Allstate Reports 52% Increase in 2004 Fourth Quarter Net Income EPS, 34% Increase in Fourth Quarter Operating Income EPS, Record 2004 Full Year Net and Operating Income EPS.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 fourth quarter of 2004:
Consolidated Highlights (1)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
Change Change
(in millions, ----------- ------------
except per
share Est. Est.
amounts 2004 2003 $ Amt % 2004 2003 $ Amt %
and ratios) ---------------------------- ----------------------------
Consolidated
revenues $8,879 $8,262 $617 7.5 $33,936 $32,149 $1,787 5.6
Net income 1,142 761 381 50.1 3,181 2,705 476 17.6
Net income
per diluted
share 1.64 1.08 0.56 51.9 4.54 3.83 0.71 18.5
Operating
income(1) 986 752 234 31.1 3,091 2,662 429 16.1
Operating
income per
diluted
share(1) 1.42 1.06 0.36 34.0 4.41 3.77 0.64 17.0
Property-
Liability
combined
ratio 88.5 92.3 -- (3.8) 93.0 94.6 -- (1.6)
pts. pts.
Effect of
catastrophes
on combined
ratio 6.2 6.5 -- (0.3) 9.5 6.0 -- 3.5
pts. pts.
Effect of
catastrophes
on Net
Income per
diluted
share 0.39 0.38 0.01 2.6 2.29 1.37 0.92 67.2
Book value
per diluted
share 31.72 29.04 2.68 9.2
Return on
equity 15.0 14.2 -- 0.8
pts.
Operating
income
return on
equity(1) 17.0 16.5 -- 0.5
pts.
(1) Measures used in this release that are not based on generally
accepted accounting principles ("non-GAAP") are defined and
reconciled to the most directly comparable GAAP measure and
operating measures are defined in the "Definitions of Non-GAAP and
Operating Measures" section of this document.
--Property-Liability premiums written(1) grew 4.8% over the fourth quarter of 2003, 5.6% adjusted for 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. 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. for premium refunds, driven by an increase in 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. "). Growth in policies in force for Allstate brand standard auto and homeowners lines remained strong at 5.5% and 6.4%, respectively, from the fourth quarter of 2003. This represents the highest growth rate achieved in the last 10 years. Total Allstate brand policies in force increased 3.9%. Allstate brand standard auto and homeowners premiums written grew 5.7% and 9.8%, respectively. These PIF 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 . --Property-Liability underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. (1) increased 57.8% over the fourth quarter of 2003 to $762 million, due to increased 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 and favorable prior year reserve reestimates. --Pre-tax catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses totaled $412 million in both the fourth quarter of 2004 and 2003, with $367 million in 2004 attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to reestimates of third quarter 2004 hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. losses. See the Allstate Protection Reestimates of Hurricane Catastrophe Losses section of this document for more details. --Allstate Financial premiums and deposits(1) increased 26.0% over the fourth quarter of 2003 to $4.16 billion. 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. for the quarter was $142 million, an increase of 40.6% over the fourth quarter of 2003. --For the total year, Allstate earned record levels of operating income ($3.1 billion, up 16.1%), net 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 ($4.54, up 18.5%) and operating income per diluted share ($4.41, up 17.0%). --Allstate's annual operating income per diluted share guidance for 2005 (assuming the level of average expected catastrophe losses used in pricing for the year) is in the range of $5.40 to $5.80. "It was a great quarter and a great year for Allstate," 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. • • . "We're we're Contraction of we are. we're we are growing and generating solid returns for our shareholders thanks to a proven business strategy that we believe is sustainable into the future. In short, we are very pleased with our results and confident about our prospects." "Allstate Protection continues to make steady progress, growing faster than the marketplace in a very competitive environment. Helping to fuel solid increases in premiums for the quarter was growth in policies in force (PIF). These PIF increases also represent an increase in the rate of change in PIF growth we reported for the third quarter of 2004 and both Allstate brand standard auto and homeowners experienced PIF growth in most states. "In the quarter, Allstate Protection's overall underwriting income increased 58% over the prior year fourth quarter. Both the Allstate brand and our Encompass ENCOMPASS Enhanced Consequence Management Planning and Support System (DARPA) business continued to contribute excellent 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. results. Allstate brand customer retention remained strong in the fourth quarter at near record levels, which we believe is a result of the service and value we provide our customers. Also contributing to our strong customer retention are the investments we continue to make in our business. Allstate brand standard auto retention improved almost a half point compared to the prior year quarter and homeowners retention levels exceeded prior year fourth quarter results by more than a full point. Our advertising campaign has focused on educating consumers about Allstate's strong competitive position in the marketplace, which has helped fuel solid gains in new business production. "Our strategic risk management efforts continue to be extremely effective. Although we believe that Allstate is well ahead of most of our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. in pricing sophistication so·phis·ti·cate v. so·phis·ti·cat·ed, so·phis·ti·cat·ing, so·phis·ti·cates v.tr. 1. To cause to become less natural, especially to make less naive and more worldly. 2. , we will continue to add new and enhanced rating variables and additional refinements of our insurance scoring algorithms In statistics, Fisher's Scoring algorithm is a form of Newton's method used to solve maximum likelihood equations numerically. Sketch of Derivation Let be random variables, independent and identically distributed with twice differentiable p.d.f. as competition continues to implement tiered tier 1 n. 1. One of a series of rows placed one above another: a stadium with four tiers of seats. 2. A rank or class. tr. & intr.v. rating programs. We believe our strategies have put Allstate in a great position going into 2005 to continue to grow profitably. "I am very encouraged by the loss cost trends in our business during the fourth quarter and all of 2004. As I have said before, we might see occasional fluctuations in the frequency trends due to weather, but the underlying frequency trend remains favorable. Severity trends continue to be moderate, and our claims employees continue to provide excellent service to improve customer satisfaction. "Allstate Financial also turned in a solid performance for the quarter. We generated strong and broad top line results delivering our second highest level of quarterly premiums and deposits ever. In particular, the Allstate Agency channel finished the year on a very strong note by generating one-third of its total 2004 sales of financial products in the fourth quarter. For the year, Allstate Financial delivered record retail, institutional, and total premiums and deposits. In January January: see month. 2005, we launched our new SureIncome(SM) withdrawal benefit on our 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. products which, combined with our 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, should boost sales in 2005. Allstate Financial also had improved bottom line results with operating income of $142 million in the quarter, in line with our expectations. Overall, the implementation of Allstate Financial's business strategy is progressing well. "In the quarter, we completed our $1.5 billion 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 one year ahead of schedule and in January 2005, began our previously announced $4.0 billion share repurchase program to be completed in 2006. Additionally, The Allstate Corporation board of directors will meet later this month to determine the dividend for the first quarter of 2005. "Overall, 2004 was a very good year. Even after absorbing ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. an unusually high level of catastrophe losses of $2.5 billion in 2004, net income per diluted share and operating income per diluted share increased 18.5% and 17.0%, respectively, over the prior year, book value per diluted share increased 9.2% to $31.72 compared to prior year, and operating income return on equity increased 0.5 points to 17.0% compared to prior year. We are very pleased with the consistent performance we have generated over time. We remain committed as ever to not rest on past performance. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about 2005 and plan to use the momentum we have generated across the enterprise to ensure our company remains a powerful force that continues to deliver solid, consistent value to customers and shareholders. We expect to generate operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per diluted share growth of 22% to 32%. This assumes our combined ratio, with an average expected level of catastrophe losses used in pricing for the year and no reserve reestimates, does not change materially from that experienced in 2004, which is in the low 90s. Further, our expectation for top-line growth will be consistent with our objective of maintaining margins. The resulting operating income return on equity is expected to exceed 18%."
Consolidated Highlights
Discussion of
Three Months Twelve Months Results for the
Ended Ended Three Months Ended
December 31, December 31, December 31, 2004
---------------- ---------------- --------------------
($ in millions,
except per
share and Est. Est.
return amounts) 2004 2003 2004 2003
-------- ------- ------- --------
Consolidated $8,879 $8,262 $33,936 $32,149 Higher premiums
revenues earned in Property-
Liability, higher
net realized
capital gains due
to increased
dispositions and
fewer write-downs,
higher net
investment income,
partially offset by
lower life and
annuity premiums
and contract
charges.
Operating 986 752 3,091 2,662 Increase in
income Property-Liability
operating income of
$195 and Allstate
Financial operating
income of $41.
Realized 212 58 392 134 See the Components
capital gains of Realized Capital
and losses, Gains and Losses
after-tax (pretax) table.
Gain/(loss) on 16 (20) (6) (26) Primarily a tax
disposition of gain from
operations, disposition of a
after-tax life insurance
subsidiary.
Cumulative -- (14) (175) (15)
effect of change
in accounting
principle, after-tax
Net income 1,142 761 3,181 2,705 Increase in
Property-Liability
and Allstate
Financial operating
income and increase
in realized capital
gains and losses,
after-tax.
Net income per 1.64 1.08 4.54 3.83
share (diluted)
Operating income 1.42 1.06 4.41 3.77
per share (diluted)
Net shares 682.7 704.0 682.7 704.0 During the fourth
outstanding quarter of 2004,
Allstate purchased
8.0 million shares
of its stock for
$396.3 million,
completing the
current $1.5
billion program.
Allstate started a
$4.0 billion
program in January
2005.
Weighted 690.7 707.2 700.3 706.2
average shares
outstanding
(diluted)
Return on equity 15.0 14.2 See the return on
equity calculation
in the Definitions
of Non-GAAP and
Operating Measures
section of this
document.
Operating income 17.0 16.5 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 31.72 29.04 At December 31,
diluted share 2004 and 2003, net
unrealized gains on
fixed income
securities, after-
tax, totaling
$2,134 and $2,307,
respectively,
represented $3.10
and $3.26,
respectively, of
book value per
diluted share.
--Book value per diluted share increased 9.2% 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(1) increased 11.0% to $28.62 at December 31, 2004 compared to December 31, 2003.
Property-Liability Highlights
Discussion of Results
Three Months Twelve Months for the
Ended Ended Three Months Ended
December 31, December 31, December 31, 2004
-------------- ---------------- ----------------------
($ in millions, Est. Est.
except ratios) 2004 2003 2004 2003
-------------- ----------------
Property- $6,499 $6,199 $26,531 $25,187 See the Property-
Liability net Liability Premiums
premiums Written by Market
written Segment table.
Property- 7,262 6,848 28,354 26,642 Premiums earned
Liability increased $305 or
revenues 4.8%.
Underwriting 762 483 1,830 1,332 Higher premiums
income / earned, continued
(loss) favorable auto
and homeowners
loss frequencies
and favorable
reserve
reestimates. See
the Allstate
Protection Market
Segment Analysis
table.
Net investment 463 435 1,773 1,677 Higher portfolio
income balances due to
positive cash
flows from
operations,
partially offset
by lower yields.
Operating 875 680 2,648 2,327 Increase of $180
income in underwriting
results, after-tax.
Realized 125 72 397 192 See the Components
capital gains of Realized Capital
and losses, Gains and Losses
after-tax (pretax) table.
Gain on -- -- -- 3
disposition of
operations,
after-tax
Cumulative effect -- -- -- (1)
of change in
accounting
principle,
after-tax
Net income 1,000 752 3,045 2,521 Higher operating
income and realized
capital gains and
losses, after-tax.
Catastrophe 412 412 2,468 1,489 Included $367
losses million reestimate
of third quarter
hurricane losses
bringing total
pre-tax net loss
for the four storms
to $2.0 billion.
See the Allstate
Protection
Reestimates of
Hurricane
Catastrophe Losses
section for further
details.
Ratios:
Property-
Liability
combined ratio 88.5 92.3 93.0 94.6
Effect of
Discontinued
Lines and
Coverages -- 0.1 2.5 2.3
Allstate
Protection
combined ratio 88.5 92.2 90.5 92.3
Effect of
catastrophe
losses 6.2 6.5 9.5 6.0
--Allstate brand standard auto and homeowners PIF increased 5.5% and 6.4%, respectively, from December 31, 2003 levels, compared to increases of 5.4% and 6.2%, respectively in the third quarter of 2004 over the third quarter of 2003. Both standard auto and homeowners experienced growth in most states. These results exclude impacts from Allstate Canada. --Allstate brand standard auto and homeowners new business premiums written grew 5.5% and 4.3%, respectively, in the quarter, while the retention ratio increased to 90.6 and 88.7 respectively, from 90.2 and 87.5 in the prior year fourth quarter. In September September: see month. , we began curtailing our acceptance of new business in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , which had an adverse impact on our growth of Allstate brand homeowners new business premiums. These results exclude impacts from Allstate Canada. --Prior year net favorable reserve re-estimates in the quarter totaled $189 million for Property-Liability, reflecting lower actual claim severity trends than anticipated in previous estimates.
Allstate Financial Highlights
Discussion of Results
Three Months Twelve Months for the
Ended Ended Three Months Ended
December 31, December 31, December 31, 2004
-------------- ---------------- ----------------------
($ in millions) Est. Est.
2004 2003 2004 2003
-------------- ----------------
Premiums and $4,163 $3,303 $15,919 $13,095 Higher sales of fixed
deposits annuities, partially
offset by lower sales
of variable annuities
and funding
agreements. See the
Allstate Financial
Premiums and Deposits
table.
Allstate 1,590 1,401 5,483 5,452 Higher net realized
Financial capital gains and
Revenues investment income,
partially offset by
lower life and
annuity premiums due
to the disposition of
substantially all of
our direct response
distribution
business.
Operating 142 101 551 449 Higher gross margins,
income lower operating
expenses from the
disposition of
substantially all of
our direct response
distribution business
and lower income
taxes as 2003 income
taxes included a $23
non-recurring
adjustment of prior
years tax
liabilities.
Realized 87 (11) (3) (53) See the Components of
capital gains Realized Capital
and losses, Gains and Losses
after-tax (pretax) table.
Gain (loss) on 16 (20) (6) (29) Primarily a tax gain
disposition of from the disposition
operations, of a life insurance
after-tax company subsidiary.
Cumulative -- (17) (175) (17)
effect of
change in
accounting
principle,
after-tax
Net income 173 38 246 305 Higher operating
income and higher
realized capital
gains and losses,
after-tax.
--Delivered record retail premium and deposits of $3.58 billion in the fourth quarter and $11.88 billion for the year. --Investments including Separate Account assets as of December 31, 2004 increased 13.9% over December 31, 2003 primarily due to strong sales of fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. and 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. . --The approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. difference between the weighted average credited rate and the average guaranteed rate on interest sensitive life and annuity contracts 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 is 52 basis points compared to 50 basis points from the prior quarter due to sales of new contracts containing significantly lower guaranteed rates than the in-force block of business. The crediting rates on approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 62% of all such in-force contracts were at the minimum guaranteed rate at December 31, 2004. --Completed the disposal of substantially all of our direct response distribution business in the fourth quarter of 2004. 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 this business reduced fourth quarter total revenues by $62 million, benefits by $35 million, operating costs operating costs npl → gastos mpl operacionales and expenses by $17 million and amortization of deferred acquisition costs ("DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ") by $11 million.
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- -----------------
($ in millions,
except per share Est. Percent Est. Percent
data) 2004 2003 Change 2004 2003 Change
-------- ------- -------- -------- -------- ---------
Revenues
Property-
liability
insurance
premiums $6,607 $6,302 4.8 $25,989 $24,677 5.3
Life and annuity
premiums and
contract
charges 564 594 (5.1) 2,072 2,304 (10.1)
Net investment
income 1,378 1,275 8.1 5,284 4,972 6.3
Realized capital
gains and
losses 330 91 - 591 196 -
-------- ------- -------- --------
Total revenues 8,879 8,262 7.5 33,936 32,149 5.6
-------- ------- -------- --------
Costs and
expenses
Property-
liability
insurance
claims and
claims expense 4,175 4,248 (1.7) 17,843 17,432 2.4
Life and annuity
contract
benefits 444 471 (5.7) 1,618 1,851 (12.6)
Interest
credited to
contractholder
funds 546 466 17.2 2,001 1,846 8.4
Amortization of
deferred policy
acquisition
costs 1,214 1,069 13.6 4,465 4,058 10.0
Operating costs
and expenses 799 804 (0.6) 3,040 3,001 1.3
Restructuring
and related
charges 25 18 38.9 51 74 (31.1)
Interest expense 85 71 19.7 308 275 12.0
-------- ------- -------- --------
Total costs and
expenses 7,288 7,147 2.0 29,326 28,537 2.8
-------- ------- -------- --------
Loss on
disposition of
operations (7) (32) 78.1 (24) (41) 41.5
Income from
operations
before income
tax expense,
dividends on
preferred
securities and
cumulative
effect of change
in accounting
principle,
after-tax 1,584 1,083 46.3 4,586 3,571 28.4
Income tax
expense 442 308 43.5 1,230 846 45.4
-------- ------- -------- --------
Income before
dividends on
preferred
securities and
cumulative
effect of change
in accounting
principle,
after-tax 1,142 775 47.4 3,356 2,725 23.2
Dividends on
preferred
securities
of subsidiary
trust - - - - (5) 100.0
Cumulative effect
of change in
accounting
principle,
after-tax - (14) 100.0 (175) (15) -
-------- ------- -------- --------
Net income $1,142 $761 50.1 $3,181 $2,705 17.6
======== ======= ======== ========
Net income per
share - Basic $1.65 $1.08 $4.57 $3.85
======== ======= ======== ========
Weighted average
shares - Basic 685.8 703.5 695.6 703.5
======== ======= ======== ========
Net income per
share - Diluted $1.64 $1.08 $4.54 $3.83
======== ======= ======== ========
Weighted average
shares - Diluted 690.7 707.2 700.3 706.2
======== ======= ======== ========
THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
($ in millions,
except per share Est. Percent Est. Percent
data) 2004 2003 Change 2004 2003 Change
-------- ------- -------- -------- ------- ---------
Contribution to
income
Operating income
before the
impact of
restructuring
and related
charges $1,002 $764 31.2 $3,124 $2,710 15.3
Restructuring and
related charges,
after-tax 16 12 33.3 33 48 (31.3)
-------- ------- -------- -------
Operating income 986 752 31.1 3,091 2,662 16.1
Realized capital
gains and
losses,
after-tax 212 58 - 392 134 192.5
DAC and DSI
amortization
relating to
realized capital
gains and losses,
after-tax (61) (10) - (89) (30) (196.7)
Reclassification
of periodic
settlements
and accruals on
non-hedge
derivative
instruments,
after-tax (11) (5) (120.0) (32) (15) (113.3)
Gain (loss) on
disposition of
operations,
after-tax 16 (20) 180.0 (6) (26) 76.9
Dividends on
preferred
securities of
subsidiary trust - - - - (5) 100.0
Cumulative effect
of change in
accounting
principle,
after-tax - (14) 100.0 (175) (15) -
-------- ------- -------- -------
Net income $1,142 $761 50.1 $3,181 $2,705 17.6
======== ======= ======== =======
Income per share
(Diluted)
Operating income
before the
impact of
restructuring
and related
charges $1.45 $1.08 34.3 $4.46 $3.84 16.1
Restructuring and
related charges,
after-tax 0.03 0.02 50.0 0.05 0.07 (28.6)
-------- ------- -------- -------
Operating income 1.42 1.06 34.0 4.41 3.77 17.0
Realized capital
gains and losses,
after-tax 0.30 0.09 - 0.56 0.19 194.7
DAC and DSI
amortization
relating to
realized capital
gains and losses,
after-tax (0.09) (0.02) - (0.13) (0.05) (160.0)
Reclassification
of periodic
settlements
and accruals on
non-hedge
derivative
instruments,
after-tax (0.01) (0.01) - (0.04) (0.02) (100.0)
Gain (loss) on
disposition of
operations,
after-tax 0.02 (0.03) 166.7 (0.01) (0.04) 75.0
Dividends on
preferred
securities of
subsidiary trust - - - - - -
Cumulative effect
of change in
accounting
principle,
after-tax - (0.01) 100.0 (0.25) (0.02) -
-------- ------- -------- -------
Net income $1.64 $1.08 51.9 $4.54 $3.83 18.5
======== ======= ======== =======
Book value per
share - Diluted $31.72 $29.04 9.2 $31.72 $29.04 9.2
======== ======= ======== =======
THE ALLSTATE CORPORATION
COMPONENTS OF REALIZED CAPITAL GAINS AND LOSSES
(PRETAX)
Three Months Ended December 31, 2004 (Est.)
-------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -------
Valuation of derivative
instruments $ 33 $ (6) $ - $ 27
Settlements of derivative
instruments (4) 11 - 7
Dispositions 175 140 2 317
Investment write-downs (12) (9) - (21)
---------- ---------- --------- -------
Total $ 192 $ 136 $ 2 $ 330
========== ========== ========= =======
Twelve Months Ended December 31, 2004 (Est.)
--------------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -------
Valuation of derivative
instruments $ 10 $ (55) $ (1) $ (46)
Settlements of derivative
instruments (69) 7 - (62)
Dispositions 697 131 - 828
Investment write-downs (46) (82) (1) (129)
---------- ---------- --------- -------
Total $ 592 $ 1 $ (2) $ 591
========== ========== ========= =======
Three Months Ended December 31, 2003
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ 4 $ (4) $ - $ -
Settlements of derivative
instruments 5 (2) - 3
Dispositions 131 23 - 154
Investment write-downs (29) (34) (3) (66)
---------- ---------- --------- -----
Total $ 111 $ (17) $ (3) $ 91
========== ========== ========= =====
Twelve Months Ended December 31, 2003
----------------------------------------
($ in millions) Property- Allstate Corporate
Liability Financial and Other Total
---------- ---------- --------- -----
Valuation of derivative
instruments $ 10 $ 6 $ - $ 16
Settlements of derivative
instruments 3 18 - 21
Dispositions 385 71 (3) 453
Investment write-downs (110) (180) (4) (294)
---------- ---------- --------- -----
Total $ 288 $ (85) $ (7) $ 196
========== ========== ========= =====
THE ALLSTATE CORPORATION
SEGMENT RESULTS
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------------ ------------------
($ in millions) Est. Est.
2004 2003 2004 2003
-------- -------- -------- --------
Property-Liability
Premiums written $ 6,499 $ 6,199 $ 26,531 $ 25,187
======== ======== ======== ========
Premiums earned $ 6,607 $ 6,302 $ 25,989 $ 24,677
Claims and claims expense 4,175 4,248 17,843 17,432
Amortization of deferred
policy acquisition costs 1,016 930 3,874 3,520
Operating costs and expenses 629 629 2,396 2,326
Restructuring and related
charges 25 12 46 67
-------- -------- -------- --------
Underwriting income 762 483 1,830 1,332
-------- -------- -------- --------
Net investment income 463 435 1,773 1,677
Income tax expense on
operations 350 238 955 682
-------- -------- -------- --------
Operating income 875 680 2,648 2,327
Realized capital gains and
losses, after-tax 125 72 397 192
Gain on disposition of
operations, after-tax - - - 3
Cumulative effect of change
in accounting principle,
after-tax - - - (1)
-------- -------- -------- --------
Net income $ 1,000 $ 752 $ 3,045 $ 2,521
======== ======== ======== ========
Catastrophe losses $ 412 $ 412 $ 2,468 $ 1,489
======== ======== ======== ========
Operating ratios
Claims and claims expense
ratio 63.2 67.4 68.7 70.6
Expense ratio 25.3 24.9 24.3 24.0
-------- -------- -------- --------
Combined ratio 88.5 92.3 93.0 94.6
======== ======== ======== ========
Effect of catastrophe
losses on combined ratio 6.2 6.5 9.5 6.0
======== ======== ======== ========
Effect of restructuring
and related charges on
combined ratio 0.4 0.2 0.2 0.3
======== ======== ======== ========
Effect of Discontinued
Lines and Coverages on
combined ratio - 0.1 2.5 2.3
======== ======== ======== ========
Allstate Financial
Premiums and deposits $ 4,163 $ 3,303 $ 15,919 $ 13,095
======== ======== ======== ========
Investments including
Separate Accounts assets $ 86,907 $ 76,320 $ 86,907 $ 76,320
======== ======== ======== ========
Premiums and contract
charges $ 564 $ 594 $ 2,072 $ 2,304
Net investment income 890 824 3,410 3,233
Periodic settlements and
accruals on non-hedge
derivative instruments 16 8 49 23
Contract benefits 444 471 1,618 1,851
Interest credited to
contractholder funds 531 466 1,983 1,846
Amortization of deferred
policy acquisition costs 118 124 471 492
Operating costs and expenses 169 174 634 672
Restructuring and related
charges - 6 5 7
Income tax expense on
operations 66 84 269 243
-------- -------- -------- --------
Operating income 142 101 551 449
Realized capital gains and
losses, after-tax 87 (11) (3) (53)
DAC and DSI amortization
relating to realized capital
gains and losses, after-tax (61) (10) (89) (30)
Reclassification of periodic
settlements and accruals on
non-hedge
derivative instruments,
after-tax (11) (5) (32) (15)
Gain (loss) on disposition of
operations, after-tax 16 (20) (6) (29)
Cumulative effect of change
in accounting principle,
after-tax - (17) (175) (17)
-------- -------- -------- --------
Net income $ 173 $ 38 $ 246 $ 305
======== ======== ======== ========
Corporate and Other
Net investment income $ 25 $ 16 $ 101 $ 62
Operating costs and expenses 86 72 318 278
Income tax benefit on
operations (30) (27) (109) (102)
-------- -------- -------- --------
Operating loss (31) (29) (108) (114)
Realized capital gains and
losses, after-tax - (3) (2) (5)
Dividends on preferred
securities of subsidiary
trust - - - (5)
Cumulative effect of change
in accounting principle,
after-tax - 3 - 3
-------- -------- -------- --------
Net loss $ (31) $ (29) $ (110) $ (121)
======== ======== ======== ========
Consolidated net income $ 1,142 $ 761 $ 3,181 $ 2,705
======== ======== ======== ========
THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
------- ------- ------- ------- ------- -------
Consolidated
Underwriting
Summary
Allstate
Protection $ 761 $ 492 54.7 $ 2,468 $ 1,903 29.7
Discontinued
Lines and
Coverages 1 (9) 111.1 (638) (571) (11.7)
------- ------- ------- -------
Underwriting
income $ 762 $ 483 57.8 $ 1,830 $ 1,332 37.4
======= ======= ======= =======
Allstate Protection
Underwriting
Summary
Premiums written $ 6,498 $ 6,197 4.9 $26,527 $25,175 5.4
======= ======= ======= =======
Premiums earned $ 6,605 $ 6,300 4.8 $25,983 $24,664 5.3
Claims and claims
expense 4,176 4,240 (1.5) 17,208 16,858 2.1
Amortization of
deferred policy
acquisition
costs 1,016 930 9.2 3,874 3,520 10.1
Operating costs
and expenses 627 626 0.2 2,387 2,316 3.1
Restructuring and
related charges 25 12 108.3 46 67 (31.3)
------- ------- ------- -------
Underwriting
income $ 761 $ 492 54.7 $ 2,468 $ 1,903 29.7
======= ======= ======= =======
Catastrophe
losses $ 412 $ 412 - $ 2,468 $ 1,489 65.7
======= ======= ======= =======
Operating ratios
Claims and
claims expense
ratio 63.2 67.3 66.2 68.4
Expense ratio 25.3 24.9 24.3 23.9
------- ------- ------- -------
Combined ratio 88.5 92.2 90.5 92.3
======= ======= ======= =======
Effect of
catastrophe
losses
on combined
ratio 6.2 6.5 9.5 6.0
======= ======= ======= =======
Effect of
restructuring
and related
charges on
combined ratio 0.4 0.2 0.2 0.3
======= ======= ======= =======
Discontinued Lines
and Coverages
Underwriting
Summary
Premiums written $ 1 $ 2 (50.0) $ 4 $ 12 (66.7)
======= ======= ======= =======
Premiums earned $ 2 $ 2 - $ 6 $ 13 (53.8)
Claims and claims
expense (1) 8 (112.5) 635 574 10.6
Operating costs
and expenses 2 3 (33.3) 9 10 (10.0)
------- ------- ------- -------
Underwriting
income (loss) $ 1 $ (9) 111.1 $ (638) $ (571) (11.7)
======= ======= ======= =======
Effect of
Discontinued
Lines and
Coverages
on the
Property-
Liability
combined ratio - 0.1 2.5 2.3
======= ======= ======= =======
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ---------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
-------- ------- ------- ------- ------- -------
Allstate brand
Standard auto $ 3,611 $ 3,416 5.7 $14,491 $13,632 6.3
Non-standard auto 396 455 (13.0) 1,777 1,975 (10.0)
-------- ------- ------- -------
Auto 4,007 3,871 3.5 16,268 15,607 4.2
Involuntary auto 49 47 4.3 232 226 2.7
Commercial lines 228 215 6.0 922 854 8.0
Homeowners 1,404 1,279 9.8 5,639 5,153 9.4
Other personal
lines 323 308 4.9 1,397 1,313 6.4
-------- ------- ------- -------
6,011 5,720 5.1 24,458 23,153 5.6
Encompass brand
Standard auto 280 277 1.1 1,212 1,202 0.8
Non-standard auto
(Deerbrook) 34 42 (19.0) 153 170 (10.0)
-------- ------- ------- -------
Auto 314 319 (1.6) 1,365 1,372 (0.5)
Involuntary auto 9 10 (10.0) 40 40 -
Homeowners 136 123 10.6 552 510 8.2
Other personal
lines 28 25 12.0 112 100 12.0
-------- ------- ------- -------
487 477 2.1 2,069 2,022 2.3
Allstate Protection
(1) 6,498 6,197 4.9 26,527 25,175 5.4
Discontinued Lines
and Coverages 1 2 (50.0) 4 12 (66.7)
-------- ------- ------- -------
Property-Liability
(1) $ 6,499 $ 6,199 4.8 $26,531 $25,187 5.3
======== ======= ======= =======
Allstate Protection
Standard auto $ 3,891 $ 3,693 5.4 $15,703 $14,834 5.9
Non-standard auto 430 497 (13.5) 1,930 2,145 (10.0)
-------- ------- ------- -------
Auto 4,321 4,190 3.1 17,633 16,979 3.9
Involuntary auto 58 57 1.8 272 266 2.3
Commercial lines 228 215 6.0 922 854 8.0
Homeowners 1,540 1,402 9.8 6,191 5,663 9.3
Other personal
lines 351 333 5.4 1,509 1,413 6.8
-------- ------- ------- -------
$ 6,498 $ 6,197 4.9 $26,527 $25,175 5.4
======== ======= ======= =======
(1) In the fourth quarter of 2004, growth in premiums written was
negatively impacted by accruals for premium refunds in standard
auto and reinsurance transactions in homeowners totaling 0.7% for
Allstate Protection and 0.8% for Property-Liability.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY NET RATE CHANGES APPROVED (1)
Three Months Ended
December 31, 2004
-------------------------------------------------
Annual Impact
of Rate Changes on
Number of Weighted Average State Specific
States Rate Change (%) Premiums Written (%)
---------- ---------------- --------------------
Allstate brand
Standard auto 11 0.6 4.6
Non-standard auto 5 0.2 4.4
Homeowners 2 - 4.4
Encompass brand
Standard auto 6 0.4 3.7
Homeowners 8 4.3 5.3
Twelve Months Ended
December 31, 2004
-------------------------------------------------
Annual Impact
of Rate Changes on
Number of Weighted Average State Specific
States Rate Change (%) Premiums Written (%)
---------- ---------------- --------------------
Allstate brand
Standard auto 23 1.3 3.3
Non-standard auto 8 1.6 4.6
Homeowners 11 0.3 3.3
Encompass brand
Standard auto 29 2.8 4.4
Non-standard auto
(Deerbrook) 9 2.1 3.8
Homeowners 31 9.3 6.2
(1) Rate increases that are indicated based on a loss trend analysis
to achieve a targeted return, will continue to be pursued in all
locations and for all products.
THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS
Three Months Ended December 31,
-----------------------------------------------------
($ in millions) Est. Est. Est. Est.
2004 2003 2004 2003 2004 2003 2004 2003
------- ------- ----- ------ ------ ----- ----- -----
Effect of
Catastrophe
Losses
on the Loss Expense
Premiums Earned Loss Ratio Ratio Ratio
--------------- ------------ ------------ -----------
Allstate brand
Standard
auto $ 3,651 $ 3,446 67.5 69.1 0.5 0.2 24.7 24.1
Non-standard
auto 432 486 51.4 59.1 0.5 0.5 21.5 20.5
------- -------
Auto 4,083 3,932 65.8 67.9 0.5 0.2 24.4 23.6
Homeowners 1,383 1,269 44.8 67.4 11.2 28.7 24.5 23.9
Other (1) 631 595 91.3 61.7 36.3 4.9 27.7 31.6
------- -------
Total
Allstate
brand 6,097 5,796 63.6 67.1 6.5 6.9 24.8 24.5
Encompass brand
Standard auto 299 301 61.2 61.5 - - 32.1 28.9
Non-standard
auto
(Deerbrook) 37 43 67.6 88.4 - 2.4 24.3 30.2
------- -------
Auto 336 344 61.9 64.8 - 0.3 31.3 29.1
Homeowners 135 127 41.5 73.2 3.0 6.3 31.1 29.2
Other (1) 37 33 81.1 100.0 13.5 6.1 29.7 33.3
------- -------
Total
Encompass
brand 508 504 57.9 69.2 1.8 2.1 31.1 29.4
------- -------
Allstate
Protection $ 6,605 $ 6,300 63.2 67.3 6.2 6.5 25.3 24.9
======= =======
Twelve Months Ended December 31,
-----------------------------------------------------
($ in millions) Est. Est. Est. Est.
2004 2003 2004 2003 2004 2003 2004 2003
------- ------- ----- ------ ------ ----- ----- -----
Effect of
Catastrophe
Losses
on the Loss Expense
Premiums Earned Loss Ratio Ratio Ratio
--------------- ------------ ------------ -----------
Allstate brand
Standard
auto $14,290 $13,406 64.4 70.1 0.7 1.4 24.0 23.7
Non-standard
auto 1,823 2,075 53.9 65.6 0.9 0.7 20.4 19.8
------- -------
Auto 16,113 15,481 63.2 69.5 0.7 1.3 23.6 23.2
Homeowners 5,349 4,892 67.4 63.2 29.2 21.8 23.0 22.8
Other (1) 2,482 2,316 84.6 68.1 27.7 5.6 27.2 26.7
------- -------
Total
Allstate
brand 23,944 22,689 66.3 68.0 9.8 6.2 23.9 23.5
Encompass brand
Standard auto 1,208 1,195 61.3 69.4 0.5 0.7 29.1 28.1
Non-standard
auto
(Deerbrook) 161 163 75.8 84.7 0.6 0.7 25.4 29.4
------- -------
Auto 1,369 1,358 63.1 71.2 0.6 0.7 28.6 28.3
Homeowners 529 494 63.7 76.7 16.4 16.6 30.1 29.2
Other (1) 141 123 84.4 71.5 5.7 4.0 29.1 40.7
------- -------
Total
Encompass
brand 2,039 1,975 64.7 72.6 5.1 4.9 29.0 29.3
------- -------
Allstate
Protection $25,983 $24,664 66.2 68.4 9.5 6.0 24.3 23.9
======= =======
(1) Other includes involuntary auto, commercial lines and other
personal lines.
THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
EFFECT OF PRETAX PRIOR YEAR RESERVE REESTIMATES ON THE COMBINED RATIO
Three Months Ended December 31,
-------------------------------------------------
Effect of Pretax Reserve
Pretax Re-estimates on the
Reserve Re-estimates (1) Combined Ratio
------------------------ ------------------------
Est. Est.
($ in millions) 2004 2003 2004 2003
------------ ----------- ----------- ------------
Auto $ (106)$ (44) (1.6) (0.7)
Homeowners (57) 30 (0.9) 0.5
Other (25) (17) (0.4) (0.3)
------------ ----------- ----------- ------------
Allstate
Protection (188) (31) (2.9) (0.5)
Discontinued
Lines and
Coverages (1) 8 - 0.1
------------ ----------- ----------- ------------
Property-
Liability $ (189)$ (23) (2.9) (0.4)
============ =========== =========== ============
Allstate brand $ (190)$ (45) (2.9) (0.7)
Encompass brand 2 14 - 0.2
------------ ----------- ----------- ------------
Allstate Protection $ (188)$ (31) (2.9) (0.5)
============ =========== =========== ============
Twelve Months Ended December 31,
-------------------------------------------------
Effect of Pretax Reserve
Pretax Re-estimates on the
Reserve Re-estimates (1) Combined Ratio
------------------------ ------------------------
Est. Est.
($ in millions) 2004 2003 2004 2003
------------ ----------- ----------- ------------
Auto $ (657) $ (221) (2.5) (0.9)
Homeowners (169) 13 (0.7) 0.1
Other (39) 35 (0.1) 0.1
------------ ----------- ----------- ------------
Allstate
Protection (865) (173) (3.3) (0.7)
Discontinued
Lines and
Coverages 635 574 2.4 2.3
------------ ----------- ----------- ------------
Property-
Liability $ (230) $ 401 (0.9) 1.6
============ =========== =========== ============
Allstate brand $ (872) $ (209) (3.3) (0.8)
Encompass brand 7 36 - 0.1
------------ ----------- ----------- ------------
Allstate Protection $ (865) $ (173) (3.3) (0.7)
============ =========== =========== ============
(1) Favorable reserve reestimates are shown in parentheses.
THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND DEPOSITS
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
Est. Percent Est. Percent
($ in millions) 2004 2003 Change 2004 2003 Change
-------- ------ ------- ------- ------- -------
Life Products
Interest-
sensitive
life $ 370 $ 323 14.6 $ 1,393 $ 1,090 27.8
Traditional 89 105 (15.2) 327 389 (15.9)
Other 138 177 (22.0) 513 647 (20.7)
-------- ------ ------- -------
597 605 (1.3) 2,233 2,126 5.0
Annuities
Fixed
annuities -
deferred 2,137 1,083 97.3 6,750 4,834 39.6
Fixed
annuities -
immediate 277 225 23.1 831 842 (1.3)
Variable
annuities 411 596 (31.0) 1,631 2,151 (24.2)
-------- ------ ------- -------
2,825 1,904 48.4 9,212 7,827 17.7
Institutional
Products
Indexed
funding
agreements 50 50 - 51 440 (88.4)
Funding
agreements
backing
medium-term
notes 535 601 (11.0) 3,983 2,268 75.6
Other - - - 3 7 (57.1)
-------- ------ ------- -------
585 651 (10.1) 4,037 2,715 48.7
Bank Deposits 156 143 9.1 437 427 2.3
-------- ------ ------- -------
Total $ 4,163 $3,303 26.0 $15,919 $13,095 21.6
======== ====== ======= =======
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, December 31,
($ in millions, except par value data) 2004 (Est.) 2003
------------ ------------
Assets
Investments
Fixed income securities, at fair value
(amortized cost $90,657 and $82,607) $ 95,715 $ 87,741
Equity securities, at fair value (cost
$4,566 and $4,028) 5,895 5,288
Mortgage loans 7,856 6,539
Short-term 4,133 1,815
Other 1,931 1,698
------------ ------------
Total investments 115,530 103,081
Cash 414 366
Premium installment receivables, net 4,721 4,386
Deferred policy acquisition costs 4,968 4,842
Reinsurance recoverables, net 4,323 3,121
Accrued investment income 1,014 1,068
Property and equipment, net 1,018 1,046
Goodwill 825 929
Other assets 2,535 1,878
Separate Accounts 14,377 13,425
------------ ------------
Total assets $ 149,725 $ 134,142
============ ============
Liabilities
Reserve for property-liability insurance
claims and claims expense $ 19,338 $ 17,714
Reserve for life-contingent contract
benefits 11,754 11,020
Contractholder funds 55,709 47,071
Unearned premiums 9,932 9,187
Claim payments outstanding 787 698
Other liabilities and accrued expenses 9,842 8,283
Deferred income taxes 829 1,103
Short-term debt 43 3
Long-term debt 5,291 5,073
Separate Accounts 14,377 13,425
------------ ------------
Total liabilities 127,902 113,577
------------ ------------
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,
683 million and 704 million shares
outstanding 9 9
Additional capital paid-in 2,685 2,614
Retained income 24,043 21,641
Deferred compensation expense (157) (194)
Treasury stock, at cost (217 million and
196 million shares) (7,372) (6,261)
Accumulated other comprehensive income:
Unrealized net capital gains and losses 2,988 3,125
Unrealized foreign currency translation
adjustments 16 (10)
Minimum pension liability adjustment (389) (359)
------------ ------------
Total accumulated other
comprehensive income 2,615 2,756
------------ ------------
Total shareholders' equity 21,823 20,565
------------ ------------
Total liabilities and shareholders'
equity $ 149,725 $ 134,142
============ ============
THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, December 31,
(in millions) 2004 (Est.) 2003
------------- ------------
Cash flows from operating activities
Net income $ 3,181 $ 2,705
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, amortization and other
non-cash items (4) (3)
Realized capital gains and losses (591) (196)
Loss on disposition of operations 24 41
Cumulative effect of change in
accounting principle 175 15
Interest credited to contractholder
funds 2,001 1,846
Changes in:
Policy benefit and other
insurance reserves 1,680 1,127
Unearned premiums 614 546
Deferred policy acquisition
costs (443) (414)
Premium installment receivables,
net (345) (284)
Reinsurance recoverables, net (1,052) (227)
Income taxes payable 11 582
Other operating assets and
liabilities 217 (47)
------------- ------------
Net cash provided by
operating activities 5,468 5,691
------------- ------------
Cash flows from investing activities
Proceeds from sales
Fixed income securities 19,839 20,298
Equity securities 4,580 2,700
Investment collections
Fixed income securities 5,904 6,652
Mortgage loans 772 733
Investment purchases
Fixed income securities (33,720) (35,627)
Equity securities (4,659) (3,351)
Mortgage loans (337) (1,175)
Change in short-term investments, net (1,098) 419
Change in other investments, net (1,804) 56
Purchases of property and equipment, net (200) (169)
------------- ------------
Net cash used in investing activities (10,723) (9,464)
------------- ------------
Cash flows from financing activities
Change in short-term debt, net 40 (276)
Proceeds from issuance of long-term debt 647 410
Repayment of long-term debt (19) (332)
Contractholder fund deposits 13,616 10,373
Contractholder fund withdrawals (7,088) (5,794)
Dividends paid (756) (633)
Treasury stock purchases (1,373) (153)
Other 236 82
------------- ------------
Net cash provided by financing
activities 5,303 3,677
------------- ------------
Net increase (decrease) in cash 48 (96)
Cash at beginning of year 366 462
------------- ------------
Cash at end of year $ 414 $ 366
============= ============
Allstate Protection Reestimates of Hurricane Catastrophe Losses Catastrophe losses for the fourth quarter of 2004 and the twelve month period ended December 31, 2004 include $367 million and $2.00 billion, respectively, net of recoveries from the Florida Hurricane Catastrophe Fund ("FHCF FHCF Florida Hurricane Catastrophe Fund FHCF Flying Horse Cracking Force (hacking) "), related to hurricanes Charley Charley elderly poodle that accompanied Steinbeck on trip across U.S. [Am. Lit.: John Steinbeck Travels with Charley in Weiss, 471] See : Dogs , Frances, Ivan Ivan - A Diana-like language making up part of VHDL. ["VHDL - The Designer Environment", A. Gilman, IEEE Design & Test 3, (Apr 1986)]. , and Jeanne Jeanne is a French female name, equivalent to the English Joan, Jane, Jean and several historical figures in English named Joanna. (Feminine forms of John) Historical people who have been called simply Jeanne: n. 1. Abbr. SE The direction or point on the mariner's compass halfway between due south and due east, or 135° east of due north. 2. An area or region lying in the southeast. 3. seaboard and other parts of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. during August and September of 2004. These estimates include net losses incurred on personal lines auto and property policies and net losses on commercial policies. As a result of these four hurricanes and their very adverse financial impacts, we are currently evaluating various measures in Florida, including proposals for legislative reform, purchasing additional reinsurance and rate actions. We are also continuing to reevaluate Verb 1. reevaluate - revise or renew one's assessment reassess appraise, assess, evaluate, valuate, value, measure - evaluate or estimate the nature, quality, ability, extent, or significance of; "I will have the family jewels appraised by a professional"; our countrywide coun·try·wide adv. & adj. Throughout a whole country; nationwide: launched a fundraising campaign countrywide; a countrywide search. Adj. 1. catastrophe risk management strategies for hurricanes and 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 exposures. Estimates of losses for these storms were increased $239 million 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. ($367 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ) and $0.33 per diluted share in the fourth quarter due to increased estimates of claim severity on personal lines and commercial property claims in Florida. When the initial estimates were prepared in the third quarter, these storms had only recently occurred, very few losses had been paid, and due to the extensive devastation and massive scale of these storms, it was not possible to gain access to and physically inspect a sufficiently large In mathematics, the phrase sufficiently large is used in contexts such as:
Estimates of losses from these storms are shown in the table below:
Estimate as of 12/31/2004
---------------------------
Estimate
Gross FHCF Net as of Estimate
($ in millions) Losses Recoveries Losses 9/30/2004 Change
-------- ---------- ------- ---------- --------
Personal Lines
Charley (August 13) $756 ($323) $433 $400 $33
Frances (September 3) 650 (235) 415 375 40
Ivan (September 14) 576 (47) 529 452 77
Jeanne (September 25) 330 -- 330 298 32
-------- ---------- ------- ---------- --------
Subtotal 2,312 (605) 1,707 1,525 182
Commercial 393 (98) 295 110 185
-------- ---------- ------- ---------- --------
Total Loss Estimate $2,705 ($703) $2,002 $1,635 $367
======== ========== ======= ========== ========
Memo:
Allstate Floridian
group $2,016 ($605) $1,411 $1,247 $164
======== ========== ======= ========== ========
Estimates of gross qualifying personal property losses for Charley, Frances and Ivan have exceeded the $312 million per occurrence FHCF retention, thus permitting reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of 90% of qualifying losses above the retention. For Jeanne, estimated qualifying property losses are $279 million, which is below the FHCF retention. Estimates of qualifying commercial habitational property losses for Charley and Frances have exceeded the $30 million per occurrence FHCF retention. For Ivan and Jeanne, estimated qualifying commercial habitational property losses are $27 million and $14 million, respectively, which are below the FHCF retention. For all of the storms, any adverse development of losses not qualifying for FHCF reimbursement will adversely impact net income if and when determined. Allstate Floridian Flor·i·da Abbr. FL or Fla. A state of the southeast United States bordering on the Atlantic Ocean and the Gulf of Mexico. It was admitted as the 27th state in 1845. Insurance Company and its subsidiaries (the "Allstate Floridian group") sell personal property insurance in Florida. The Allstate Floridian group is separately capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. , maintains distinct ratings and is not reinsured by other Allstate subsidiaries or affiliates that are not part of the group. During 2004, the Allstate Floridian group received $411 million in capital from Allstate Insurance Company. The current estimates of losses for these storms have a much greater degree of certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. than previous estimates, which were prepared shortly after these storms occurred. However, there are still factors and complications that may cause future development of these estimates to be either favorable or unfavorable. Among other things, there are still claims that may be reported; we are still evaluating the impact in communities that were hit by more than one hurricane; and our evaluation of losses is complicated by the fact that property damage resulted from both flooding Refers to various denial-of-service techniques that saturate a critical resource, leading either to system failure or to the exclusion of legitimate access. See e-mail bombing, Fraggle attack, smurf attack and SYN-flood attack. , which Allstate policies do not cover, and high winds, which Allstate policies typically do cover. In addition, because of increased demand for services and supplies in the areas affected by the hurricanes and the length of time required to repair the damage, our loss estimate may not accurately reflect inflated costs of repair. Finally, the loss estimates could be affected by the amount of FHCF reimbursements actually received. Definitions of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Operating Ratios Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: Claims and claims expense ("loss") ratio is the ratio of claims and claims expense to premiums earned. Loss ratios include the impact of catastrophe losses. Expense ratio is the ratio of amortization of DAC, operating costs 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 to premiums earned. Combined Ratio is the ratio of claims and claims expense, amortization of DAC, operating costs and expenses and restructuring and related charges to premiums earned. The difference between 100% and the combined ratio represents underwriting income as a percentage of premiums earned. Effect of 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 on combined ratio is the ratio of claims and claims expense and other costs and expenses in the Discontinued Lines and Coverages segment to Property-Liability premiums earned. The sum of the effect of Discontinued Lines and Coverages on the combined ratio and the Allstate Protection combined ratio is equal to the Property-Liability combined ratio. 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 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 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. 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 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. investments, replicated assets or product attributes (e.g. net investment income and interest credited to contractholder funds) and by doing so, 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, 2004 and 2003.
For the three months ended December 31,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------ ---------- ------------- -------------
($ in millions, Est. Est. Est. Est.
except per share 2004 2003 2004 2003 2004 2003 2004 2003
data) ----- ---- ----- ---- ------ ----- ------ ------
Operating income $875 $680 $142 $101 $986 $752 $1.42 $1.06
Realized capital
gains and losses 192 111 136 (17) 330 91
Income tax benefit
(expense) (67) (39) (49) 6 (118) (33)
------- ----- ---- ----- ------ -----
Realized capital
gains and losses,
after-tax 125 72 87 (11) 212 58 0.30 0.09
DAC and DSI
amortization
relating to
realized capital
gains and losses,
after-tax -- -- (61) (10) (61) (10) (0.09) (0.02)
Reclassification of
periodic settlements
and accruals on
non-hedge derivative
instruments,
after-tax -- -- (11) (5) (11) (5) (0.01) (0.01)
Gain (loss) on
disposition of
operations, after-
tax -- -- 16 (20) 16 (20) 0.02 (0.03)
------- ----- ---- ----- ------ ----- ------ ------
Income before
cumulative effect
of change in
accounting
principle, after-
tax 1,000 752 173 55 1,142 775 1.64 1.09
Cumulative effect
of change in
accounting
principle, after-
tax -- -- -- (17) -- (14) -- (0.01)
------- ----- ---- ----- ------ ----- ------ ------
Net income (loss) $1,000 $752 $173 $38 $1,142 $761 $1.64 $1.08
======= ==== ===== ==== ======= ===== ====== ======
For the twelve months ended December 31,
Property- Allstate Per diluted
Liability Financial Consolidated share
------------- ----------- ------------ --------------
($ in millions, Est. Est. Est. Est.
except per 2004 2003 2004 2003 2004 2003 2004 2003
share data) ------ ------ ----- ----- ------ ------ ----- -----
Operating income $2,648 $2,327 $ 551 $ 449 $3,091 $2,662 $4.41 $3.77
Realized capital
gains and losses 592 288 1 (85) 591 196
Income tax
benefit
(expense) (195) (96) (4) 32 (199) (62)
------ ------ ----- ---- ------ ------
Realized capital
gains and
losses,
after-tax 397 192 (3) (53) 392 134 0.56 0.19
DAC and DSI
amortization
relating to
realized capital
gains and
losses,
after-tax. -- -- (89) (30) (89) (30) (0.13) (0.05)
Reclassification
of periodic
settlements
and accruals
on non-hedge
derivative
instruments,
after-tax -- -- (32) (15) (32) (15) (0.04) (0.02)
(Loss) gain on
disposition of
operations,
after-tax -- 3 (6) (29) (6) (26) (0.01) (0.04)
------ ------ ----- ---- ------ ------ ------ ------
Income before
dividends on
preferred
securities and
cumulative
effect of change
in accounting
principle,
after-tax 3,045 2,522 421 322 3,356 2,725 4.79 3.85
Dividends on
preferred
securities of
subsidiary trust,
after-tax -- -- -- -- -- (5) -- --
Cumulative effect
of change in
accounting
principle,
after-tax -- (1) (175) (17) (175) (15) (0.25) (0.02)
------ ------ ----- ---- ------ ------ ------ ------
Net income
(loss) $3,045 $2,521 $ 246 $305 $3,181 $2,705 $ 4.54 $ 3.83
====== ====== ===== ==== ====== ====== ====== ======
In this press release, we provide guidance on operating income per diluted share for 2005 (assuming a level of average expected catastrophe losses used in pricing for the year). A reconciliation of this measure to net income is not possible 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 possible, 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 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 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. at the beginning and at the end of the 12-month period, 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 and that are driven by developments, 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 generally not influenced by management: 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 reconciliation.
($ in millions) For the twelve months
ended December 31,
--------------------------
Est. 2004 2003
------------ ------------
Return on equity
Numerator:
Net income $ 3,181 $ 2,705
============ ============
Denominator:
Beginning shareholders' equity 20,565 17,438
Ending shareholders' equity 21,823 20,565
Average shareholders' equity $ 21,194 $ 19,002
============ ============
ROE 15.0 14.2
============ ============
($ in millions) For the twelve months
ended December 31,
--------------------------
Est. 2004 2003
------------ ------------
Operating income return on equity
Numerator:
Operating income $ 3,091 $ 2,662
============ ============
Denominator:
Beginning shareholders' equity 20,565 17,438
Unrealized net capital gains 3,125 2,602
------------ ------------
Adjusted beginning shareholders'
equity 17,440 14,836
Ending shareholders' equity 21,823 20,565
Unrealized net capital gains 2,988 3,125
------------ ------------
Adjusted ending shareholders'
equity 18,835 17,440
Average shareholders' equity $ 18,138 $ 16,138
============ ============
Operating income ROE 17.0 16.5
============ ============
In this press release, we provide guidance on operating income return on equity for 2005. A reconciliation of this measure to return on equity is not possible on a forward-looking basis because it is not possible to provide a reliable reconciliation of operating income to net income on a forward looking basis for the reasons stated above or a reliable reconciliation of shareholders' equity excluding unrealized net capital gains and losses to shareholders' equity because unrealized net capital gains and losses can vary substantially from one period to another. The potential variability of the above reconciling items could have a significant impact on return on equity. 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 shareholders' equity after excluding the net impact of unrealized net capital gains on fixed income securities and related DAC and life insurance reserves by 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 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 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 reconciliation:
As of
December 31,
-------------------
Est.
(in millions, except per share data) 2004 2003
--------- ---------
Book value per diluted share
Numerator:
Shareholders' equity $ 21,823 $ 20,565
--------- ---------
Denominator:
Shares outstanding and dilutive potential shares
outstanding 688.0 708.2
--------- ---------
Book value per diluted share $ 31.72 $ 29.04
--------- ---------
Book value per diluted share, excluding the net
impact of unrealized net capital gains on
fixed income securities
Numerator:
Shareholders' equity $ 21,823 $ 20,565
Unrealized net capital gains on fixed income
securities 2,134 2,307
--------- ---------
Adjusted shareholders' equity $ 19,689 $ 18,258
--------- ---------
Denominator:
Shares outstanding and dilutive potential shares
outstanding 688.0 708.2
--------- ---------
Book value per diluted share, excluding unrealized
net capital gains on fixed income securities $ 28.62 $ 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, 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, maintenance charges 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 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 Allstate Financial's GAAP net income in the following tables.
Three Months Twelve Months
Ended Ended
December 31, December 31,
--------------- ----------------
Est. Est.
($ in millions) 2004 2003 2004 2003
------- ------- ------- -------
Life and annuity premiums and
contract charges $ 564 $ 594 $ 2,072 $ 2,304
Net investment income(1) 906 832 3,459 3,256
Contract benefits (444) (471) (1,618) (1,851)
Interest credited to contractholder
funds(2) (526) (466) (1,956) (1,846)
------- ------- ------- -------
Gross margin 500 489 1,957 1,863
Amortization of DAC and DSI (123) (124) (498) (492)
Operating costs and expenses (169) (174) (634) (672)
Restructuring and related charges -- (6) (5) (7)
Income tax expense (66) (84) (269) (243)
Realized capital gains and losses,
after-tax 87 (11) (3) (53)
DAC and DSI amortization relating
to realized capital gains and
losses, after-tax (61) (10) (89) (30)
Reclassification of periodic
settlements and accruals on non-
hedge derivative instruments,
after-tax (11) (5) (32) (15)
Loss on disposition of operations,
after-tax 16 (20) (6) (29)
Cumulative effect of change in
accounting principle, after-tax -- (17) (175) (17)
------- ------- ------- -------
Allstate Financial net income $ 173 $ 38 $ 246 $ 305
------- ------- ------- -------
(1) Net investment income includes periodic settlements and accruals
on non-hedge derivative instruments, pretax, totaling $16 million
for the fourth quarter of 2004, $8 million for the fourth quarter
of 2003, $49 million for the twelve months ended December 31, 2004
and $23 million for the twelve months ended December 31, 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 $20 million in the fourth
quarter of 2004 and $45 million for the twelve months ended
December 31, 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 life-contingent immediate annuity premiums and cost of insurance contract charges less contract benefits. Benefit margin excludes the implied interest on life-contingent immediate annuities, which is included in the calculation of investment margin, and mortality charges on variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. , which are included as a component of maintenance charges. 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 December 31,
-----------------------------------------------------------
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 $ -- $ -- $ 300 $ 347 $ -- $ -- $ -- $ -- $ 300 $ 347
Contract
charges -- -- 139 130 104 93 21 24 264 247
Net
investment
Income
(1) 906 832 -- -- -- -- -- -- 906 832
Contract
benefits (142) (134) (302) (337) -- -- -- -- (444) (471)
Interest
credited
to
contract-
holder
funds (2) (526) (466) -- -- -- -- -- -- (526) (466)
----- ------ ----- ----- ---- ------ ---- ----- ----- -----
$ 238 $ 232 $ 137 $ 140 $104 $ 93 $ 21 $ 24 $ 500 $ 489
===== ====== ===== ===== ==== ====== ==== ===== ===== =====
(1) Net investment income includes periodic settlements and accruals
on non-hedge derivative instruments, pretax, totaling $16 million
for the fourth quarter of 2004 and $8 million for the fourth
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 $20 million in the fourth
quarter of 2004. Prior periods have not been restated.
Twelve Months Ended December 31,
------------------------------------------------------------
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 $-- $-- $1,045 $1,365 $-- $-- $-- $-- $1,045 $1,365
Contract
charges -- -- 558 518 393 342 76 79 1,027 939
Net
investment
income
(1) 3,459 3,256 -- -- -- -- -- -- 3,459 3,256
Contract
benefits(538) (514)(1,080)(1,337) -- -- -- -- (1,618)(1,851)
Interest
credited
to
contract-
holder
funds
(2) (1,956)(1,846) -- -- -- -- -- -- (1,956)(1,846)
----- ----- ----- ---- ---- ---- ---- ---- ----- -----
$ 965 $ 896 $ 523 $ 546 $393 $ 342 $ 76 $ 79 $1,957 $1,863
===== ===== ===== ===== ==== ===== ==== ==== ====== ======
(1) Net investment income includes periodic settlements and accruals
on non-hedge derivative instruments, pretax, totaling $49 million
for the twelve months ended December 31, 2004 and $23 million for
the twelve months ended December 31, 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 $45 million for the twelve
months ended December 31, 2004. Prior periods have not been
restated.
Operating Measures We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following operating financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums earned is a GAAP measure. Premiums are considered earned and are included in financial results on a pro-rata Pro-rata Used to describe a proportionate allocation. Notes: For example, a pro-rata dividend means that every shareholder gets an equal proportion for each share they own. See also: Dividend basis over the policy period. The portion of premiums written applicable to the unexpired terms of the policies is recorded as unearned premiums on our Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Financial Position. A reconciliation of premiums written to premiums earned is presented in the following table.
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
($ in millions) Est. Est.
2004 2003 2004 2003
-------- -------- -------- --------
Premiums written $ 6,499 $ 6,199 $ 26,531 $ 25,187
Change in Property-Liability
unearned Premiums 88 88 (608) (581)
Other 20 15 66 71
-------- -------- -------- --------
Premiums earned $ 6,607 $ 6,302 $ 25,989 $ 24,677
======== ======== ======== ========
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 Twelve Months Ended
December 31, December 31,
------------------ -------------------
($ in millions) Est. Est.
2004 2003 2004 2003
-------- -------- -------- --------
Life and annuity premiums(1) $ 300 $ 347 $ 1,045 $ 1,365
Deposits to contractholder
funds 3,536 2,528 13,616 10,373
Deposits to separate accounts 319 436 1,268 1,391
Change in unearned premiums and
other adjustments 8 (8) (10) (34)
-------- -------- -------- --------
Total Premiums and deposits $ 4,163 $ 3,303 $ 15,919 $ 13,095
======== ======== ======== ========
(1) Life and annuity contract charges in the amount of est. $264
million and $247 million for the three months ended December 31,
2004 and 2003, respectively, and est. $1.03 billion and $939
million for the twelve months ended December 31, 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 Agency 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 fourth quarter of 2004 and 2003 totaled $737 million and $609 million, respectively. New sales of financial products by Allstate exclusive agencies for the twelve months ended December 31, 2004 and 2003 totaled est. $2.27 billion and $1.83 billion, respectively. Forward Looking Statements 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 2005. 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: --Actual levels of PIF may be lower than projected if we are not able to grow or maintain our retention levels and new business levels due to competitive pressures. --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 particular, losses due to catastrophes may exceed the average expected level used in pricing for the year. --Claim frequency could be higher than expected. --Lower than projected interest rates and equity market returns could decrease consolidated net investment income, increase DAC amortization, reduce contract charges, investment margins and the profitability of the Allstate Financial segment. --Higher than projected interest rates and lower equity market returns could increase surrenders and withdrawals, increase DAC amortization and reduce the competitive position and 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 13,600 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(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, 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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