Allstate (ALL)

Consolidated Financial Results

Total revenues for the fourth quarter of 2009 were $8.1 billion, an increase of 22.7% compared to the fourth quarter of 2008.  This reflected lower realized capital losses, which decrease revenues, than the prior year quarter.  Partially offsetting this were decreases in net investment income of 19.0% and property-liability premiums of 2.3%.  Allstate’s fourth quarter 2009 net income was $518 million compared to a net loss of $1.1 billion in the fourth quarter of 2008 due to lower realized capital losses and improved operating income.  Operating income was $592 million in the fourth quarter of 2009 compared to $518 million in the same period of 2008, reflecting improved results in both Property-Liability and Allstate Financial.

Total 2009 revenues were $32.0 billion, an increase of 8.9% compared to 2008.  Net income totaled $854 million in 2009 compared to a net loss of $1.7 billion in 2008.  Revenue and net income increases during 2009 were due to lower realized capital losses.  Operating income increased 7.0% during 2009 to $1.9 billion due to an increase in the Property-Liability business, partly offset by lower operating income in Allstate Financial.

Property-Liability Combined Ratio Reflects Continued Strength in Auto

Allstate’s Property-Liability business produced a combined ratio of 93.2 in the fourth quarter of 2009 compared to 96.4 in the prior year quarter, resulting from continued margin strength in the auto business and actions taken to reduce expenses, partly offset by the impact of catastrophe losses on the homeowners business.  The underlying combined ratio was 88.1 for the year, in line with the outlook of 87 to 89 established at the beginning of 2009.  Management’s outlook for the 2010 underlying combined ratio is 88 to 90.

Allstate brand standard auto premiums written* for the fourth quarter of 2009 increased 0.7% compared to the prior year fourth quarter, with increases of 11.4% in new issued applications, 2.6% in average premium and 0.2 points in the renewal ratio, to 88.8.  Policies in force declined 1.0% versus the prior year quarter as improved sales and retention were offset by fewer policies available to renew.  The combined ratio was 93.7, a decline of 5.7 points from the fourth quarter of 2008, due to lower average claim costs and lower expenses partly offset by higher loss frequency.  Rate increases approved during the quarter averaged 5.5% in 15 states.

Allstate brand homeowners premiums written for the fourth quarter of 2009 increased 0.9% compared to the same period a year ago, as a 6.0% increase in average premium was partly offset by a 3.9% decline in policies in force.  The combined ratio was 89.0 in the fourth quarter of 2009 compared to 84.6 in the fourth quarter of 2008, reflecting higher catastrophe losses and non-catastrophe claim frequencies, partly offset by lower non-catastrophe claim severities.  Allstate continues to implement profit improvement actions in this business and also will benefit from rate increases averaging 6.5% in 22 states that were approved during the quarter.

Allstate had catastrophe losses of $328 million in the fourth quarter compared to $260 million in the fourth quarter of 2008.  Fourth quarter 2009 included catastrophe losses of $210 million from 13 events during the quarter and $148 million related to reestimates of events during the first nine months of 2009.

The Property-Liability expense ratio for the fourth quarter of 2009 was 24.9, a decline of 1.9 points compared to the prior year quarter, primarily resulting from a non-recurring write-off and benefit expense in 2008, partly offset by lower premiums earned.

Consolidated Financial Results

Total revenues for the third quarter of 2009 were $7.6 billion, an increase of 3.6% compared to the third quarter of 2008.  This reflected lower realized capital losses than the prior year quarter, partially offset by a decrease in net investment income and property-liability premiums.  Allstate’s third quarter net income was $221 million and operating income was $538 million, compared to a net loss of $923 million and an operating loss of $190 million in the third quarter of 2008.  Lower catastrophe losses contributed to the improvement in operating income.  The net income improvement reflected higher operating income and lower realized capital losses in the third quarter of 2009 compared to the prior year quarter.

Property-Liability Combined Ratio Reflects Continued Strength in Auto

Allstate’s Property-Liability business produced a combined ratio of 94.7 in the third quarter of 2009, resulting from continued margin strength in the auto business and actions taken to reduce expenses, partly offset by the impact of catastrophe losses on the homeowners business.  The underlying combined ratio was 88.0 in the third quarter and 88.1 in the first nine months of 2009, within the company’s 87-89 outlook range for the full year.  Management anticipates that the underlying combined ratio for the full year 2009 will be within its previous outlook range.

Allstate brand standard auto premiums written for the third quarter of 2009 were comparable to the prior year third quarter, with new issued applications increasing 12.0% and the renewal ratio increasing 0.2 points to 89.1.  Policies in force declined 1.3% versus the prior year quarter as improved sales and retention were offset by fewer policies available to renew.  The combined ratio was 92.7, up 1.7 points from the third quarter of 2008, primarily due to higher loss frequency, as frequency returned to historical norms following low levels in 2008.  Average claim cost increases were within expectations.

Allstate brand homeowners premiums written for the third quarter of 2009 declined 0.2% compared to the same period a year ago, resulting from a 4.1% decline in policies in force.  The combined ratio improved to 98.3 in the third quarter of 2009 compared to 181.3 in the third quarter of 2008, reflecting lower catastrophe losses, partly offset by higher non-catastrophe claim frequencies and severities.  Allstate continues to implement profit improvement actions in this business and will benefit in the future from rate increases averaging 6.9% in 19 states that were approved during the quarter.

Allstate had catastrophe losses of $407 million for the third quarter and $1.7 billion for the first nine months of 2009.  In comparison, the company had $1.8 billion of catastrophe losses in the third quarter and $3.1 billion in the first nine months of 2008, including $1.4 billion of losses from Hurricanes Ike and Gustav.

The Property-Liability expense ratio for the third quarter of 2009 was comparable to the prior year quarter primarily resulting from the timing of marketing expenditures and more focused technology spending, being offset by lower premiums earned and higher restructuring charges from staff reductions.  Excluding restructuring, the expense ratio declined 0.4 points in the third quarter of 2009 compared to the third quarter of 2008.

Consolidated Financial Results

Total revenues for the second quarter of 2009 were $8.5 billion, an increase of 14.5% ($1.1 billion) compared to the second quarter of 2008.  This reflected realized capital gains compared to realized capital losses in the prior year quarter, partially offset by a decrease in net investment income and property-liability premiums.  Allstate’s second quarter net income was $389 million compared to $25 million in the second quarter of 2008.  Second quarter 2009 operating income was $297 million, compared to $683 million in the prior year quarter.

Consolidated Financial Results

Total revenues for the first quarter of 2009 were $7.88 billion, a decline of 2.5% ($204 million) compared to the first quarter of 2008.  This reflected a decrease in net investment income and property-liability premiums.  Allstate’s first quarter net loss was $274 million, compared to a net loss of $1.13 billion in the prior quarter and net income of $348 million in the first quarter of 2008.  First quarter 2009 operating income of $454 million was offset by $488 million in after-tax net realized capital losses, which included a $254 million increase in the deferred tax valuation allowance, and an after-tax charge of $224 million for accelerated amortization of deferred policy acquisition and deferred sales inducement costs (commonly referred to as “DAC unlock”) at Allstate Financial.

Consolidated Financial Results

Net loss per diluted share was $(3.07) for the year ended December 31, 2008 compared to net income per diluted share of $7.77 for 2007, reflecting a $(6.71) impact for net realized capital losses in 2008 compared to net realized capital gains in 2007 and a $(0.90) impact for additional deferred policy acquisition costs (“DAC”) amortization relating to a DAC unlocking and a premium deficiency assessment in the fourth quarter of 2008.  Net loss per diluted share was $(2.11) in the fourth quarter of 2008 compared to net income per diluted share of $1.36 in the fourth quarter of 2007, reflecting a $(2.31) impact for net realized capital losses in the fourth quarter of 2008 compared to net realized capital gains in the fourth quarter of 2007 and a $(0.92) impact for additional DAC amortization relating to a DAC unlocking and a premium deficiency assessment in the fourth quarter of 2008.  Lower operating income in the year ended and fourth quarter ended December 31, 2008 also contributed to the changes.

Operating income per diluted share was $3.22 for the year ended December 31, 2008 compared to $6.47 in 2007, reflecting lower net investment income and decreased underwriting income.  Underwriting income declined primarily due to increased catastrophe losses in 2008, which had a $(2.44) impact on the ratio, reflecting a record level of tornadoes and two substantial hurricanes.  Operating income per diluted share was $0.97 in the fourth quarter of 2008 compared to $1.24 in the fourth quarter of 2007, reflecting lower net investment income and decreased underwriting income.  Investment income was lower in both the 2008 year and the fourth quarter due to a reduction in short-term interest rates and the decision to maintain ample liquidity given the uncertainty in the financial markets and economy.

Consolidated revenues were $6.6 billion in the fourth quarter of 2008 and $29.4 billion for the 2008 year.  The decrease in revenue of $2.4 billion and $7.4 billion for the quarter and full year in comparison to 2007 is primarily the result of realized net capital losses in 2008, which are treated as a reduction in revenue.

Book value per share declined to $23.51 as of December 31, 2008 from $31.44 as of September 30, 2008 and $38.58 as of December 31, 2007, due to a decline in total shareholders’ equity resulting primarily from higher unrealized net capital losses and the net loss in 2008.  Book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities, declined to $30.08 as of December 31, 2008 from $34.25 as of September 30, 2008 and $38.11 as of December 31, 2007.