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Subjects: EARNINGS, Conference Call, Webcast, Divestiture

Allstate Reports Third Quarter 2023 Results


The Allstate Corporation (NYSE: ALL) today reported financial results for the third quarter of 2023.

The Allstate Corporation Consolidated Highlights (1)

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions, except per share data and ratios)

2023

2022

% / pts
Change

 

2023

2022

% / pts
Change

Consolidated revenues

$

14,497

 

$

13,208

 

9.8

%

 

$

42,262

 

$

37,763

 

11.9

%

Net loss applicable to common shareholders

 

(41

)

 

(685

)

(94.0

)

 

 

(1,776

)

 

(1,091

)

62.8

 

per diluted common share (2)

 

(0.16

)

 

(2.55

)

(93.7

)

 

 

(6.76

)

 

(3.99

)

69.4

 

Adjusted net income (loss)*

 

214

 

 

(411

)

NM

 

 

 

(1,290

)

 

112

 

NM

 

per diluted common share* (2)

 

0.81

 

 

(1.53

)

NM

 

 

 

(4.91

)

 

0.40

 

NM

 

Return on Allstate common shareholders' equity (trailing twelve months)

 

 

 

 

 

Net income (loss) applicable to common shareholders

 

 

 

 

 

(14.7

)%

 

(1.5

)%

(13.2

)

Adjusted net income (loss)*

 

 

 

 

 

(9.7

)%

 

4.4

%

(14.1

)

Common shares outstanding (in millions)

 

 

 

 

 

261.7

 

 

265.9

 

(1.6

)

Book value per common share

 

 

 

 

 

47.79

 

 

58.39

 

(18.2

)

 

 

 

 

 

 

 

 

Consolidated premiums written (3)

 

14,425

 

 

13,157

 

9.6

 

 

 

41,021

 

 

37,660

 

8.9

 

Property-Liability insurance premiums earned

 

12,270

 

 

11,157

 

10.0

 

 

 

35,826

 

 

32,529

 

10.1

 

Property-Liability combined ratio

 

 

 

 

 

 

 

Recorded

 

103.4

 

 

111.6

 

(8.2

)

 

 

109.8

 

 

105.8

 

4.0

 

Underlying combined ratio*

 

91.9

 

 

96.4

 

(4.5

)

 

 

92.7

 

 

93.6

 

(0.9

)

Catastrophe losses

 

1,181

 

 

763

 

54.8

 

 

 

5,568

 

 

2,333

 

138.7

 

Total policies in force (in thousands)

 

 

 

 

 

190,089

 

 

185,007

 

2.7

 

(1)

Prior periods have been recast to reflect the impact of the adoption of Financial Accounting Standard Board ("FASB") guidance revising the accounting for certain long-duration insurance contracts in the Health and Benefits segment.

(2)

In periods where a net loss or adjusted net loss is reported, weighted average shares for basic earnings per share is used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

(3)

Includes premiums and contract charges for the Health and Benefits segment.

*

Measures used in this release that are not based on accounting principles generally accepted in the United States of America ("non-GAAP") are denoted with an asterisk and defined and reconciled to the most directly comparable GAAP measure in the "Definitions of Non-GAAP Measures" section of this document.
NM = not meaningful

"Allstate's focus on improving profitability while implementing our growth strategy made excellent progress this quarter," said Tom Wilson, Chair, President and CEO of The Allstate Corporation. "Improved underwriting performance, strong investment income and profits from Protection Services and Health and Benefits generated adjusted net income* of $214 million, or $0.81 per diluted common share in the quarter. Property-Liability earned premium growth of 10.0% and execution of other components of the profit improvement plan improved the underlying combined ratio compared to the prior year quarter. Property-Liability had an underwriting loss in the quarter of $414 million, however, reflecting continued increases in auto insurance loss costs, elevated catastrophe losses and adverse prior year loss development. In response, we continue to raise auto and homeowners insurance prices, improve expense efficiencies, restrict growth in profit challenged states and enhance claims practices. The execution of these comprehensive actions will restore margins to target levels."

"We are pursuing the sale of Allstate's Health and Benefits businesses since substantial value can be realized when aligned with a broader set of complementary businesses and product offerings. Allstate's voluntary workplace benefits business was combined with National General's group and individual health business, creating a broad-based benefits platform that serves 4.3 million policyholders and generated $240 million of adjusted net income over the last twelve months. This value creation was integral to the National General acquisition plan and now positions the business for additional growth and value enhancement. A sale would likely be completed in 2024."

"Significant progress has also been made in executing the strategy to increase property-liability market share and broaden protection provided to customers. Providing lowest cost protection requires continued cost reductions which is reflected in a lower expense ratio. Allstate exclusive agent productivity increased, excluding three states where profit improvement actions have reduced new business, and National General is growing through independent agents. Plans to increase growth in states that are achieving target auto insurance margins are now being initiated with further expansion planned for 2024. Allstate Protection Plans continues to grow its embedded protection offerings with U.S. retailers and internationally. Shareholder value will continue to grow with higher profitability, strategic capital allocation and organic long-term growth," concluded Wilson.

Third Quarter 2023 Results

 

Property-Liability Results

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions)

2023

2022

% / pts
Change

 

2023

2022

% / pts
Change

Premiums earned

$

12,270

 

$

11,157

 

10.0

%

 

$

35,826

 

$

32,529

 

10.1

%

Allstate brand

 

10,215

 

 

9,517

 

7.3

 

 

 

30,069

 

 

27,816

 

8.1

 

National General

 

2,055

 

 

1,640

 

25.3

 

 

 

5,757

 

 

4,713

 

22.2

 

 

 

 

 

 

 

 

 

Premiums written

$

13,304

 

$

12,037

 

10.5

%

 

$

37,707

 

$

34,307

 

9.9

%

Allstate brand

 

11,020

 

 

10,304

 

6.9

 

 

 

31,250

 

 

29,201

 

7.0

 

National General

 

2,284

 

 

1,733

 

31.8

 

 

 

6,457

 

 

5,106

 

26.5

 

 

 

 

 

 

 

 

 

Underwriting income (loss)

$

(414

)

$

(1,292

)

(68.0

)%

 

$

(3,509

)

$

(1,876

)

87.0

%

Allstate brand

 

(168

)

 

(1,049

)

(84.0

)

 

 

(2,987

)

 

(1,623

)

84.0

 

National General

 

(167

)

 

(124

)

34.7

 

 

 

(443

)

 

(133

)

NM

 

 

 

 

 

 

 

 

 

Recorded combined ratio

 

103.4

 

 

111.6

 

(8.2

)

 

 

109.8

 

 

105.8

 

4.0

 

Underlying combined ratio*

 

91.9

 

 

96.4

 

(4.5

)

 

 

92.7

 

 

93.6

 

(0.9

)

Allstate Protection Auto Results

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions, except ratios)

2023

2022

% / pts
Change

 

2023

2022

% / pts
Change

Premiums earned

$

8,345

$

7,545

10.6

%

 

$

24,374

$

21,974

10.9

%

Allstate brand

 

6,910

 

 

6,416

 

7.7

 

 

 

20,342

 

 

18,742

 

8.5

 

National General

 

1,435

 

 

1,129

 

27.1

 

 

 

4,032

 

 

3,232

 

24.8

 

 

 

 

 

 

 

 

 

Premiums written

$

8,770

 

$

7,860

 

11.6

%

 

$

25,388

 

$

22,892

 

10.9

%

Allstate brand

 

7,206

 

 

6,704

 

7.5

 

 

 

20,853

 

 

19,386

 

7.6

 

National General

 

1,564

 

 

1,156

 

35.3

 

 

 

4,535

 

 

3,506

 

29.3

 

 

 

 

 

 

 

 

 

Policies in Force (in thousands)

 

 

 

 

 

25,376

 

 

26,131

 

(2.9

)%

Allstate brand

 

 

 

 

 

20,546

 

 

21,853

 

(6.0

)

National General

 

 

 

 

 

4,830

 

 

4,278

 

12.9

 

 

 

 

 

 

 

 

 

Recorded combined ratio

 

102.1

 

 

117.4

 

(15.3

)

 

 

104.9

 

 

109.3

 

(4.4

)

Underlying combined ratio*

 

98.8

 

 

104.0

 

(5.2

)

 

 

101.2

 

 

101.7

 

(0.5

)

Allstate Protection Homeowners Results

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions, except ratios)

2023

2022

% / pts
Change

 

2023

2022

% / pts
Change

Premiums earned

$

2,969

$

2,642

12.4

%

 

$

8,662

$

7,698

12.5

%

Allstate brand

 

2,613

 

 

2,350

 

11.2

 

 

 

7,638

 

 

6,841

 

11.7

 

National General

 

356

 

 

292

 

21.9

 

 

 

1,024

 

 

857

 

19.5

 

 

 

 

 

 

 

 

 

Premiums written

$

3,525

 

$

3,145

 

12.1

%

 

$

9,440

 

$

8,434

 

11.9

%

Allstate brand

 

3,118

 

 

2,803

 

11.2

 

 

 

8,265

 

 

7,488

 

10.4

 

National General

 

407

 

 

342

 

19.0

 

 

 

1,175

 

 

946

 

24.2

 

 

 

 

 

 

 

 

 

Policies in Force (in thousands)

 

 

 

 

 

7,297

 

 

7,237

 

0.8

%

Allstate brand

 

 

 

 

 

6,627

 

 

6,599

 

0.4

 

National General

 

 

 

 

 

670

 

 

638

 

5.0

 

 

 

 

 

 

 

 

 

Recorded combined ratio

 

104.4

 

 

89.9

 

14.5

 

 

 

122.8

 

 

93.8

 

29.0

 

Catastrophe Losses

$

878

 

$

354

 

148.0

%

 

$

4,516

 

$

1,650

 

173.7

%

Underlying combined ratio*

 

72.9

 

 

74.1

 

(1.2

)

 

 

69.4

 

 

70.6

 

(1.2

)

 

Protection Services Results

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions)

2023

2022

% / $
Change

 

2023

2022

% / $
Change

Total revenues (1)

$

697

 

$

640

 

 

8.9

%

 

$

2,054

 

$

1,896

 

 

8.3

%

Allstate Protection Plans

 

416

 

 

349

 

 

19.2

 

 

 

1,200

 

 

1,016

 

 

18.1

 

Allstate Dealer Services

 

146

 

 

143

 

 

2.1

 

 

 

442

 

 

417

 

 

6.0

 

Allstate Roadside

 

69

 

 

65

 

 

6.2

 

 

 

199

 

 

194

 

 

2.6

 

Arity

 

29

 

 

49

 

 

(40.8

)

 

 

101

 

 

163

 

 

(38.0

)

Allstate Identity Protection

 

37

 

 

34

 

 

8.8

 

 

 

112

 

 

106

 

 

5.7

 

Adjusted net income (loss)

$

27

 

$

35

 

$

(8

)

 

$

102

 

$

131

 

$

(29

)

Allstate Protection Plans

 

20

 

 

29

 

 

(9

)

 

 

79

 

 

108

 

 

(29

)

Allstate Dealer Services

 

5

 

 

10

 

 

(5

)

 

 

18

 

 

27

 

 

(9

)

Allstate Roadside

 

7

 

 

1

 

 

6

 

 

 

17

 

 

4

 

 

13

 

Arity

 

(6

)

 

(2

)

 

(4

)

 

 

(13

)

 

(4

)

 

(9

)

Allstate Identity Protection

 

1

 

 

(3

)

 

4

 

 

 

1

 

 

(4

)

 

5

 

(1)

Excludes net gains and losses on investments and derivatives.

 

Allstate Health and Benefits Results (1)

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions)

2023

2022

% Change

 

2023

2022

% Change

Premiums and contract charges

$

463

$

463

?

%

 

$

1,379

$

1,396

(1.2

)%

Employer voluntary benefits

 

253

 

 

257

 

(1.6

)

 

 

753

 

 

777

 

(3.1

)

Group health

 

111

 

 

96

 

15.6

 

 

 

328

 

 

285

 

15.1

 

Individual health

 

99

 

 

110

 

(10.0

)

 

 

298

 

 

334

 

(10.8

)

Adjusted net income

$

69

 

$

63

 

9.5

%

 

$

182

 

$

187

 

(2.7

)%

(1)

Prior periods have been recast to reflect the impact of the adoption of FASB guidance revising the accounting for certain long-duration insurance contracts.

 

Allstate Investment Results

 

Three months ended
September 30,

 

Nine months ended
September 30,

($ in millions, except ratios)

2023

2022

$ / pts
Change

 

2023

2022

$ / pts
Change

Net investment income

$

689

 

$

690

 

$

(1

)

 

$

1,874

 

$

1,846

 

$

28

 

Market-based (1)

 

567

 

 

402

 

 

165

 

 

 

1,610

 

 

1,093

 

 

517

 

Performance-based (1)

 

186

 

 

335

 

 

(149

)

 

 

439

 

 

877

 

 

(438

)

Net gains (losses) on investments and derivatives

$

(86

)

$

(167

)

$

81

 

 

$

(223

)

$

(1,167

)

$

944

 

Change in unrealized net capital gains and losses, pre-tax

$

(855

)

$

(1,009

)

$

154

 

 

$

(325

)

$

(4,506

)

$

4,181

 

Total return on investment portfolio

 

(0.4

)%

 

(0.8

)%

 

0.4

 

 

 

2.1

%

 

(6.4

)%

 

8.5

 

Total return on investment portfolio (trailing twelve months)

 

 

 

 

 

4.6

%

 

(5.3

)%

 

9.9

 

(1)

Investment expenses are not allocated between market-based and performance-based portfolios with the exception of investee level expenses.

Proactive Capital Management

"Allstate continues to proactively manage capital and has the financial flexibility, liquidity and capital resources to navigate the challenging operating environment and invest in growth. Our capital position remains sound with statutory surplus in the insurance companies of $13.5 billion and over $2.9 billion of assets are held at the holding company, representing 2.2 times annual fixed charges," said Jess Merten, Chief Financial Officer. "We are making progress on the comprehensive profit improvement plan and remain confident strategic actions will result in profitable growth and attractive shareholder returns," concluded Merten.

Visit www.allstateinvestors.com for additional information about Allstate's results, including a webcast of its quarterly conference call and the call presentation. The conference call will be at 11 a.m. ET on Wednesday, November 2. Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.

Forward-Looking Statements

This news release contains "forward-looking statements" that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like "plans," "seeks," "expects," "will," "should," "anticipates," "estimates," "intends," "believes," "likely," "targets" and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the "Risk Factors" section in our most recent annual report on Form 10-K. Forward-looking statements are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.

THE ALLSTATE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 

 

 

 

($ in millions, except par value data)

 

September 30,
2023

 

December 31,
2022

Assets

 

 

 

Investments

 

 

 

Fixed income securities, at fair value (amortized cost, net $49,979 and $45,370)

$

46,771

 

 

$

42,485

 

Equity securities, at fair value (cost $2,393 and $4,253)

 

2,419

 

 

 

4,567

 

Mortgage loans, net

 

830

 

 

 

762

 

Limited partnership interests

 

8,363

 

 

 

8,114

 

Short-term, at fair value (amortized cost $3,369 and $4,174)

 

3,368

 

 

 

4,173

 

Other investments, net

 

1,608

 

 

 

1,728

 

Total investments

 

63,359

 

 

 

61,829

 

Cash

 

860

 

 

 

736

 

Premium installment receivables, net

 

10,102

 

 

 

9,165

 

Deferred policy acquisition costs

 

5,824

 

 

 

5,442

 

Reinsurance and indemnification recoverables, net

 

9,083

 

 

 

9,619

 

Accrued investment income

 

525

 

 

 

423

 

Deferred income taxes

 

816

 

 

 

382

 

Property and equipment, net

 

909

 

 

 

987

 

Goodwill

 

3,502

 

 

 

3,502

 

Other assets, net

 

6,196

 

 

 

5,904

 

Total assets

$

101,176

 

 

$

97,989

 

Liabilities

 

 

 

Reserve for property and casualty insurance claims and claims expense

$

40,659

 

 

$

37,541

 

Reserve for future policy benefits

 

1,309

 

 

 

1,322

 

Contractholder funds

 

884

 

 

 

879

 

Unearned premiums

 

24,518

 

 

 

22,299

 

Claim payments outstanding

 

1,480

 

 

 

1,268

 

Other liabilities and accrued expenses

 

9,933

 

 

 

9,353

 

Debt

 

7,946

 

 

 

7,964

 

Total liabilities

 

86,729

 

 

 

80,626

 

Equity

 

 

 

Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 82.0 thousand and 81.0 thousand shares issued and outstanding, $2,050 and $2,025 aggregate liquidation preference

 

2,001

 

 

 

1,970

 

Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 262 million and 263 million shares outstanding

 

9

 

 

 

9

 

Additional capital paid-in

 

3,811

 

 

 

3,788

 

Retained income

 

48,491

 

 

 

50,970

 

Treasury stock, at cost (638 million and 637 million shares)

 

(37,149

)

 

 

(36,857

)

Accumulated other comprehensive income:

 

 

 

Unrealized net capital gains and losses

 

(2,512

)

 

 

(2,255

)

Unrealized foreign currency translation adjustments

 

(101

)

 

 

(165

)

Unamortized pension and other postretirement prior service credit

 

15

 

 

 

29

 

Discount rate for reserve for future policy benefits

 

28

 

 

 

(1

)

Total accumulated other comprehensive loss

 

(2,570

)

 

 

(2,392

)

Total Allstate shareholders' equity

 

14,593

 

 

 

17,488

 

Noncontrolling interest

 

(146

)

 

 

(125

)

Total equity

 

14,447

 

 

 

17,363

 

Total liabilities and equity

$

101,176

 

 

$

97,989

 

THE ALLSTATE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

($ in millions, except per share data)

Three months ended
September 30,

 

Nine months ended
September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Property and casualty insurance premiums

$

12,839

 

 

$

11,661

 

 

$

37,482

 

 

$

34,004

 

Accident and health insurance premiums and contract charges

 

463

 

 

 

463

 

 

 

1,379

 

 

 

1,396

 

Other revenue

 

592

 

 

 

561

 

 

 

1,750

 

 

 

1,684

 

Net investment income

 

689

 

 

 

690

 

 

 

1,874

 

 

 

1,846

 

Net gains (losses) on investments and derivatives

 

(86

)

 

 

(167

)

 

 

(223

)

 

 

(1,167

)

Total revenues

 

14,497

 

 

 

13,208

 

 

 

42,262

 

 

 

37,763

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

Property and casualty insurance claims and claims expense

 

10,237

 

 

 

10,073

 

 

 

32,290

 

 

 

27,262

 

Accident, health and other policy benefits (including remeasurement (gains) losses of $0, $(4), $0 and $(4))

 

262

 

 

 

252

 

 

 

785

 

 

 

785

 

Amortization of deferred policy acquisition costs

 

1,841

 

 

 

1,683

 

 

 

5,374

 

 

 

4,909

 

Operating costs and expenses

 

1,771

 

 

 

1,842

 

 

 

5,273

 

 

 

5,594

 

Pension and other postretirement remeasurement (gains) losses

 

149

 

 

 

79

 

 

 

56

 

 

 

91

 

Restructuring and related charges

 

87

 

 

 

14

 

 

 

141

 

 

 

27

 

Amortization of purchased intangibles

 

83

 

 

 

90

 

 

 

246

 

 

 

264

 

Interest expense

 

88

 

 

 

85

 

 

 

272

 

 

 

251

 

Total costs and expenses

 

14,518

 

 

 

14,118

 

 

 

44,437

 

 

 

39,183

 

 

 

 

 

 

 

 

 

Loss from operations before income tax expense

 

(21

)

 

 

(910

)

 

 

(2,175

)

 

 

(1,420

)

 

 

 

 

 

 

 

 

Income tax benefit

 

(17

)

 

 

(236

)

 

 

(475

)

 

 

(374

)

 

 

 

 

 

 

 

 

Net loss

 

(4

)

 

 

(674

)

 

 

(1,700

)

 

 

(1,046

)

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to noncontrolling interest

 

1

 

 

 

(15

)

 

 

(23

)

 

 

(34

)

 

 

 

 

 

 

 

 

Net loss attributable to Allstate

 

(5

)

 

 

(659

)

 

 

(1,677

)

 

 

(1,012

)

 

 

 

 

 

 

 

 

Less: Preferred stock dividends

 

36

 

 

 

26

 

 

 

99

 

 

 

79

 

 

 

 

 

 

 

 

 

Net loss applicable to common shareholders

$

(41

)

 

$

(685

)

 

$

(1,776

)

 

$

(1,091

)

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Net loss applicable to common shareholders per common share - Basic

$

(0.16

)

 

$

(2.55

)

 

$

(6.76

)

 

$

(3.99

)

Weighted average common shares - Basic

 

261.8

 

 

 

268.7

 

 

 

262.6

 

 

 

273.5

 

Net loss applicable to common shareholders per common share - Diluted

$

(0.16

)

 

$

(2.55

)

 

$

(6.76

)

 

$

(3.99

)

Weighted average common shares - Diluted

 

261.8

 

 

 

268.7

 

 

 

262.6

 

 

 

273.5

 

Definitions of Non-GAAP Measures

We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Adjusted net income is net income (loss) applicable to common shareholders, excluding:

Net income (loss) applicable to common shareholders is the GAAP measure that is most directly comparable to adjusted net income.

We use adjusted net income as an important measure to evaluate our results of operations. We believe that the measure provides investors with a valuable measure of the Company's ongoing performance because it reveals trends in our insurance and financial services business that may be obscured by the net effect of net gains and losses on investments and derivatives, pension and other postretirement remeasurement gains and losses, amortization or impairment of purchased intangibles, gain or loss on disposition and adjustments for other significant non-recurring, infrequent or unusual items and the related tax expense or benefit of these items. Net gains and losses on investments and derivatives, and pension and other postretirement remeasurement gains and losses may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to the insurance underwriting process. Gain or loss on disposition is excluded because it is non-recurring in nature and the amortization or impairment of purchased intangibles is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, adjusted net income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine adjusted net income is the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Adjusted net income is used by management along with the other components of net income (loss) applicable to common shareholders to assess our performance. We use adjusted measures of adjusted net income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income (loss) applicable to common shareholders, adjusted net income and their components separately and in the aggregate when reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income results in their evaluation of our and our industry's financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the Company and management's performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses adjusted net income as the denominator. Adjusted net income should not be considered a substitute for net income (loss) applicable to common shareholders and does not reflect the overall profitability of our business.

The following tables reconcile net income (loss) applicable to common shareholders and adjusted net income. Taxes on adjustments to reconcile net income (loss) applicable to common shareholders and adjusted net income (loss) generally use a 21% effective tax rate.

($ in millions, except per share data)

Three months ended September 30,

 

Consolidated

 

Per diluted common share

 

2023

 

2022

 

2023

 

2022

Net loss applicable to common shareholders (1)

$

(41

)

 

$

(685

)

 

$

(0.16

)

 

$

(2.55

)

Net (gains) losses on investments and derivatives

 

86

 

 

 

167

 

 

 

0.33

 

 

 

0.62

 

Pension and other postretirement remeasurement (gains) losses

 

149

 

 

 

79

 

 

 

0.57

 

 

 

0.29

 

Amortization of purchased intangibles

 

83

 

 

 

90

 

 

 

0.31

 

 

 

0.34

 

(Gain) loss on disposition

 

5

 

 

 

5

 

 

 

0.02

 

 

 

0.02

 

Income tax expense (benefit)

 

(68

)

 

 

(67

)

 

 

(0.26

)

 

 

(0.25

)

Adjusted net income (loss) * (1)

$

214

 

 

$

(411

)

 

$

0.81

 

 

$

(1.53

)

 

 

 

 

 

 

 

 

Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)

 

 

 

 

 

1.5

 

 

 

2.9

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

Consolidated

 

Per diluted common share

 

2023

 

2022

 

2023

 

2022

Net loss applicable to common shareholders (1)

$

(1,776

)

 

$

(1,091

)

 

$

(6.76

)

 

$

(3.99

)

Net (gains) losses on investments and derivatives

 

223

 

 

 

1,167

 

 

 

0.85

 

 

 

4.23

 

Pension and other postretirement remeasurement (gains) losses

 

56

 

 

 

91

 

 

 

0.21

 

 

 

0.34

 

Amortization of purchased intangibles

 

246

 

 

 

264

 

 

 

0.94

 

 

 

0.96

 

(Gain) loss on disposition

 

4

 

 

 

(6

)

 

 

0.02

 

 

 

(0.02

)

Non-recurring costs (2)

 

90

 

 

 

?

 

 

 

0.34

 

 

 

?

 

Income tax expense (benefit)

 

(133

)

 

 

(313

)

 

 

(0.51

)

 

 

(1.12

)

Adjusted net income (loss) * (1)

$

(1,290

)

 

$

112

 

 

$

(4.91

)

 

$

0.40

 

 

 

 

 

 

 

 

 

Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)

 

 

 

 

 

1.9

 

 

 

3.3

 

_____________

(1)

In periods where a net loss or adjusted net loss is reported, weighted average shares for basic earnings per share is used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

(2)

Relates to settlement costs for non-recurring litigation that is outside of the ordinary course of business.

Adjusted net income return on Allstate common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month adjusted net income by the average of Allstate common shareholders' equity at the beginning and at the end of the 12-months, after excluding the effect of unrealized net capital gains and losses. Return on Allstate common shareholders' equity is the most directly comparable GAAP measure. We use adjusted net income as the numerator for the same reasons we use adjusted net income, as discussed previously. We use average Allstate common shareholders' equity excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders' equity primarily applicable to Allstate's earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income (loss) applicable to common shareholders and return on Allstate common shareholders' equity because it excludes the effect of items that tend to be highly variable from period to period. We believe that this measure is useful to investors and that it provides a valuable tool for investors when considered along with return on Allstate common shareholders' equity because it eliminates the after-tax effects of realized and unrealized net capital gains and losses that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by management. In addition, it eliminates non-recurring items that are not indicative of our ongoing business or economic trends. A byproduct of excluding the items noted above to determine adjusted net income return on Allstate common shareholders' equity from return on Allstate common shareholders' equity is the transparency and understanding of their significance to return on common shareholders' equity variability and profitability while recognizing these or similar items may recur in subsequent periods. We use adjusted measures of adjusted net income return on Allstate common shareholders' equity in incentive compensation. Therefore, we believe it is useful for investors to have adjusted net income return on Allstate common shareholders' equity and return on Allstate common shareholders' equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income return on common shareholders' equity results in their evaluation of our and our industry's financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management's utilization of capital. We also provide it to facilitate a comparison to our long-term adjusted net income return on Allstate common shareholders' equity goal. Adjusted net income return on Allstate common shareholders' equity should not be considered a substitute for return on Allstate common shareholders' equity and does not reflect the overall profitability of our business.

The following tables reconcile return on Allstate common shareholders' equity and adjusted net income (loss) return on Allstate common shareholders' equity.

($ in millions)

For the twelve months ended
September 30,

 

2023

 

2022

Return on Allstate common shareholders' equity

 

 

 

Numerator:

 

 

 

Net income (loss) applicable to common shareholders

$

(2,079

)

 

$

(294

)

Denominator:

 

 

 

Beginning Allstate common shareholders' equity

$

15,713

 

 

$

24,515

 

Ending Allstate common shareholders' equity (1)

 

12,592

 

 

 

15,713

 

Average Allstate common shareholders' equity

$

14,153

 

 

$

20,114

 

Return on Allstate common shareholders' equity

 

(14.7

)%

 

 

(1.5

)%

($ in millions)

For the twelve months ended
September 30,

 

2023

 

2022

Adjusted net income (loss) return on Allstate common shareholders' equity

 

 

 

Numerator:

 

 

 

Adjusted net income (loss) *

$

(1,641

)

 

$

915

 

 

 

 

 

Denominator:

 

 

 

Beginning Allstate common shareholders' equity

$

15,713

 

 

$

24,515

 

Less: Unrealized net capital gains and losses

 

(2,929

)

 

 

1,829

 

Adjusted beginning Allstate common shareholders' equity

 

18,642

 

 

 

22,686

 

 

 

 

 

Ending Allstate common shareholders' equity (1)

 

12,592

 

 

 

15,713

 

Less: Unrealized net capital gains and losses

 

(2,512

)

 

 

(2,929

)

Adjusted ending Allstate common shareholders' equity

 

15,104

 

 

 

18,642

 

Average adjusted Allstate common shareholders' equity

$

16,873

 

 

$

20,664

 

Adjusted net income (loss) return on Allstate common shareholders' equity *

 

(9.7

)%

 

 

4.4

%

_____________

(1)

Excludes equity related to preferred stock of $2,001 million and $1,970 million as of September 30, 2023 and 2022, respectively.

Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization or impairment of purchased intangibles ("underlying combined ratio") is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of catastrophes on the combined ratio, the effect of prior year non-catastrophe reserve reestimates on the combined ratio, and the effect of amortization or impairment of purchased intangibles on the combined ratio. We believe that this ratio is useful to investors, and it is used by management to reveal the trends in our Property-Liability business that may be obscured by catastrophe losses, prior year reserve reestimates and amortization or impairment of purchased intangibles. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves, which could increase or decrease current year net income. Amortization or impairment of purchased intangibles relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business.

The following tables reconcile the respective combined ratio to the underlying combined ratio. Underwriting margin is calculated as 100% minus the combined ratio.

Property-Liability

Three months ended
September 30,

 

Nine months ended
September 30,

 

2023

 

2022

 

2023

 

2022

Combined ratio

103.4

 

 

111.6

 

 

109.8

 

 

105.8

 

Effect of catastrophe losses

(9.6

)

 

(6.8

)

 

(15.5

)

 

(7.2

)

Effect of prior year non-catastrophe reserve reestimates

(1.4

)

 

(7.8

)

 

(1.1

)

 

(4.5

)

Effect of amortization of purchased intangibles

(0.5

)

 

(0.6

)

 

(0.5

)

 

(0.5

)

Underlying combined ratio*

91.9

 

 

96.4

 

 

92.7

 

 

93.6

 

 

 

 

 

 

 

 

 

Effect of prior year catastrophe reserve reestimates

0.1

 

 

(0.1

)

 

?

 

 

0.1

 

Allstate Protection - Auto Insurance

Three months ended
September 30,

 

Nine months ended
September 30,

 

2023

 

2022

 

2023

 

2022

Combined ratio

102.1

 

 

117.4

 

 

104.9

 

 

109.3

 

Effect of catastrophe losses

(2.6

)

 

(4.4

)

 

(2.7

)

 

(2.2

)

Effect of prior year non-catastrophe reserve reestimates

(0.3

)

 

(8.5

)

 

(0.5

)

 

(4.9

)

Effect of amortization of purchased intangibles

(0.4

)

 

(0.5

)

 

(0.5

)

 

(0.5

)

Underlying combined ratio*

98.8

 

 

104.0

 

 

101.2

 

 

101.7

 

 

 

 

 

 

 

 

 

Effect of prior year catastrophe reserve reestimates

0.1

 

 

(0.1

)

 

(0.1

)

 

(0.3

)

Allstate Protection - Homeowners Insurance

Three months ended
September 30,

 

Nine months ended
September 30,

 

2023

 

2022

 

2023

 

2022

Combined ratio

104.4

 

 

89.9

 

 

122.8

 

 

93.8

 

Effect of catastrophe losses

(29.6

)

 

(13.4

)

 

(52.1

)

 

(21.4

)

Effect of prior year non-catastrophe reserve reestimates

(1.5

)

 

(1.9

)

 

(0.9

)

 

(1.3

)

Effect of amortization of purchased intangibles

(0.4

)

 

(0.5

)

 

(0.4

)

 

(0.5

)

Underlying combined ratio*

72.9

 

 

74.1

 

 

69.4

 

 

70.6

 

 

 

 

 

 

 

 

 

Effect of prior year catastrophe reserve reestimates

0.6

 

 

0.1

 

 

0.7

 

 

1.0

 

 


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