Coverages 322 95 2.5 0.8
--------- -------- -------- --------
Property-Liability $ (125) $ 93 (1.0) 0.8
========= ======== ======== ========
Allstate Brand $ (449) $ (26) (3.5) (0.2)
Ivantage 2 24 - 0.2
--------- -------- -------- --------
Allstate Protection $ (447) $ (2) (3.5) -
========= ======== ======== ========
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND DEPOSITS
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- --------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
------ ------ ------- ------ ------ -------
Life Products
Interest-sensitive
life $ 331 $ 252 31.3 $ 671 $ 495 35.6
Traditional 84 92 (8.7) 156 179 (12.8)
Other 143 152 (5.9) 256 304 (15.8)
------ ------ ------ ------
558 496 12.5 1,083 978 10.7
Annuities
Fixed annuities -
deferred 1,518 1,354 12.1 2,602 2,280 14.1
Fixed annuities -
immediate 182 178 2.2 388 443 (12.4)
Variable annuities 439 545 (19.4) 890 934 (4.7)
------ ------ ------ ------
2,139 2,077 3.0 3,880 3,657 6.1
Institutional
Products
Indexed funding
agreements - 151 (100.0) 1 265 (99.6)
Funding agreements
backing medium-
term notes 1,498 483 - 2,598 718 -
Other - - - - 4 (100.0)
------ ------ ------ ------
1,498 634 136.3 2,599 987 163.3
Bank Deposits 89 89 - 177 170 4.1
------ ------ ------ ------
Total $4,284 $3,296 30.0 $7,739 $5,792 33.6
====== ====== ====== ======
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30, December 31,
($ in millions, except par value data) 2004 (Est.) 2003
------------ ------------
Assets
Investments
Fixed income securities, at fair value
(amortized cost $87,177 and $82,607) $ 90,155 $ 87,741
Equity securities, at fair value (cost
$4,404 and $4,028) 5,576 5,288
Mortgage loans 7,153 6,539
Short-term 2,972 1,815
Other 1,727 1,698
------------ ------------
Total investments 107,583 103,081
Cash 295 366
Premium installment receivables, net 4,632 4,386
Deferred policy acquisition costs 5,065 4,842
Reinsurance recoverables, net 3,506 3,121
Accrued investment income 996 1,068
Property and equipment, net 1,011 1,046
Goodwill 878 929
Other assets 2,278 1,878
Separate Accounts 13,564 13,425
------------ ------------
Total assets $ 139,808 $ 134,142
============ ============
Liabilities
Reserve for property-liability insurance
claims and claims expense $ 17,975 $ 17,714
Reserve for life-contingent contract
benefits 11,069 11,020
Contractholder funds 51,457 47,071
Unearned premiums 9,464 9,187
Claim payments outstanding 628 698
Other liabilities and accrued expenses 9,758 8,283
Deferred income taxes 358 1,103
Short-term debt 202 3
Long-term debt 4,650 5,073
Separate Accounts 13,564 13,425
------------ ------------
Total liabilities 119,125 113,577
------------ ------------
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,
695 million and 704 million shares
outstanding 9 9
Additional capital paid-in 2,668 2,614
Retained income 23,231 21,641
Deferred compensation expense (175) (194)
Treasury stock, at cost (205 million and
196 million shares) (6,710) (6,261)
Accumulated other comprehensive income:
Unrealized net capital gains and losses
and net gains and losses on derivative
financial instruments 2,035 3,125
Unrealized foreign currency translation
adjustments (16) (10)
Minimum pension liability adjustment (359) (359)
------------ ------------
Total accumulated other
comprehensive income 1,660 2,756
------------ ------------
Total shareholders' equity 20,683 20,565
------------ ------------
Total liabilities and shareholders'
equity $ 139,808 $ 134,142
============ ============
Discontinued Lines and Coverages Reserves Underwriting losses of $319 million were primarily related to a $216 million re-estimate of asbestos IBNR reserves, a $76 million re-estimate of the allowance for future uncollectible Adj. 1. uncollectible - not capable of being collected; "a bad (or uncollectible) debt" bad invalid - having no cogency or legal force; "invalid reasoning"; "an invalid driver's license" 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. recoverables, and reserve re-estimates of $20 million related to other (non-A&E) Discontinued Lines exposures in run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → . Each quarter, we review reserves to determine if any intervening in·ter·vene intr.v. in·ter·vened, in·ter·ven·ing, in·ter·venes 1. To come, appear, or lie between two things: You can't see the lake from there because the house intervenes. 2. significant events or developments require adjustments to reserves. The re-estimate of asbestos reserves was a result of our assessment of the impact of recent and previously unexpected claim activity reported by direct excess policyholders and the related re-estimates of expected future claim activity. During the third quarter of 2004, management will complete its annual comprehensive "ground up" review of reserves for the Discontinued Lines and Coverages segment. Further changes to reserve estimates may occur upon completion of this review. Our net asbestos reserves by type of exposure and total reserve additions by quarter are shown in the following table.
June 30, 2004
---------------------------------
($ in millions) Number of Est. Net % of
Active Asbestos Asbestos
Policyholders Reserves Reserves
Direct policyholders
-Primary 55 $26 2%
-Excess 289 195 16
------------- --------- ---------
Total direct policyholders 344 221 18%
Assumed reinsurance 220 17
Incurred but not reported claims
("IBNR") 820 65
--------- ---------
Total net reserves $1,261 100%
Reserve additions
First Quarter $--
Second Quarter 216
---------
Six months ended June 30 $216
Net survival ratio excluding
commutations, policy buy-backs and
settlement agreements
Annual 25.2
3-Year 27.5
December 31, 2003
---------------------------------
($ in millions) Number of Net % of
Active Asbestos Asbestos
Policyholders Reserves Reserves
Direct policyholders
-Primary 52 $28 3%
-Excess 286 201 19
------------- --------- ---------
Total direct policyholders 338 229 22%
Assumed reinsurance 191 17
Incurred but not reported claims
("IBNR") 659 61
--------- ---------
Total net reserves $1,079 100%
Reserve additions
First Quarter $34
Second Quarter 38
---------
Six months ended June 30 $72
Net survival ratio excluding
commutations, policy buy-backs and
settlement agreements
Annual 24.2
3-Year 22.2
During the first six months of 2004, 29 direct primary and excess policyholders reported new claims, and claims of 23 policyholders' were closed, so the number of direct policyholders with active claims increased by six. Reserve additions for asbestos in the second quarter and first six months of 2004, totaling $216 million, were primarily for products-related coverage. This increase was a result of more claim activity and re-estimates of future claim activity for excess insurance policyholders with existing active claims. As a result of the increased claim activity over prior estimates, we have increased our outlook for future claims. This trend is consistent with the trends of other carriers in the industry. We believe it is related to increased publicity and awareness of coverage, ongoing litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , potential congressional activity and bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most actions. IBNR now represents 65% of total net asbestos reserves, 4 points higher than at December 31, 2003. IBNR provides for estimated probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. future unfavorable reserve development of known claims and future reporting of additional unknown claims from current and new direct active policyholders and ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. companies. Our exposure to non-products-related losses represents approximately 5% of total asbestos case reserves. We do not anticipate significant changes in this percentage as insureds' retentions associated with excess insurance programs, which are our principal direct insurance, and assumed reinsurance exposure are seldom exceeded. We did not write direct primary insurance on policyholders with the potential for significant non-products-related loss exposure. Our three-year average survival ratio, as updated above, is viewed to be a more representative prospective measure of current reserve adequacy than other survival ratio calculations. Now at 27.5 years as of June 30, 2004, our survival ratio is at a level we consider a strong asbestos reserve position. A one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants increase in the three-year average asbestos survival ratio at June 30, 2004 would require an after-tax increase in reserves of approximately $29 million. To further limit our asbestos exposure, we have significant reinsurance, primarily to reduce our exposure to loss in our direct excess insurance business. Our reinsurance recoverables are estimated to be approximately 40% of our gross estimated loss reserves. In the second quarter of 2004, we evaluated the financial condition of several reinsurers in light of their recent activities with respect to commutations and claim settlement practices. Based on this review, we refined our bad debt allowance to provide a greater allowance for companies in run-off and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. those who have reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. to limit or wall off their liabilities. This has resulted in an increase of $76 million to the allowance, bringing it to $168 million, or approximately 15% of total Discontinued Lines recoverables from reinsurers. We believe that our reserves are appropriately established based on assessments of pertinent PERTINENT, evidence. Those facts which tend to prove the allegations of the party offering them, are called pertinent; those which have no such tendency are called impertinent, 8 Toull. n. 22. By pertinent is also meant that which belongs. Willes, 319. factors and characteristics of exposure (e.g. claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. 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, 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 instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. which are reported with realized capital gains and losses but included in operating income, --amortization of deferred policy acquisition costs ("DAC") and deferred sales inducements ("DSI (Dynamic Systems Initiative) An umbrella term for a suite of Microsoft products that help manage the Windows environment in large enterprises. DSI was introduced in 2003. "), to the extent that they resulted from the recognition of realized capital gains and losses, and --(loss) gain on disposition of operations, after-tax. 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 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. businesses 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 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 six months ended June 30, 2004 and 2003.
For the three months ended June 30,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------ ----------- ------------ -------------
($ in millions,
except per Est. Est. Est. Est.
share data) 2004 2003 2004 2003 2004 2003 2004 2003
----- ------ ----- ----- ----- ------ ------ ------
Operating
income $936 $496 $126 $131 $1,036 $599 $1.47 $0.85
Realized capital
gains and
losses 109 31 (61) (39) 41 (9)
Income tax
benefit
(expense) (38) (8) 18 14 (18) 6
----- ------ ----- ----- ----- ------
Realized capital
gains and
losses,
after-tax 71 23 (43) (25) 23 (3) 0.03 --
DAC and DSI
amortization
relating to
realized
capital
gains and
losses,
after-tax -- -- (3) (7) (3) (7) (0.01) (0.01)
Reclassification
of periodic
settlements
and accruals
on non-hedge
derivative
instruments,
after-tax -- -- (7) (1) (7) (1) -- --
(Loss) gain on
disposition of
operations,
after-tax -- 2 (15) -- (15) 2 (0.02) --
----- ------ ----- ----- ----- ------ ------ ------
Income before
dividends on
preferred
securities and
cumulative
effect of
change in
accounting
principle,
after-tax 1,007 521 58 98 1,034 590 1.47 0.84
Dividends on
preferred
securities of
subsidiary
trust,
after-tax -- -- -- -- -- (2) -- --
Cumulative
effect of
change in
accounting
principle,
after-tax -- -- -- -- -- -- -- --
----- ------ ----- ----- ----- ------ ------ ------
Net income
(loss) $1,007 $521 $58 $98 $1,034 $588 $1.47 $0.84
===== ====== ===== ===== ===== ====== ====== ======
For the six months ended June 30,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------ ----------- ------------ -------------
($ in millions,
except per Est. Est. Est. Est.
share data) 2004 2003 2004 2003 2004 2003 2004 2003
----- ------ ----- ----- ----- ------ ------ ------
Operating
income $1,848 $1,114 $258 $213 $2,056 $1,272 $2.91 $1.80
Realized capital
gains and
losses 300 68 (84) (75) 211 (8)
Income tax
benefit
(expense) (97) (18) 27 29 (68) 11
----- ------ ----- ----- ----- ------
Realized capital
gains and
losses,
after-tax 203 50 (57) (46) 143 3 0.20 --
DAC and DSI
amortization
relating to
realized
capital
gains and
losses,
after-tax -- -- (13) (16) (13) (16) (0.02) (0.02)
Reclassification
of periodic
settlements
and accruals
on non-hedge
derivative
instruments,
after-tax -- -- (11) (3) (11) (3) (0.01) --
(Loss) gain on
disposition of
operations,
after-tax -- 2 (17) -- (17) 2 (0.02) --
----- ------ ----- ----- ----- ------ ------ ------
Income before
dividends on
preferred
securities and
cumulative
effect of
change in
accounting
principle,
after-tax 2,051 1,166 160 148 2,158 1,258 3.06 1.78
Dividends on
preferred
securities of
subsidiary
trust,
after-tax -- -- -- -- -- (5) -- --
Cumulative
effect of
change in
accounting
principle,
after-tax -- -- (175) -- (175) -- (0.25) --
----- ------ ----- ----- ----- ------ ------ ------
Net income
(loss) $2,051 $1,166 $(15) $148 $1,983 $1,253 $2.81 $1.78
===== ====== ===== ===== ===== ====== ====== ======
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 remainder of 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 amortization of DAC and DSI 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, and cumulative effect of changes in accounting principle, after-tax, which we assume to be zero for the remainder of the year. Underwriting income (loss) is calculated as premiums earned, less claims and claims expense ("losses"), amortization of DAC, operating costs and expenses and restructuring 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. It is useful for investors to evaluate the components of income separately and in the aggregate when reviewing 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 June 30,
-------------------------
Est. 2004 2003
------------ -----------
Return on equity
Numerator:
Net income $ 3,435 $ 1,948
============ ===========
Denominator:
Beginning shareholders' equity 19,299 17,217
Ending shareholders' equity 20,683 19,299
Average shareholders' equity $ 19,991 $ 18,258
============ ===========
ROE 17.2% 10.7%
============ ===========
For the twelve months
($ in millions) ended June 30,
-------------------------
Est. 2004 2003
------------ -----------
Operating income return on equity
Numerator:
Operating income $ 3,446 $ 2,406
============ ===========
Denominator:
Beginning shareholders' equity 19,299 17,217
Unrealized net capital gains 3,491 1,870
------------ -----------
Adjusted beginning shareholders'
equity 15,808 15,347
Ending shareholders' equity 20,683 19,299
Unrealized net capital gains 2,035 3,491
------------ -----------
Adjusted ending shareholders'
equity 18,648 15,808
Average shareholders' equity $ 17,228 $ 15,578
============ ===========
Operating income ROE 20.0% 15.4%
============ ===========
Book value per diluted share excluding the net impact of unrealized net capital gains on fixed income securities is a ratio that uses a non-GAAP measure. It is calculated by dividing (a) shareholders' equity after excluding the net impact of unrealized net capital gains on fixed income securities and related DAC and life insurance reserves by (b) total shares outstanding plus dilutive potential shares outstanding. Book value per diluted share is the most directly comparable GAAP ratio. We use the trend in Book value per diluted share excluding unrealized net capital gains on fixed income securities in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with Book value per diluted share to identify and analyze the change in net worth attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to management efforts between periods. We believe the non-GAAP ratio is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily market conditions, the magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the and timing of which are not influenced by management, and we believe it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. We note that Book value per diluted share excluding unrealized net capital gains on fixed income securities is a measure commonly used by insurance investors as a valuation technique. Book value per diluted share excluding unrealized net capital gains on fixed income securities should not be considered as a substitute for Book value per diluted share and does not reflect the recorded net worth of our business. The following table shows the two computations:
(in millions, except per share data) As of As of
June 30, December 31,
------------------- -------------
Est.
Book value per diluted share 2004 2003 2003
--------- --------- -------------
Numerator:
Shareholders' equity $ 20,683 $ 19,299 $ 20,565
========= ========= =============
Denominator:
Shares outstanding and
dilutive potential
shares outstanding 699.9 706.2 708.2
========= ========= =============
Book value per diluted share $ 29.55 $ 27.33 $ 29.04
========= ========= =============
Book value per diluted share,
excluding the net impact
of unrealized net capital gains
on fixed income securities
Numerator:
Shareholders' equity $ 20,683 $ 19,299 $ 20,565
Unrealized net capital gains
on fixed income
Securities 1,271 2,975 2,307
--------- --------- -------------
Adjusted shareholders' equity $ 19,412 $ 16,324 $ 18,258
========= ========= =============
Denominator:
Shares outstanding and
dilutive potential
shares outstanding 699.9 706.2 708.2
========= ========= =============
Book value per diluted share,
excluding unrealized net
capital gains on fixed income
securities $ 27.74 $ 23.12 $ 25.78
========= ========= =============
Gross margin represents 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 and net investment income, less contract benefits and interest credited to contractholder funds. We use gross margin as a component of our evaluation of the profitability of Allstate Financial's life insurance and financial product portfolio. Additionally, for many of our products, including fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. , variable life and annuities, and interest-sensitive life insurance, the amortization of DAC and DSI is determined based on actual and expected gross margin. Gross margin is comprised of four components that are utilized to further analyze the business; they include the investment margin, benefit margin, and maintenance and surrender charges Surrender Charge A fee levied on a life insurance policyholder upon cancellation of his or her life insurance policy. The fee is used to cover the costs of keeping the insurance policy on the insurance provider's books. . We believe gross margin and its components are useful to investors because they allow for the evaluation of income components separately and in the aggregate when reviewing performance. Gross margin, investment margin and benefit margin should not be considered as a substitute for net income and do not reflect the overall profitability of the business. Net income is the GAAP measure that is most directly comparable to these margins. Gross margin is reconciled to Allstate Financial's GAAP net income in the following tables.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
($ in millions) Est. Est.
2004 2003 2004 2003
--------- -------- ------- --------
Life and annuity premiums and
contract charges $ 504 $ 533 $ 1,000 $ 1,172
Net investment income(1) 845 799 1,672 1,601
Contract benefits (378) (426) (773) (956)
Interest credited to
contractholder funds(2) (473) (460) (929) (913)
--------- -------- ------- --------
Gross margin 498 446 970 904
Amortization of DAC and DSI (125) (92) (255) (264)
Operating costs and expenses (177) (161) (322) (329)
Restructuring and related charges (4) -- (4) --
Income tax expense (66) (62) (131) (98)
Realized capital gains and losses,
after-tax (43) (25) (57) (46)
DAC and DSI amortization relating
to realized capital
gains and losses, after-tax (3) (7) (13) (16)
Reclassification of periodic
settlements and accruals on
non-hedge derivative instruments,
after-tax (7) (1) (11) (3)
Loss on disposition of operations,
after-tax (15) -- (17) --
Cumulative effect of change in
accounting principle, after-tax -- -- (175) --
--------- -------- ------- --------
Allstate Financial net income $ 58 $ 98 $ (15)$ 148
========= ======== ======= ========
(1) Net investment income includes periodic settlements and accruals on non-hedge derivative instruments, pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern , totaling $12 million for the second quarter of 2004, $2 million for the second quarter of 2003, $18 million for the six months ended June 30, 2004 and $5 million for the six months ended June 30, 2003. (2) Beginning in 2004, amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating gross margin. Amortization of DSI totaled $7 million in the second quarter of 2004 and $21 for the six months ended June 30, 2004. Prior periods have not been restated. Investment margin is a component of gross margin. Investment margin represents the excess of net investment income over interest credited to contractholder funds and the implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. interest on life contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the immediate annuities immediate annuity An annuity that is purchased with a lump sum and that begins making payments one period after the purchase. Immediate annuities are most commonly purchased by people who have accumulated a sum of money and are ready for retirement. included in Allstate Financial's reserve for life-contingent contract benefits. We use investment margin to evaluate Allstate Financial's profitability related to the difference between investment returns on assets supporting certain products and the amounts credited to customers ("spread") during a fiscal period. Benefit margin is a component of gross margin. Benefit margin represents life and annuity premiums and cost of insurance contract charges less contract benefits excluding the implied interest on life-contingent immediate annuities, which is included in the calculation of investment margin. We use benefit margin to evaluate Allstate Financial's underwriting performance, as it reflects the profitability of our products with respect to mortality or morbidity morbidity /mor·bid·i·ty/ (mor-bid´it-e) 1. a diseased condition or state. 2. the incidence or prevalence of a disease or of all diseases in a population. mor·bid·i·ty n. risk during a fiscal period. The components of gross margin are reconciled to the corresponding financial statement line items in the following tables.
Three Months Ended June 30,
-----------------------------------------------------------
Investment Benefit Maintenance Surrender Gross
Margin Margin Charges Charges Margin
---------- ---------- ---------- ---------- -----------
(in Est. Est. Est. Est. Est.
millions) 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Life and
annuity
premiums $ -- $ -- $252 $297 $ -- $ -- $ -- $ -- $252 $297
Contract
charges -- -- 140 134 94 84 18 18 252 236
Net
investment
income (1) 845 799 -- -- -- -- -- -- 845 799
Contract
benefits (130) (128) (248) (298) -- -- -- -- (378) (426)
Interest
credited to
contract-
holder
funds (2) (473) (460) -- -- -- -- -- -- (473) (460)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$242 $211 $144 $133 $94 $84 $18 $18 $498 $446
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
(1) Net investment income includes periodic settlements and accruals on non-hedge derivative instruments, pretax, totaling $12 million for the second quarter of 2004 and $2 million for the second quarter of 2003. (2) Beginning in 2004, amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating gross margin. Amortization of DSI totaled $7 million in the second quarter of 2004. Prior periods have not been restated.
Six Months Ended June 30,
-----------------------------------------------------------
Investment Benefit Maintenance Surrender Gross
Margin Margin Charges Charges Margin
---------- ---------- ---------- ---------- -----------
(in Est. Est. Est. Est. Est.
millions) 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Life and
annuity
premiums $ -- $ -- $498 $709 $ -- $ -- $ -- $ -- $498 $709
Contract
charges -- -- 276 261 188 165 38 37 502 463
Net
investment
income
(1) 1,672 1,601 -- -- -- -- -- -- 1,672 1,601
Contract
benefits (261) (254) (512) (702) -- -- -- -- (773) (956)
Interest
credited
to
contract-
holder
funds (2) (929) (913) -- -- -- -- -- -- (929) (913)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$482 $434 $262 $268 $188 $165 $38 $37 $970 $904
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
(1) Net investment income includes periodic settlements and accruals on non-hedge derivative instruments, pretax, totaling $18 million for the six months ended June 30, 2004 and $5 million for the six months ended June 30, 2003. (2) Beginning in 2004, amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating gross margin. Amortization of DSI totaled $21 for the six months ended June 30, 2004. Prior periods have not been restated. Operating Measures We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following operating financial measures. Our method of calculating these measures may differ from that used by other companies and therefore comparability may be limited. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums earned is a GAAP measure. Premiums are considered earned and are included in financial results on a pro-rata Pro-rata Used to describe a proportionate allocation. Notes: For example, a pro-rata dividend means that every shareholder gets an equal proportion for each share they own. See also: Dividend basis over the policy period. The portion of premiums written applicable to the unexpired terms of the policies is recorded as unearned premiums on our Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Financial Position. A reconciliation of premiums written to premiums earned is presented in the following table.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
($ in millions) Est. Est.
2004 2003 2004 2003
--------- -------- ------- --------
Premiums written $ 6,741 $ 6,422 $13,074 $ 12,359
Change in Property-Liability
unearned premiums (288) (270) (246) (248)
Other 7 (6) 3 34
--------- -------- ------- --------
Premiums earned $ 6,460 $ 6,146 $12,831 $ 12,145
========= ======== ======= ========
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 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 .
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
($ in millions) Est. Est.
2004 2003 2004 2003
--------- -------- ------- --------
Life and annuity premiums(1) $ 252 $ 297 $ 498 $ 709
Deposits to contractholder funds,
separate accounts and other 4,032 2,999 7,241 5,083
--------- -------- ------- --------
Total premiums and deposits $ 4,284 $ 3,296 $ 7,739 $ 5,792
========= ======== ======= ========
(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. $252 million and $236 million for the three months ended June 30, 2004 and 2003, respectively, and est. $502 million and $463 million for the six months ended June 30, 2004 and 2003, 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 premiums and contract charges. 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 companies' mutual funds, and excludes renewal premiums. New sales of financial products by Allstate exclusive agencies for the six months ended June 30, 2004 and 2003 totaled est. $1.01 billion and $783 million, 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 helps individuals in more than 16 million households protect what they have today and better prepare for tomorrow through more than 12,900 exclusive agencies and financial specialists in the U.S. and Canada. Customers can access Allstate products and services through Allstate agencies, 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 agencies. Allstate Financial Group provides life insurance, annuity, retirement, banking and investment products through distribution channels that include Allstate agencies, independent agencies, 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. |
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