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As Of Filer Filing For·On·As Docs:Size 5/05/20 Allstate Corp 10-Q 3/31/20 112:27M |
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Document |
i Delaware | i 36-3871531 | |||
(State
or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbols | Name of each exchange on which registered |
Common Stock, par value $.01 per
share | ALL | New York Stock Exchange Chicago Stock Exchange |
i 5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053 | i ALL.PR.B | i New
York Stock Exchange |
i Depositary Shares represent 1/1,000th of a share of 5.625% Noncumulative Preferred Stock, Series G | i ALL PR G | i New
York Stock Exchange |
i Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series H | i ALL PR H | i New
York Stock Exchange |
i Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series I | i ALL PR I | i New
York Stock Exchange |
i Large
accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | i ☐ |
Emerging
growth company | i ☐ |
Part I Financial Information | Page | |
Condensed Consolidated Statements of Operations for the Three Month Periods Ended March 31, 2020 and 2019 (unaudited) | ||
Condensed
Consolidated Statements of Comprehensive Income for the Three Month Periods Ended March 31, 2020 and 2019 (unaudited) | ||
Condensed Consolidated Statements of Financial Position as of March 31, 2020 and December 31, 2019 (unaudited) | ||
Condensed
Consolidated Statements of Shareholders’ Equity for the Three Month Periods Ended March 31, 2020 and 2019 (unaudited) | ||
Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2020 and 2019 (unaudited) | ||
Highlights | ||
Property-Liability
Operations | ||
– Allstate brand | ||
– Esurance
brand | ||
– Encompass brand | ||
Discontinued Lines and Coverages | ||
Service Businesses | ||
Allstate Life | ||
Allstate
Benefits | ||
Allstate Annuities | ||
Part
II Other Information | ||
($ in
millions, except per share data) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Revenues | ||||||||
Property
and casualty insurance premiums | $ | i 9,235 | $ | i 8,802 | ||||
Life
premiums and contract charges | i 617 | i 628 | ||||||
Other
revenue | i 265 | i 250 | ||||||
Net
investment income | i 421 | i 648 | ||||||
Realized
capital gains (losses) | ( i 462 | ) | i 662 | |||||
Total
revenues | i 10,076 | i 10,990 | ||||||
Costs
and expenses | ||||||||
Property and casualty insurance claims and claims expense | i 5,341 | i 5,820 | ||||||
Shelter-in-Place
Payback expense | i 210 | i — | ||||||
Life
contract benefits | i 501 | i 497 | ||||||
Interest
credited to contractholder funds | i 132 | i 162 | ||||||
Amortization
of deferred policy acquisition costs | i 1,401 | i 1,364 | ||||||
Operating
costs and expenses | i 1,399 | i 1,380 | ||||||
Pension
and other postretirement remeasurement (gains) losses | i 318 | i 15 | ||||||
Restructuring
and related charges | i 5 | i 18 | ||||||
Amortization
of purchased intangibles | i 28 | i 32 | ||||||
Interest
expense | i 81 | i 83 | ||||||
Total
costs and expenses | i 9,416 | i 9,371 | ||||||
Gain
on disposition of operations | i 1 | i 1 | ||||||
Income
from operations before income tax expense | i 661 | i 1,620 | ||||||
Income
tax expense | i 112 | i 328 | ||||||
Net
income | i 549 | i 1,292 | ||||||
Preferred
stock dividends | i 36 | i 31 | ||||||
Net
income applicable to common shareholders | $ | i 513 | $ | i 1,261 | ||||
Earnings
per common share | ||||||||
Net income applicable to common shareholders per common share - Basic | $ | i 1.62 | $ | i 3.79 | ||||
Weighted
average common shares - Basic | i 317.4 | i 332.6 | ||||||
Net
income applicable to common shareholders per common share - Diluted | $ | i 1.59 | $ | i 3.74 | ||||
Weighted
average common shares - Diluted | i 322.4 | i 337.5 |
($ in
millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Net income | $ | i 549 | $ | i 1,292 | ||||
Other
comprehensive (loss) income, after-tax | ||||||||
Changes in: | ||||||||
Unrealized
net capital gains and losses | ( i 1,357 | ) | i 974 | |||||
Unrealized
foreign currency translation adjustments | ( i 39 | ) | i 5 | |||||
Unamortized
pension and other postretirement prior service credit | i 4 | ( i 12 | ) | |||||
Other
comprehensive (loss) income, after-tax | ( i 1,392 | ) | i 967 | |||||
Comprehensive
(loss) income | $ | ( i 843 | ) | $ | i 2,259 |
($ in millions, except par value data) | ||||||||
Assets | ||||||||
Investments | ||||||||
Fixed
income securities, at fair value (amortized cost, net $58,945 and $56,293) | $ | i 59,857 | $ | i 59,044 | ||||
Equity
securities, at fair value (cost $3,631 and $6,568) | i 3,701 | i 8,162 | ||||||
Mortgage
loans, net | i 4,759 | i 4,817 | ||||||
Limited
partnership interests | i 7,087 | i 8,078 | ||||||
Short-term,
at fair value (amortized cost $5,671 and $4,256) | i 5,671 | i 4,256 | ||||||
Other,
net | i 3,767 | i 4,005 | ||||||
Total
investments | i 84,842 | i 88,362 | ||||||
Cash | i 338 | i 338 | ||||||
Premium
installment receivables, net | i 6,401 | i 6,472 | ||||||
Deferred
policy acquisition costs | i 4,742 | i 4,699 | ||||||
Reinsurance
and indemnification recoverables, net | i 9,214 | i 9,211 | ||||||
Accrued
investment income | i 593 | i 600 | ||||||
Property
and equipment, net | i 1,123 | i 1,145 | ||||||
Goodwill | i 2,544 | i 2,545 | ||||||
Other
assets, net | i 3,876 | i 3,534 | ||||||
Separate
Accounts | i 2,434 | i 3,044 | ||||||
Total
assets | $ | i 116,107 | $ | i 119,950 | ||||
Liabilities | ||||||||
Reserve
for property and casualty insurance claims and claims expense | $ | i 27,148 | $ | i 27,712 | ||||
Reserve
for life-contingent contract benefits | i 12,244 | i 12,300 | ||||||
Contractholder
funds | i 17,404 | i 17,692 | ||||||
Unearned
premiums | i 14,999 | i 15,343 | ||||||
Claim
payments outstanding | i 892 | i 929 | ||||||
Deferred
income taxes | i 331 | i 1,154 | ||||||
Other
liabilities and accrued expenses | i 9,849 | i 9,147 | ||||||
Long-term
debt | i 6,633 | i 6,631 | ||||||
Separate
Accounts | i 2,434 | i 3,044 | ||||||
Total
liabilities | i 91,934 | i 93,952 | ||||||
Commitments
and Contingent Liabilities (Note 12) | i | i | ||||||
Shareholders’
equity | ||||||||
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand and 92.5 thousand shares issued and outstanding, $2,025 and $2,313 aggregate liquidation preference | i 1,970 | i 2,248 | ||||||
Common
stock, $.01 par value, 3.0 billion shares authorized and 900 million issued, 315 million and 319 million shares outstanding | i 9 | i 9 | ||||||
Additional
capital paid-in | i 3,519 | i 3,463 | ||||||
Retained
income | i 48,326 | i 48,074 | ||||||
Treasury
stock, at cost (585 million and 581 million shares) | ( i 30,209 | ) | ( i 29,746 | ) | ||||
Accumulated
other comprehensive income: | ||||||||
Unrealized net capital gains and losses on fixed income securities with credit losses | i — | i 70 | ||||||
Other
unrealized net capital gains and losses | i 714 | i 2,094 | ||||||
Unrealized
adjustment to DAC, DSI and insurance reserves | ( i 184 | ) | ( i 277 | ) | ||||
Total
unrealized net capital gains and losses | i 530 | i 1,887 | ||||||
Unrealized
foreign currency translation adjustments | ( i 98 | ) | ( i 59 | ) | ||||
Unamortized
pension and other postretirement prior service credit | i 126 | i 122 | ||||||
Total
accumulated other comprehensive income (“AOCI”) | i 558 | i 1,950 | ||||||
Total
shareholders’ equity | i 24,173 | i 25,998 | ||||||
Total
liabilities and shareholders’ equity | $ | i 116,107 | $ | i 119,950 |
($ in
millions, except per share data) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Preferred stock par value | $ | i — | $ | i — | ||||
Preferred
stock additional capital paid-in | ||||||||
Balance, beginning of period | i 2,248 | i 1,930 | ||||||
Preferred
stock redemption | ( i 278 | ) | i — | |||||
Balance,
end of period | i 1,970 | i 1,930 | ||||||
Common
stock par value | i 9 | i 9 | ||||||
Common
stock additional capital paid-in | ||||||||
Balance, beginning of period | i 3,463 | i 3,310 | ||||||
Forward
contract on accelerated share repurchase agreement | i 75 | i — | ||||||
Equity
incentive plans activity | ( i 19 | ) | ( i 19 | ) | ||||
Balance,
end of period | i 3,519 | i 3,291 | ||||||
Retained
income | ||||||||
Balance, beginning of period | i 48,074 | i 44,033 | ||||||
Cumulative
effect of change in accounting principle | ( i 88 | ) | i 21 | |||||
Net
income | i 549 | i 1,292 | ||||||
Dividends
on common stock (declared per share of $0.54 and $0.50) | ( i 173 | ) | ( i 167 | ) | ||||
Dividends
on preferred stock | ( i 36 | ) | ( i 31 | ) | ||||
Balance,
end of period | i 48,326 | i 45,148 | ||||||
Deferred
ESOP expense | i — | ( i 3 | ) | |||||
Treasury
stock | ||||||||
Balance, beginning of period | ( i 29,746 | ) | ( i 28,085 | ) | ||||
Shares
acquired | ( i 511 | ) | i — | |||||
Shares
reissued under equity incentive plans, net | i 48 | i 43 | ||||||
Balance,
end of period | ( i 30,209 | ) | ( i 28,042 | ) | ||||
Accumulated
other comprehensive income | ||||||||
Balance, beginning of period | i 1,950 | i 118 | ||||||
Change
in unrealized net capital gains and losses | ( i 1,357 | ) | i 974 | |||||
Change
in unrealized foreign currency translation adjustments | ( i 39 | ) | i 5 | |||||
Change
in unamortized pension and other postretirement prior service credit | i 4 | ( i 12 | ) | |||||
Balance,
end of period | i 558 | i 1,085 | ||||||
Total
shareholders’ equity | $ | i 24,173 | $ | i 23,418 |
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Cash
flows from operating activities | ||||||||
Net income | $ | i 549 | $ | i 1,292 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, amortization and other non-cash items | i 155 | i 157 | ||||||
Realized
capital (gains) losses | i 462 | ( i 662 | ) | |||||
Pension
and other postretirement remeasurement (gains) losses | i 318 | i 15 | ||||||
Gain
on disposition of operations | ( i 1 | ) | ( i 1 | ) | ||||
Interest
credited to contractholder funds | i 132 | i 162 | ||||||
Changes
in: | ||||||||
Policy benefits and other insurance reserves | ( i 654 | ) | ( i 114 | ) | ||||
Unearned
premiums | ( i 272 | ) | ( i 201 | ) | ||||
Deferred
policy acquisition costs | i 38 | i 33 | ||||||
Premium
installment receivables, net | i 26 | ( i 39 | ) | |||||
Reinsurance
recoverables, net | i 24 | i 179 | ||||||
Income
taxes | i 28 | i 303 | ||||||
Other
operating assets and liabilities | i 222 | ( i 410 | ) | |||||
Net
cash provided by operating activities | i 1,027 | i 714 | ||||||
Cash
flows from investing activities | ||||||||
Proceeds from sales | ||||||||
Fixed
income securities | i 12,114 | i 9,034 | ||||||
Equity
securities | i 5,250 | i 633 | ||||||
Limited
partnership interests | i 749 | i 241 | ||||||
Other
investments | i 116 | i 44 | ||||||
Investment
collections | ||||||||
Fixed income securities | i 555 | i 628 | ||||||
Mortgage
loans | i 118 | i 104 | ||||||
Other
investments | i 61 | i 68 | ||||||
Investment
purchases | ||||||||
Fixed income securities | ( i 14,667 | ) | ( i 9,056 | ) | ||||
Equity
securities | ( i 1,619 | ) | ( i 871 | ) | ||||
Limited
partnership interests | ( i 357 | ) | ( i 282 | ) | ||||
Mortgage
loans | ( i 142 | ) | ( i 114 | ) | ||||
Other
investments | ( i 129 | ) | ( i 89 | ) | ||||
Change
in short-term investments, net | ( i 1,953 | ) | ( i 552 | ) | ||||
Change
in other investments, net | i 37 | i 47 | ||||||
Purchases
of property and equipment, net | ( i 65 | ) | ( i 80 | ) | ||||
Acquisition
of operations | i — | ( i 18 | ) | |||||
Net
cash provided by (used in) investing activities | i 68 | ( i 263 | ) | |||||
Cash
flows from financing activities | ||||||||
Redemption of preferred stock | ( i 288 | ) | i — | |||||
Contractholder
fund deposits | i 246 | i 254 | ||||||
Contractholder
fund withdrawals | ( i 471 | ) | ( i 458 | ) | ||||
Dividends
paid on common stock | ( i 159 | ) | ( i 158 | ) | ||||
Dividends
paid on preferred stock | ( i 29 | ) | ( i 31 | ) | ||||
Treasury
stock purchases | ( i 414 | ) | i — | |||||
Shares
reissued under equity incentive plans, net | i 8 | ( i 5 | ) | |||||
Other | i 12 | ( i 1 | ) | |||||
Net
cash used in financing activities | ( i 1,095 | ) | ( i 399 | ) | ||||
Net
increase in cash | i — | i 52 | ||||||
Cash
at beginning of period | i 338 | i 499 | ||||||
Cash
at end of period | $ | i 338 | $ | i 551 |
Note
1 | General |
Allowance
for credit losses | ||||||||
($ in millions) | ||||||||
Fixed income securities | $ | i 4 | $ | i — | ||||
Mortgage
loans | i 85 | i 45 | ||||||
Other
investments | ||||||||
Bank loans | i 79 | i 53 | ||||||
Agent
loans | i 5 | i 5 | ||||||
Investments | i 173 | i 103 | ||||||
Premium
installment receivables | i 96 | i 91 | ||||||
Reinsurance
recoverables | i 74 | i 74 | ||||||
Other
assets | i 18 | i 18 | ||||||
Assets | i 361 | i 286 | ||||||
Commitments
to fund mortgage loans, bank loans and agent loans | i 4 | i 3 | ||||||
Liabilities | i 4 | i 3 | ||||||
Total | $ | i 365 | $ | i 289 |
Note
2 | Earnings per Common Share |
Computation
of basic and diluted earnings per common share | ||||||||
(In millions, except per share data) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Numerator: | ||||||||
Net
income | $ | i 549 | $ | i 1,292 | ||||
Less:
Preferred stock dividends | i 36 | i 31 | ||||||
Net
income applicable to common shareholders | $ | i 513 | $ | i 1,261 | ||||
Denominator: | ||||||||
Weighted
average common shares outstanding | i 317.4 | i 332.6 | ||||||
Effect
of dilutive potential common shares: | ||||||||
Stock options | i 3.3 | i 3.1 | ||||||
Restricted
stock units (non-participating) and performance stock awards | i 1.7 | i 1.8 | ||||||
Weighted
average common and dilutive potential common shares outstanding | i 322.4 | i 337.5 | ||||||
Earnings
per common share - Basic | $ | i 1.62 | $ | i 3.79 | ||||
Earnings
per common share - Diluted | $ | i 1.59 | $ | i 3.74 | ||||
Anti-dilutive
options excluded from diluted earnings per common share | i 0.8 | i 4.0 |
Note 3 | Acquisitions |
Note 4 | Reportable
Segments |
• Realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in adjusted net income |
• Pension and other postretirement remeasurement gains and losses, after-tax |
• Valuation
changes on embedded derivatives not hedged, after-tax |
• Amortization of DAC and DSI, to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives not hedged, after-tax |
• Business combination expenses and the amortization or impairment of purchased intangibles, after-tax |
• Gain (loss) on disposition of operations, after-tax |
• Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that
it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years |
Reportable
segments revenue information | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Property-Liability | ||||||||
Insurance
premiums | ||||||||
Auto | $ | i 6,154 | $ | i 5,930 | ||||
Homeowners | i 2,038 | i 1,935 | ||||||
Other
personal lines | i 471 | i 459 | ||||||
Commercial
lines | i 218 | i 183 | ||||||
Allstate
Protection | i 8,881 | i 8,507 | ||||||
Discontinued
Lines and Coverages | i — | i — | ||||||
Total
Property-Liability insurance premiums | i 8,881 | i 8,507 | ||||||
Other
revenue | i 181 | i 176 | ||||||
Net
investment income | i 202 | i 291 | ||||||
Realized
capital gains (losses) | ( i 103 | ) | i 497 | |||||
Total
Property-Liability | i 9,161 | i 9,471 | ||||||
Service
Businesses | ||||||||
Consumer product protection plans | i 206 | i 145 | ||||||
Roadside
assistance | i 51 | i 63 | ||||||
Finance
and insurance products | i 97 | i 87 | ||||||
Intersegment
premiums and service fees (1) | i 38 | i 33 | ||||||
Other
revenue | i 52 | i 47 | ||||||
Net
investment income | i 10 | i 9 | ||||||
Realized
capital gains (losses) | ( i 24 | ) | i 8 | |||||
Total
Service Businesses | i 430 | i 392 | ||||||
Allstate
Life | ||||||||
Traditional life insurance premiums | i 153 | i 154 | ||||||
Interest-sensitive
life insurance contract charges | i 180 | i 183 | ||||||
Other
revenue | i 32 | i 27 | ||||||
Net
investment income | i 128 | i 127 | ||||||
Realized
capital gains (losses) | ( i 31 | ) | ( i 5 | ) | ||||
Total
Allstate Life | i 462 | i 486 | ||||||
Allstate
Benefits | ||||||||
Traditional life insurance premiums | i 9 | i 9 | ||||||
Accident
and health insurance premiums | i 244 | i 250 | ||||||
Interest-sensitive
life insurance contract charges | i 29 | i 29 | ||||||
Net
investment income | i 20 | i 19 | ||||||
Realized
capital gains (losses) | ( i 14 | ) | i 4 | |||||
Total
Allstate Benefits | i 288 | i 311 | ||||||
Allstate
Annuities | ||||||||
Fixed annuities contract charges | i 2 | i 3 | ||||||
Net
investment income | i 47 | i 190 | ||||||
Realized
capital gains (losses) | ( i 269 | ) | i 156 | |||||
Total
Allstate Annuities | ( i 220 | ) | i 349 | |||||
Corporate
and Other | ||||||||
Net investment income | i 14 | i 12 | ||||||
Realized
capital gains (losses) | ( i 21 | ) | i 2 | |||||
Total
Corporate and Other | ( i 7 | ) | i 14 | |||||
Intersegment
eliminations (1) | ( i 38 | ) | ( i 33 | ) | ||||
Consolidated
revenues | $ | i 10,076 | $ | i 10,990 |
(1) | Intersegment
insurance premiums and service fees are primarily related to Arity and Allstate Roadside Services and are eliminated in the condensed consolidated financial statements. |
Reportable
segments financial performance | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Property-Liability | ||||||||
Allstate
Protection (1) | $ | i 1,348 | $ | i 703 | ||||
Discontinued
Lines and Coverages | ( i 3 | ) | ( i 3 | ) | ||||
Total
underwriting income | i 1,345 | i 700 | ||||||
Net
investment income | i 202 | i 291 | ||||||
Income
tax expense on operations | ( i 303 | ) | ( i 202 | ) | ||||
Realized
capital gains (losses), after-tax | ( i 82 | ) | i 393 | |||||
Property-Liability
net income applicable to common shareholders | i 1,162 | i 1,182 | ||||||
Service
Businesses | ||||||||
Adjusted net income | i 37 | i 11 | ||||||
Realized
capital gains (losses), after-tax | ( i 19 | ) | i 7 | |||||
Amortization
of purchased intangibles, after-tax | ( i 21 | ) | ( i 24 | ) | ||||
Service
Businesses net loss applicable to common shareholders | ( i 3 | ) | ( i 6 | ) | ||||
Allstate
Life | ||||||||
Adjusted net income | i 80 | i 73 | ||||||
Realized
capital gains (losses), after-tax | ( i 25 | ) | ( i 4 | ) | ||||
Valuation
changes on embedded derivatives not hedged, after-tax | i 12 | i — | ||||||
DAC
and DSI amortization related to realized capital gains and losses, after-tax | ( i 3 | ) | ( i 2 | ) | ||||
Allstate
Life net income applicable to common shareholders | i 64 | i 67 | ||||||
Allstate
Benefits | ||||||||
Adjusted net income | i 24 | i 31 | ||||||
Realized
capital gains (losses), after-tax | ( i 10 | ) | i 3 | |||||
Allstate
Benefits net income applicable to common shareholders | i 14 | i 34 | ||||||
Allstate
Annuities | ||||||||
Adjusted net loss | ( i 139 | ) | ( i 25 | ) | ||||
Realized
capital gains (losses), after-tax | ( i 213 | ) | i 124 | |||||
Valuation
changes on embedded derivatives not hedged, after-tax | i 2 | ( i 3 | ) | |||||
Gain
on disposition of operations, after-tax | i 1 | i 1 | ||||||
Allstate
Annuities net (loss) income applicable to common shareholders | ( i 349 | ) | i 97 | |||||
Corporate
and Other | ||||||||
Adjusted net loss | ( i 107 | ) | ( i 103 | ) | ||||
Realized
capital gains (losses), after-tax | ( i 17 | ) | i 1 | |||||
Pension
and other postretirement remeasurement gains (losses), after-tax | ( i 251 | ) | ( i 11 | ) | ||||
Corporate
and Other net loss applicable to common shareholders | ( i 375 | ) | ( i 113 | ) | ||||
Consolidated
net income applicable to common shareholders | $ | i 513 | $ | i 1,261 |
(1) | During
the first quarter of 2020, the Company announced a Shelter-in-Place Payback of over $ i 600 million to customers, as the significant decline in the number of auto accidents contributed favorably to the underwriting results. $ i 210
million of this cost was accrued in first quarter 2020 and the remainder will be recognized in second quarter 2020. |
Note
5 | Investments |
Portfolio composition | ||||||||
($ in millions) | ||||||||
Fixed income securities, at fair value | $ | i 59,857 | $ | i 59,044 | ||||
Equity
securities, at fair value | i 3,701 | i 8,162 | ||||||
Mortgage
loans, net | i 4,759 | i 4,817 | ||||||
Limited
partnership interests | i 7,087 | i 8,078 | ||||||
Short-term
investments, at fair value | i 5,671 | i 4,256 | ||||||
Other,
net | i 3,767 | i 4,005 | ||||||
Total | $ | i 84,842 | $ | i 88,362 |
Amortized
cost, gross unrealized gains (losses) and fair value for fixed income securities | ||||||||||||||||
($ in millions) | Amortized cost, net | Gross unrealized | Fair value | |||||||||||||
Gains | Losses | |||||||||||||||
U.S. government and agencies | $ | i 5,104 | $ | i 295 | $ | i — | $ | i 5,399 | ||||||||
Municipal | i 8,182 | i 555 | ( i 28 | ) | i 8,709 | |||||||||||
Corporate | i 43,624 | i 1,242 | ( i 1,231 | ) | i 43,635 | |||||||||||
Foreign
government | i 884 | i 30 | ( i 3 | ) | i 911 | |||||||||||
ABS | i 852 | i 3 | ( i 19 | ) | i 836 | |||||||||||
MBS | i 299 | i 71 | ( i 3 | ) | i 367 | |||||||||||
Total
fixed income securities | $ | i 58,945 | $ | i 2,196 | $ | ( i 1,284 | ) | $ | i 59,857 | |||||||
Amortized
cost | Gross unrealized | Fair value | ||||||||||||||
Gains | Losses | |||||||||||||||
U.S. government and agencies | $ | i 4,971 | $ | i 141 | $ | ( i 26 | ) | $ | i 5,086 | |||||||
Municipal | i 8,080 | i 551 | ( i 11 | ) | i 8,620 | |||||||||||
Corporate | i 41,090 | i 2,035 | ( i 47 | ) | i 43,078 | |||||||||||
Foreign
government | i 968 | i 16 | ( i 5 | ) | i 979 | |||||||||||
ABS | i 860 | i 8 | ( i 6 | ) | i 862 | |||||||||||
MBS | i 324 | i 96 | ( i 1 | ) | i 419 | |||||||||||
Total
fixed income securities | $ | i 56,293 | $ | i 2,847 | $ | ( i 96 | ) | $ | i 59,044 |
Scheduled
maturities for fixed income securities | ||||||||
($ in millions) | ||||||||
Amortized cost, net | Fair value | |||||||
Due in one year or less | $ | i 2,920 | $ | i 2,927 | ||||
Due
after one year through five years | i 24,825 | i 24,849 | ||||||
Due
after five years through ten years | i 20,360 | i 20,451 | ||||||
Due
after ten years | i 9,689 | i 10,427 | ||||||
i 57,794 | i 58,654 | |||||||
ABS
and MBS | i 1,151 | i 1,203 | ||||||
Total | $ | i 58,945 | $ | i 59,857 |
Net
investment income | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Fixed income securities | $ | i 525 | $ | i 538 | ||||
Equity
securities | i 6 | i 30 | ||||||
Mortgage
loans | i 60 | i 53 | ||||||
Limited
partnership interests (1) | ( i 192 | ) | i 9 | |||||
Short-term
investments | i 17 | i 26 | ||||||
Other | i 63 | i 63 | ||||||
Investment
income, before expense | i 479 | i 719 | ||||||
Investment
expense | ( i 58 | ) | ( i 71 | ) | ||||
Net
investment income | $ | i 421 | $ | i 648 |
(1) | The
Company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of financial statements. In consideration of intervening events during the three months ended March 31, 2020, where information was available to enable updated estimates, the Company recognized current period declines in the value of limited partnership interests. This included updating publicly traded investments held within limited partnerships to their March 31, 2020 values, which reduced income by $ i 52
million. Additionally, $ i 195 million of valuation increases reported in the fourth quarter 2019 partnership financial statements were excluded from income considering the equity market decline in March 2020. |
Realized
capital gains (losses) by asset type | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Fixed
income securities | $ | i 375 | $ | i 64 | ||||
Equity
securities | ( i 750 | ) | i 553 | |||||
Mortgage
loans | ( i 41 | ) | i — | |||||
Limited
partnership interests | ( i 116 | ) | i 72 | |||||
Derivatives | i 88 | ( i 46 | ) | |||||
Other | ( i 18 | ) | i 19 | |||||
Realized
capital gains (losses) | $ | ( i 462 | ) | $ | i 662 |
Realized
capital gains (losses) by transaction type | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Sales | $ | i 388 | $ | i 95 | ||||
Credit
losses (1) | ( i 79 | ) | ( i 14 | ) | ||||
Valuation
of equity investments (2) | ( i 859 | ) | i 627 | |||||
Valuation
and settlements of derivative instruments | i 88 | ( i 46 | ) | |||||
Realized
capital gains (losses) | $ | ( i 462 | ) | $ | i 662 |
(1) | Due
to the adoption of the measurement of credit losses on financial instruments accounting standard, prior period OTTI impairment write-downs are now presented as credit losses. |
(2) | Includes valuation of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities. |
Net appreciation (decline) recognized in net income | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
2020 | 2019 | |||||||
Equity securities | $ | ( i 560 | ) | $ | i 496 | |||
Limited
partnership interests carried at fair value | ( i 55 | ) | ( i 33 | ) | ||||
Total | $ | ( i 615 | ) | $ | i 463 |
Credit losses recognized in net income
(1) | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Fixed
income securities: | ||||||||
Corporate | $ | ( i 1 | ) | $ | i — | |||
ABS | i — | ( i 1 | ) | |||||
MBS | ( i 3 | ) | ( i 1 | ) | ||||
Total
fixed income securities | ( i 4 | ) | ( i 2 | ) | ||||
Mortgage
loans | ( i 40 | ) | i — | |||||
Limited
partnership interests | ( i 7 | ) | ( i 1 | ) | ||||
Other
investments | ||||||||
Bank loans | ( i 27 | ) | ( i 11 | ) | ||||
Total
credit losses by asset type | $ | ( i 78 | ) | $ | ( i 14 | ) | ||
Liabilities | ||||||||
Commitments
to fund commercial mortgage loans, bank loans and agent loans | ( i 1 | ) | i — | |||||
Total
| $ | ( i 79 | ) | $ | ( i 14 | ) |
(1) | Due
to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as OTTI impairment write-downs are now presented as credit losses. |
Unrealized
net capital gains and losses included in AOCI | ||||||||||||||||
($ in millions) | Fair value | Gross unrealized | Unrealized net gains (losses) | |||||||||||||
Gains | Losses | |||||||||||||||
Fixed
income securities | $ | i 59,857 | $ | i 2,196 | $ | ( i 1,284 | ) | $ | i 912 | |||||||
Short-term
investments | i 5,671 | i — | i — | i — | ||||||||||||
Derivative
instruments | i — | i — | ( i 3 | ) | ( i 3 | ) | ||||||||||
Equity
method of accounting (“EMA”) limited partnerships (1) | ( i 2 | ) | ||||||||||||||
Unrealized
net capital gains and losses, pre-tax | i 907 | |||||||||||||||
Amounts
recognized for: | ||||||||||||||||
Insurance reserves (2) | ( i 105 | ) | ||||||||||||||
DAC
and DSI (3) | ( i 128 | ) | ||||||||||||||
Amounts
recognized | ( i 233 | ) | ||||||||||||||
Deferred
income taxes | ( i 144 | ) | ||||||||||||||
Unrealized
net capital gains and losses, after-tax | $ | i 530 | ||||||||||||||
Fixed income securities | $ | i 59,044 | $ | i 2,847 | $ | ( i 96 | ) | $ | i 2,751 | |||||||
Short-term
investments | i 4,256 | i — | i — | i — | ||||||||||||
Derivative
instruments | i — | i — | ( i 3 | ) | ( i 3 | ) | ||||||||||
EMA
limited partnerships | ( i 4 | ) | ||||||||||||||
Unrealized
net capital gains and losses, pre-tax | i 2,744 | |||||||||||||||
Amounts
recognized for: | ||||||||||||||||
Insurance reserves | ( i 126 | ) | ||||||||||||||
DAC
and DSI | ( i 224 | ) | ||||||||||||||
Amounts
recognized | ( i 350 | ) | ||||||||||||||
Deferred
income taxes | ( i 507 | ) | ||||||||||||||
Unrealized
net capital gains and losses, after-tax | $ | i 1,887 |
(1) | Unrealized
net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable. |
(2) | The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuities). |
(3) | The
DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized. |
Change
in unrealized net capital gains (losses) | ||||
($ in millions) | Three months ended March 31, 2020 | |||
Fixed income securities | $ | ( i 1,839 | ) | |
Short-term
investments | i — | |||
Derivative instruments | i — | |||
EMA
limited partnerships | i 2 | |||
Total | ( i 1,837 | ) | ||
Amounts
recognized for: | ||||
Insurance reserves | i 21 | |||
DAC
and DSI | i 96 | |||
Amounts recognized | i 117 | |||
Deferred
income taxes | i 363 | |||
Decrease in unrealized net capital gains and losses, after-tax | $ | ( i 1,357 | ) |
Carrying
value for limited partnership interests | ||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
EMA | Fair Value | Total | EMA | Fair
Value | Total | |||||||||||||||||||
Private equity | $ | i 4,204 | $ | i 1,577 | $ | i 5,781 | $ | i 4,463 | $ | i 1,668 | $ | i 6,131 | ||||||||||||
Real
estate | i 954 | i 136 | i 1,090 | i 899 | i 142 | i 1,041 | ||||||||||||||||||
Other
(1) | i 212 | i 4 | i 216 | i 902 | i 4 | i 906 | ||||||||||||||||||
Total | $ | i 5,370 | $ | i 1,717 | $ | i 7,087 | $ | i 6,264 | $ | i 1,814 | $ | i 8,078 |
(1) | Other
consists of certain limited partnership interests where the underlying assets are predominately public equity securities. |
Other investments by asset type | ||||||||
($ in millions) | ||||||||
Bank loans, net | $ | i 1,117 | $ | i 1,204 | ||||
Real
estate | i 970 | i 1,005 | ||||||
Policy
loans | i 882 | i 894 | ||||||
Agent
loans, net | i 671 | i 666 | ||||||
Derivatives
and other | i 127 | i 236 | ||||||
Total | $ | i 3,767 | $ | i 4,005 |
Rollforward of credit loss allowance for fixed income securities | ||||
($ in millions) | Three
months ended March 31, 2020 | |||
Beginning balance | $ | i — | ||
Credit
losses on securities for which credit losses not previously reported | ( i 4 | ) | ||
Ending balance (1) | $ | ( i 4 | ) |
(1) | Allowance
for fixed income securities as of March 31, 2020 comprised $ i 1 million and $ i 3
million of corporate bonds and MBS, respectively. |
Gross
unrealized losses and fair value by type and length of time held in a continuous unrealized loss position | ||||||||||||||||||||||||||
($ in millions) | Less than 12 months | 12 months or more | Total unrealized losses | |||||||||||||||||||||||
Number of issues | Fair value | Unrealized losses | Number of issues | Fair value | Unrealized losses | |||||||||||||||||||||
Fixed
income securities | ||||||||||||||||||||||||||
Municipal | i 470 | $ | i 1,029 | $ | ( i 28 | ) | i — | $ | i — | $ | i — | $ | ( i 28 | ) | ||||||||||||
Corporate | i 1,838 | i 18,525 | ( i 1,161 | ) | i 31 | i 187 | ( i 70 | ) | ( i 1,231 | ) | ||||||||||||||||
Foreign
government | i 25 | i 85 | ( i 3 | ) | i 1 | i 6 | i — | ( i 3 | ) | |||||||||||||||||
ABS | i 63 | i 383 | ( i 13 | ) | i 13 | i 61 | ( i 6 | ) | ( i 19 | ) | ||||||||||||||||
MBS | i 35 | i 33 | ( i 3 | ) | i 101 | i 7 | i — | ( i 3 | ) | |||||||||||||||||
Total
fixed income securities | i 2,431 | $ | i 20,055 | $ | ( i 1,208 | ) | i 146 | $ | i 261 | $ | ( i 76 | ) | $ | ( i 1,284 | ) | |||||||||||
Investment
grade fixed income securities | i 1,816 | $ | i 15,130 | $ | ( i 689 | ) | i 116 | $ | i 130 | $ | ( i 27 | ) | $ | ( i 716 | ) | |||||||||||
Below
investment grade fixed income securities | i 615 | i 4,925 | ( i 519 | ) | i 30 | i 131 | ( i 49 | ) | ( i 568 | ) | ||||||||||||||||
Total
fixed income securities | i 2,431 | $ | i 20,055 | $ | ( i 1,208 | ) | i 146 | $ | i 261 | $ | ( i 76 | ) | $ | ( i 1,284 | ) | |||||||||||
Fixed
income securities | ||||||||||||||||||||||||||
U.S.
government and agencies | i 31 | $ | i 1,713 | $ | ( i 26 | ) | i 10 | $ | i 26 | $ | i — | $ | ( i 26 | ) | ||||||||||||
Municipal | i 307 | i 576 | ( i 9 | ) | i 1 | i 14 | ( i 2 | ) | ( i 11 | ) | ||||||||||||||||
Corporate | i 186 | i 1,392 | ( i 20 | ) | i 65 | i 485 | ( i 27 | ) | ( i 47 | ) | ||||||||||||||||
Foreign
government | i 55 | i 412 | ( i 4 | ) | i 6 | i 102 | ( i 1 | ) | ( i 5 | ) | ||||||||||||||||
ABS | i 36 | i 193 | ( i 2 | ) | i 23 | i 160 | ( i 4 | ) | ( i 6 | ) | ||||||||||||||||
MBS | i 27 | i 15 | i — | i 123 | i 14 | ( i 1 | ) | ( i 1 | ) | |||||||||||||||||
Total
fixed income securities | i 642 | $ | i 4,301 | $ | ( i 61 | ) | i 228 | $ | i 801 | $ | ( i 35 | ) | $ | ( i 96 | ) | |||||||||||
Investment
grade fixed income securities | i 581 | $ | i 3,878 | $ | ( i 41 | ) | i 185 | $ | i 594 | $ | ( i 20 | ) | $ | ( i 61 | ) | |||||||||||
Below
investment grade fixed income securities | i 61 | i 423 | ( i 20 | ) | i 43 | i 207 | ( i 15 | ) | ( i 35 | ) | ||||||||||||||||
Total
fixed income securities | i 642 | $ | i 4,301 | $ | ( i 61 | ) | i 228 | $ | i 801 | $ | ( i 35 | ) | $ | ( i 96 | ) |
Gross
unrealized losses by unrealized loss position and credit quality as of March 31, 2020 | ||||||||||||
($ in millions) | Investment grade | Below investment grade | Total | |||||||||
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2) | $ | ( i 579 | ) | $ | ( i 311 | ) | $ | ( i 890 | ) | |||
Fixed
income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4) | ( i 137 | ) | ( i 257 | ) | ( i 394 | ) | ||||||
Total
unrealized losses | $ | ( i 716 | ) | $ | ( i 568 | ) | $ | ( i 1,284 | ) |
(1) | Below
investment grade fixed income securities include $ i 304 million that have been in an unrealized loss position for less than twelve months. |
(2) | Related
to securities with an unrealized loss position less than 20% of amortized cost, net, the degree of which suggests that these securities do not pose a high risk of having credit losses. |
(3) | No below investment grade fixed income securities have been in an unrealized loss position for a period of twelve or more consecutive months. |
(4) | Evaluated
based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations. |
Mortgage
loans amortized cost by debt service coverage ratio distribution and year of origination | ||||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
2015 and prior | 2016 | 2017 | 2018 | 2019 | Current | Total | Total | |||||||||||||||||||||||||
Below
1.0 | $ | i 15 | $ | i — | $ | i 32 | $ | i — | $ | i — | $ | i — | $ | i 47 | $ | i 56 | ||||||||||||||||
1.0
- 1.25 | i 66 | i 14 | i 32 | i — | i 91 | i 30 | i 233 | i 225 | ||||||||||||||||||||||||
1.26
- 1.50 | i 535 | i 14 | i 97 | i 318 | i 238 | i — | i 1,202 | i 1,237 | ||||||||||||||||||||||||
Above
1.50 | i 1,416 | i 522 | i 393 | i 369 | i 555 | i 107 | i 3,362 | i 3,302 | ||||||||||||||||||||||||
Amortized
cost before allowance | $ | i 2,032 | $ | i 550 | $ | i 554 | $ | i 687 | $ | i 884 | $ | i 137 | $ | i 4,844 | $ | i 4,820 | ||||||||||||||||
Allowance
(1) | ( i 85 | ) | ( i 3 | ) | ||||||||||||||||||||||||||||
Amortized
cost, net | $ | i 4,759 | $ | i 4,817 |
(1) | Due
to the adoption of the measurement of credit losses on financial instruments accounting standard, prior valuation allowance is now presented as an allowance for expected credit losses. |
Rollforward
of credit loss allowance for mortgage loans | ||||
($ in millions) | Three months ended March 31, 2020 | |||
Beginning balance | $ | ( i 3 | ) | |
Cumulative
effect of change in accounting principle | ( i 42 | ) | ||
Net (increases) decreases related to credit losses | ( i 40 | ) | ||
Ending
balance | $ | ( i 85 | ) |
Bank
loans amortized cost by credit rating and year of origination | ||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
2015 and prior | 2016 | 2017 | 2018 | 2019 | Current | Total | ||||||||||||||||||||||
BBB | $ | i — | $ | i — | $ | i 10 | $ | i 18 | $ | i 9 | $ | i 4 | $ | i 41 | ||||||||||||||
BB | i 31 | i 4 | i 43 | i 70 | i 67 | i 21 | i 236 | |||||||||||||||||||||
B | i 12 | i 38 | i 155 | i 237 | i 185 | i 84 | i 711 | |||||||||||||||||||||
CCC
and below | i 9 | i 40 | i 40 | i 53 | i 59 | i 7 | i 208 | |||||||||||||||||||||
Amortized
cost before allowance | i 52 | i 82 | i 248 | i 378 | i 320 | i 116 | i 1,196 | |||||||||||||||||||||
Allowance | ( i 79 | ) | ||||||||||||||||||||||||||
Amortized
cost, net | $ | i 1,117 |
Rollforward
of credit loss allowance for bank loans | ||||
($ in millions) | Three months ended March 31, 2020 | |||
Beginning balance | $ | i — | ||
Cumulative
effect of change in accounting principle | ( i 53 | ) | ||
Net (increases) decreases related to credit losses | ( i 27 | ) | ||
Reduction
of allowance related to sales | i 1 | |||
Ending balance | $ | ( i 79 | ) |
Note 6 | Fair
Value of Assets and Liabilities |
(a) | Quoted prices for similar assets or liabilities in active markets; |
(b) | Quoted
prices for identical or similar assets or liabilities in markets that are not active; or |
(c) | Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. |
(1) | Specific inputs significant to the fair value estimation models are not market observable. This primarily occurs in the Company’s use of broker quotes to value certain securities where the inputs have not been corroborated to be market observable, and the use of valuation models that use significant non-market observable inputs. |
(2) | Quotes continue to be received from independent third-party valuation service providers
and all |
• | Fixed income securities: |
• | Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that are not
active. |
• | Short-term: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads. |
• | Other investments: Free-standing exchange listed derivatives that are not actively traded are valued based on quoted prices for identical instruments in markets that are not active. |
• | Fixed
income securities: |
• | Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in |
• | Short-term: For certain short-term investments, amortized cost is used as the best estimate of fair value. |
• | Other investments: Certain OTC derivatives, such as
interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility. Other primary inputs include interest rate yield curves and credit spreads. |
• | Contractholder funds: Derivatives embedded in certain life and annuity contracts are valued internally using models widely accepted in the financial services industry that determine a single best estimate of fair value for the embedded derivatives within a block
of contractholder liabilities. The models primarily use stochastically determined cash flows based on the contractual elements of embedded derivatives, projected option cost and applicable market data, such as interest rate yield curves and equity index volatility |
Assets
and liabilities measured at fair value | ||||||||||||||||||||
($ in millions) | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Counterparty
and cash collateral netting | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
U.S.
government and agencies | $ | i 5,022 | $ | i 377 | $ | i — | $ | i 5,399 | ||||||||||||
Municipal | i — | i 8,651 | i 58 | i 8,709 | ||||||||||||||||
Corporate
- public | i — | i 31,621 | i 60 | i 31,681 | ||||||||||||||||
Corporate
- privately placed | i — | i 11,866 | i 88 | i 11,954 | ||||||||||||||||
Foreign
government | i — | i 911 | i — | i 911 | ||||||||||||||||
ABS | i — | i 797 | i 39 | i 836 | ||||||||||||||||
MBS | i — | i 327 | i 40 | i 367 | ||||||||||||||||
Total
fixed income securities | i 5,022 | i 54,550 | i 285 | i 59,857 | ||||||||||||||||
Equity
securities | i 3,069 | i 290 | i 342 | i 3,701 | ||||||||||||||||
Short-term
investments | i 4,687 | i 934 | i 50 | i 5,671 | ||||||||||||||||
Other
investments: Free-standing derivatives | i — | i 77 | i — | $ | ( i 53 | ) | i 24 | |||||||||||||
Separate
account assets | i 2,434 | i — | i — | i 2,434 | ||||||||||||||||
Total
recurring basis assets | i 15,212 | i 55,851 | i 677 | ( i 53 | ) | i 71,687 | ||||||||||||||
Non-recurring
basis (1) | i — | i — | i 3 | i 3 | ||||||||||||||||
Total
assets at fair value | $ | i 15,212 | $ | i 55,851 | $ | i 680 | $ | ( i 53 | ) | $ | i 71,690 | |||||||||
%
of total assets at fair value | i 21.2 | % | i 77.9 | % | i 1.0 | % | ( i 0.1 | )% | i 100.0 | % | ||||||||||
Investments
reported at NAV | i 1,717 | |||||||||||||||||||
Total | $ | i 73,407 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
Contractholder
funds: Derivatives embedded in life and annuity contracts | $ | i — | $ | i — | $ | ( i 417 | ) | $ | ( i 417 | ) | ||||||||||
Other
liabilities: Free-standing derivatives | ( i 3 | ) | ( i 19 | ) | i — | $ | i 12 | ( i 10 | ) | |||||||||||
Total
recurring basis liabilities | $ | ( i 3 | ) | $ | ( i 19 | ) | $ | ( i 417 | ) | $ | i 12 | $ | ( i 427 | ) | ||||||
%
of total liabilities at fair value | i 0.7 | % | i 4.4 | % | i 97.7 | % | ( i 2.8 | )% | i 100.0 | % |
(1) | Includes
$ i 3 million of bank loans. |
Assets and liabilities measured at fair value | ||||||||||||||||||||
($ in millions) | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Counterparty and cash collateral netting | Total | |||||||||||||||
Assets | ||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
U.S.
government and agencies | $ | i 4,689 | $ | i 397 | $ | i — | $ | i 5,086 | ||||||||||||
Municipal | i — | i 8,558 | i 62 | i 8,620 | ||||||||||||||||
Corporate
- public | i — | i 30,819 | i 61 | i 30,880 | ||||||||||||||||
Corporate
- privately placed | i — | i 12,084 | i 114 | i 12,198 | ||||||||||||||||
Foreign
government | i — | i 979 | i — | i 979 | ||||||||||||||||
ABS | i — | i 797 | i 65 | i 862 | ||||||||||||||||
MBS | i — | i 379 | i 40 | i 419 | ||||||||||||||||
Total
fixed income securities | i 4,689 | i 54,013 | i 342 | i 59,044 | ||||||||||||||||
Equity
securities | i 7,407 | i 384 | i 371 | i 8,162 | ||||||||||||||||
Short-term
investments | i 1,940 | i 2,291 | i 25 | i 4,256 | ||||||||||||||||
Other
investments: Free-standing derivatives | i — | i 180 | i — | $ | ( i 40 | ) | i 140 | |||||||||||||
Separate
account assets | i 3,044 | i — | i — | i 3,044 | ||||||||||||||||
Other
assets | i 1 | i — | i — | i 1 | ||||||||||||||||
Total
recurring basis assets | i 17,081 | i 56,868 | i 738 | ( i 40 | ) | i 74,647 | ||||||||||||||
Total
assets at fair value | $ | i 17,081 | $ | i 56,868 | $ | i 738 | $ | ( i 40 | ) | $ | i 74,647 | |||||||||
%
of total assets at fair value | i 22.9 | % | i 76.2 | % | i 1.0 | % | ( i 0.1 | )% | i 100.0 | % | ||||||||||
Investments
reported at NAV | i 1,814 | |||||||||||||||||||
Total | $ | i 76,461 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
Contractholder
funds: Derivatives embedded in life and annuity contracts | $ | i — | $ | i — | $ | ( i 462 | ) | $ | ( i 462 | ) | ||||||||||
Other
liabilities: Free-standing derivatives | i — | ( i 84 | ) | i — | $ | i 12 | ( i 72 | ) | ||||||||||||
Total
recurring basis liabilities | $ | i — | $ | ( i 84 | ) | $ | ( i 462 | ) | $ | i 12 | $ | ( i 534 | ) | |||||||
%
of total liabilities at fair value | i — | % | i 15.7 | % | i 86.5 | % | ( i 2.2 | )% | i 100.0 | % |
Quantitative
information about the significant unobservable inputs used in Level 3 fair value measurements | ||||||||||||
($ in millions) | Fair value | Valuation technique | Unobservable input | Range | Weighted average | |||||||
Derivatives embedded in life and annuity contracts – Equity-indexed
and forward starting options | $ | ( i 361 | ) | Stochastic
cash flow model | Projected option cost | 1.0 - 4.2% | i 2.71% | |||||
Derivatives embedded in life and annuity contracts – Equity-indexed
and forward starting options | $ | ( i 430 | ) | Stochastic
cash flow model | Projected option cost | 1.0 - 4.2% | i 2.67% |
Rollforward
of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | Total gains (losses) included in: | Transfers | Balance
as of March 31, 2020 | |||||||||||||||||||||||||||||||||||||
($ in millions) | Net income | OCI | Into Level 3 | Out of Level 3 | Purchases | Sales | Issues | Settlements | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||||||||||||||||||
Municipal | $ | i 62 | $ | i 1 | $ | ( i 1 | ) | $ | i — | $ | i — | $ | i — | $ | ( i 2 | ) | $ | i — | $ | ( i 2 | ) | $ | i 58 | |||||||||||||||||
Corporate
- public | i 61 | i — | i — | i — | i — | i — | i — | i — | ( i 1 | ) | i 60 | |||||||||||||||||||||||||||||
Corporate
- privately placed | i 114 | i — | ( i 1 | ) | i — | ( i 25 | ) | i 1 | i — | i — | ( i 1 | ) | i 88 | |||||||||||||||||||||||||||
ABS | i 65 | i — | i — | i 26 | ( i 49 | ) | i 33 | ( i 9 | ) | i — | ( i 27 | ) | i 39 | |||||||||||||||||||||||||||
MBS | i 40 | i — | i — | i — | i — | i — | i — | i — | i — | i 40 | ||||||||||||||||||||||||||||||
Total
fixed income securities | i 342 | i 1 | ( i 2 | ) | i 26 | ( i 74 | ) | i 34 | ( i 11 | ) | i — | ( i 31 | ) | i 285 | ||||||||||||||||||||||||||
Equity
securities | i 371 | ( i 30 | ) | i — | i — | i — | i 1 | i — | i — | i — | i 342 | |||||||||||||||||||||||||||||
Short-term
investments | i 25 | i — | i — | i — | i — | i 25 | i — | i — | i — | i 50 | ||||||||||||||||||||||||||||||
Total
recurring Level 3 assets | i 738 | ( i 29 | ) | ( i 2 | ) | i 26 | ( i 74 | ) | i 60 | ( i 11 | ) | i — | ( i 31 | ) | i 677 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Contractholder
funds: Derivatives embedded in life and annuity contracts | ( i 462 | ) | i 48 | i — | i — | i — | i — | i — | ( i 8 | ) | i 5 | ( i 417 | ) | |||||||||||||||||||||||||||
Total
recurring Level 3 liabilities | $ | ( i 462 | ) | $ | i 48 | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | ( i 8 | ) | $ | i 5 | $ | ( i 417 | ) |
Total
Level 3 gains (losses) included in net income for the three months ended March 31, 2020 | ||||||||||||||||||||
Net investment income | Realized capital gains (losses) | Life contract benefits | Interest credited to contractholder
funds | Total | ||||||||||||||||
Components of net income | $ | ( i 23 | ) | $ | ( i 6 | ) | $ | ( i 24 | ) | $ | i 72 | $ | i 19 |
Rollforward
of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2018 | Total gains (losses) included in: | Transfers | Balance
as of March 31, 2019 | |||||||||||||||||||||||||||||||||||||
($ in millions) | Net income | OCI | Into Level 3 | Out of Level 3 | Purchases | Sales | Issues | Settlements | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||||||||||||||||||
Municipal | $ | i 70 | $ | i — | $ | i 1 | $ | i — | $ | i — | $ | i — | $ | ( i 2 | ) | $ | i — | $ | ( i 1 | ) | $ | i 68 | ||||||||||||||||||
Corporate
- public | i 70 | i — | i 1 | i — | i — | i 20 | i — | i — | ( i 1 | ) | i 90 | |||||||||||||||||||||||||||||
Corporate
- privately placed | i 90 | ( i 2 | ) | i 2 | i 15 | i — | i — | ( i 13 | ) | i — | ( i 2 | ) | i 90 | |||||||||||||||||||||||||||
ABS | i 69 | i — | i — | i — | ( i 47 | ) | i 78 | ( i 10 | ) | i — | ( i 3 | ) | i 87 | |||||||||||||||||||||||||||
MBS | i 26 | i — | i — | i 3 | i — | i 6 | i — | i — | i — | i 35 | ||||||||||||||||||||||||||||||
Total
fixed income securities | i 325 | ( i 2 | ) | i 4 | i 18 | ( i 47 | ) | i 104 | ( i 25 | ) | i — | ( i 7 | ) | i 370 | ||||||||||||||||||||||||||
Equity
securities | i 341 | i 28 | i — | i — | i — | i 2 | ( i 68 | ) | i — | i — | i 303 | |||||||||||||||||||||||||||||
Short-term
investments | i 30 | i — | i — | i — | i — | i 10 | i — | i — | i — | i 40 | ||||||||||||||||||||||||||||||
Free-standing
derivatives, net | i 1 | i — | i — | i — | i — | i — | i — | i — | i — | i 1 | ||||||||||||||||||||||||||||||
Total
recurring Level 3 assets | i 697 | i 26 | i 4 | i 18 | ( i 47 | ) | i 116 | ( i 93 | ) | i — | ( i 7 | ) | i 714 | |||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Contractholder
funds: Derivatives embedded in life and annuity contracts | ( i 224 | ) | ( i 28 | ) | i — | i — | i — | i — | i — | i — | i 1 | ( i 251 | ) | |||||||||||||||||||||||||||
Total
recurring Level 3 liabilities | $ | ( i 224 | ) | $ | ( i 28 | ) | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 1 | $ | ( i 251 | ) |
Total
Level 3 gains (losses) included in net income for the three months ended March 31, 2019 | ||||||||||||||||||||
Net investment income | Realized capital gains (losses) | Life contract benefits | Interest credited to contractholder
funds | Total | ||||||||||||||||
Components of net income | $ | i — | $ | i 26 | $ | i 8 | $ | ( i 36 | ) | $ | ( i 2 | ) |
Valuation
changes included in net income and OCI for Level 3 assets and liabilities held as of March 31, | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Fixed
income securities: | ||||||||
Municipal | $ | i 1 | $ | i — | ||||
Equity
securities | $ | ( i 30 | ) | $ | i 4 | |||
Free-standing
derivatives, net | i — | i — | ||||||
Total
recurring Level 3 assets | $ | ( i 29 | ) | $ | i 4 | |||
Liabilities | ||||||||
Contractholder
funds: Derivatives embedded in life and annuity contracts | $ | i 48 | $ | ( i 28 | ) | |||
Total
recurring Level 3 liabilities | i 48 | ( i 28 | ) | |||||
Total
included in net income | $ | i 19 | $ | ( i 24 | ) | |||
Components
of net income | ||||||||
Net investment income | $ | ( i 23 | ) | $ | i — | |||
Realized
capital gains (losses) | ( i 6 | ) | i 4 | |||||
Life
contract benefits | ( i 24 | ) | i 8 | |||||
Interest
credited to contractholder funds | i 72 | ( i 36 | ) | |||||
Total
included in net income | $ | i 19 | $ | ( i 24 | ) | |||
Assets | ||||||||
Municipal | $ | ( i 1 | ) | |||||
Corporate
- privately placed | ( i 1 | ) | ||||||
Total recurring
Level 3 assets | $ | ( i 2 | ) | |||||
Changes in unrealized net capital gains and losses
reported in OCI (1) | $ | ( i 2 | ) |
(1) | Effective
January 1, 2020, the Company adopted the fair value accounting standard that prospectively requires the disclosure of valuation changes reported in OCI. |
Financial
instruments not carried at fair value | ||||||||||||||||||
($ in millions) | ||||||||||||||||||
Financial assets | Fair value level | Amortized
cost, net | Fair value | Amortized cost, net | Fair value | |||||||||||||
Mortgage loans | Level 3 | $ | i 4,759 | $ | i 4,875 | $ | i 4,817 | $ | i 5,012 | |||||||||
Bank
loans | Level 3 | i 1,117 | i 1,042 | i 1,204 | i 1,185 | |||||||||||||
Agent
loans | Level 3 | i 671 | i 686 | i 666 | i 664 | |||||||||||||
Financial
liabilities | Fair value level | Carrying value (1) | Fair value | Carrying value (1) | Fair value | |||||||||||||
Contractholder
funds on investment contracts | Level 3 | $ | i 8,190 | $ | i 8,755 | $ | i 8,438 | $ | i 9,158 | |||||||||
Long-term
debt | Level 2 | i 6,633 | i 7,568 | i 6,631 | i 7,738 | |||||||||||||
Liability
for collateral | Level 2 | i 1,291 | i 1,291 | i 1,829 | i 1,829 |
Note
7 | Derivative Financial Instruments |
Summary
of the volume and fair value positions of derivative instruments as of March 31, 2020 | ||||||||||||||||||||
($ in millions, except number of contracts) | Volume (1) | |||||||||||||||||||
Balance sheet location | Notional
amount | Number of contracts | Fair value, net | Gross asset | Gross liability | |||||||||||||||
Asset derivatives | ||||||||||||||||||||
Derivatives
designated as fair value accounting hedging instruments | ||||||||||||||||||||
Other | Other
assets | $ | i 2 | n/a | $ | i — | $ | i — | $ | i — | ||||||||||
Derivatives
not designated as accounting hedging instruments | ||||||||||||||||||||
Interest
rate contracts | ||||||||||||||||||||
Futures | Other
assets | i — | i 568 | i — | i — | i — | ||||||||||||||
Equity
and index contracts | ||||||||||||||||||||
Options
| Other investments | i — | i 3,262 | i 21 | i 21 | i — | ||||||||||||||
Futures | Other
assets | i — | i 12 | i — | i — | i — | ||||||||||||||
Total
return index contracts | ||||||||||||||||||||
Total return
swap agreements – fixed income | Other investments | i 83 | n/a | ( i 5 | ) | i — | ( i 5 | ) | ||||||||||||
Foreign
currency contracts | ||||||||||||||||||||
Foreign
currency forwards | Other investments | i 629 | n/a | i 42 | i 44 | ( i 2 | ) | |||||||||||||
Credit
default contracts | ||||||||||||||||||||
Credit
default swaps – buying protection | Other investments | i 114 | n/a | i 1 | i 4 | ( i 3 | ) | |||||||||||||
Credit
default swaps – selling protection | Other investments | i 7 | n/a | i — | i — | i — | ||||||||||||||
Subtotal | i 833 | i 3,842 | i 59 | i 69 | ( i 10 | ) | ||||||||||||||
Total
asset derivatives | $ | i 835 | i 3,842 | $ | i 59 | $ | i 69 | $ | ( i 10 | ) | ||||||||||
Liability
derivatives | ||||||||||||||||||||
Derivatives
not designated as accounting hedging instruments | ||||||||||||||||||||
Interest
rate contracts | ||||||||||||||||||||
Interest
rate cap agreements | Other liabilities & accrued expenses | $ | i 33 | n/a | $ | i — | $ | i — | $ | i — | ||||||||||
Futures | Other
liabilities & accrued expenses | i — | i 6,808 | ( i 1 | ) | i — | ( i 1 | ) | ||||||||||||
Equity
and index contracts | ||||||||||||||||||||
Options | Other
liabilities & accrued expenses | i — | i 3,016 | ( i 4 | ) | i — | ( i 4 | ) | ||||||||||||
Futures | Other
liabilities & accrued expenses | i — | i 1,476 | ( i 2 | ) | i — | ( i 2 | ) | ||||||||||||
Total
return index contracts | ||||||||||||||||||||
Total return
swap agreements – fixed income | Other liabilities & accrued expenses | i 2 | n/a | i — | i — | i — | ||||||||||||||
Total
return swap agreements – equity index | Other liabilities & accrued expenses | i 6 | n/a | ( i 1 | ) | i — | ( i 1 | ) | ||||||||||||
Foreign
currency contracts | ||||||||||||||||||||
Foreign
currency forwards | Other liabilities & accrued expenses | i 145 | n/a | i 6 | i 7 | ( i 1 | ) | |||||||||||||
Embedded
derivative financial instruments | ||||||||||||||||||||
Guaranteed
accumulation benefits | Contractholder funds | i 127 | n/a | ( i 33 | ) | i — | ( i 33 | ) | ||||||||||||
Guaranteed
withdrawal benefits | Contractholder funds | i 164 | n/a | ( i 23 | ) | i — | ( i 23 | ) | ||||||||||||
Equity-indexed
and forward starting options in life and annuity product contracts | Contractholder funds | i 1,768 | n/a | ( i 361 | ) | i — | ( i 361 | ) | ||||||||||||
Credit
default contracts | ||||||||||||||||||||
Credit
default swaps – buying protection | Other liabilities & accrued expenses | i 54 | n/a | i — | i 1 | ( i 1 | ) | |||||||||||||
Credit
default swaps – selling protection | Other liabilities & accrued expenses | i 752 | n/a | ( i 2 | ) | i — | ( i 2 | ) | ||||||||||||
Total
liability derivatives | i 3,051 | i 11,300 | ( i 421 | ) | $ | i 8 | $ | ( i 429 | ) | |||||||||||
Total
derivatives | $ | i 3,886 | i 15,142 | $ | ( i 362 | ) |
(1) |
Summary
of the volume and fair value positions of derivative instruments as of December 31, 2019 | ||||||||||||||||||||
($ in millions, except number of contracts) | Volume | |||||||||||||||||||
Balance sheet location | Notional
amount | Number of contracts | Fair value, net | Gross asset | Gross liability | |||||||||||||||
Asset derivatives | ||||||||||||||||||||
Derivatives
designated as accounting hedging instruments | ||||||||||||||||||||
Other | Other
assets | $ | i 2 | n/a | $ | i — | $ | i — | $ | i — | ||||||||||
Derivatives
not designated as accounting hedging instruments | ||||||||||||||||||||
Interest
rate contracts | ||||||||||||||||||||
Futures | Other
assets | i — | i 3,668 | i — | i — | i — | ||||||||||||||
Equity
and index contracts | ||||||||||||||||||||
Options | Other
investments | i — | i 5,539 | i 140 | i 140 | i — | ||||||||||||||
Futures
| Other assets | i — | i 1,533 | i 1 | i 1 | i — | ||||||||||||||
Total
return index contracts | ||||||||||||||||||||
Total return
swap agreements – fixed income | Other investments | i 56 | n/a | i 1 | i 1 | i — | ||||||||||||||
Credit
default contracts | ||||||||||||||||||||
Credit
default swaps – buying protection | Other investments | i 17 | n/a | i — | i — | i — | ||||||||||||||
Subtotal | i 73 | i 10,740 | i 142 | i 142 | i — | |||||||||||||||
Total
asset derivatives | $ | i 75 | i 10,740 | $ | i 142 | $ | i 142 | $ | i — | |||||||||||
Liability
derivatives | ||||||||||||||||||||
Derivatives
not designated as accounting hedging instruments | ||||||||||||||||||||
Interest
rate contracts | ||||||||||||||||||||
Interest
rate cap agreements | Other liabilities & accrued expenses | $ | i 34 | n/a | $ | i — | $ | i — | $ | i — | ||||||||||
Futures | Other
liabilities & accrued expenses | i — | i 1,089 | i — | i — | i — | ||||||||||||||
Equity
and index contracts | ||||||||||||||||||||
Options | Other
liabilities & accrued expenses | i — | i 5,400 | ( i 68 | ) | i — | ( i 68 | ) | ||||||||||||
Futures | Other
liabilities & accrued expenses | i — | i 3 | i — | i — | i — | ||||||||||||||
Total
return index contracts | ||||||||||||||||||||
Total return
swap agreements – fixed income | Other liabilities & accrued expenses | i 119 | n/a | i — | i — | i — | ||||||||||||||
Total
return swap agreements – equity index | Other liabilities & accrued expenses | i 187 | n/a | i 11 | i 11 | i — | ||||||||||||||
Foreign
currency contracts | ||||||||||||||||||||
Foreign
currency forwards | Other liabilities & accrued expenses | i 745 | n/a | i 19 | i 28 | ( i 9 | ) | |||||||||||||
Embedded
derivative financial instruments | ||||||||||||||||||||
Guaranteed
accumulation benefits | Contractholder funds | i 161 | n/a | ( i 18 | ) | i — | ( i 18 | ) | ||||||||||||
Guaranteed
withdrawal benefits | Contractholder funds | i 205 | n/a | ( i 14 | ) | i — | ( i 14 | ) | ||||||||||||
Equity-indexed
and forward starting options in life and annuity product contracts | Contractholder funds | i 1,791 | n/a | ( i 430 | ) | i — | ( i 430 | ) | ||||||||||||
Credit
default contracts | ||||||||||||||||||||
Credit
default swaps – buying protection | Other liabilities & accrued expenses | i 152 | n/a | ( i 7 | ) | i — | ( i 7 | ) | ||||||||||||
Credit
default swaps – selling protection | Other liabilities & accrued expenses | i 9 | n/a | i — | i — | i — | ||||||||||||||
Total
liability derivatives | i 3,403 | i 6,492 | ( i 507 | ) | $ | i 39 | $ | ( i 546 | ) | |||||||||||
Total
derivatives | $ | i 3,478 | i 17,232 | $ | ( i 365 | ) |
Gross
and net amounts for OTC derivatives (1) | ||||||||||||||||||||||||
($ in millions) | Offsets | |||||||||||||||||||||||
Gross
amount | Counter-party netting | Cash collateral (received) pledged | Net amount on balance sheet | Securities collateral (received) pledged | Net amount | |||||||||||||||||||
Asset
derivatives | $ | i 56 | $ | ( i 18 | ) | $ | ( i 35 | ) | $ | i 3 | $ | i — | $ | i 3 | ||||||||||
Liability
derivatives | ( i 13 | ) | i 18 | ( i 6 | ) | ( i 1 | ) | i — | ( i 1 | ) | ||||||||||||||
Asset
derivatives | $ | i 40 | $ | ( i 39 | ) | $ | ( i 1 | ) | $ | i — | $ | i — | $ | i — | ||||||||||
Liability
derivatives | ( i 16 | ) | i 39 | ( i 27 | ) | ( i 4 | ) | i — | ( i 4 | ) |
(1) | All
OTC derivatives are subject to enforceable master netting agreements. |
Gains
(losses) from valuation and settlements reported on derivatives not designated as accounting hedges | ||||||||||||||||||||
($ in millions) | Realized capital gains (losses) | Life contract benefits | Interest credited to contractholder funds | Operating costs and expenses | Total
gain (loss) recognized in net income on derivatives | |||||||||||||||
Three months ended March 31, 2020 | ||||||||||||||||||||
Interest
rate contracts | $ | i 39 | $ | i — | $ | i — | $ | i — | $ | i 39 | ||||||||||
Equity
and index contracts | i 28 | i — | ( i 50 | ) | ( i 45 | ) | ( i 67 | ) | ||||||||||||
Embedded
derivative financial instruments | i — | ( i 24 | ) | i 69 | i — | i 45 | ||||||||||||||
Foreign
currency contracts | i 36 | i — | i — | i — | i 36 | |||||||||||||||
Credit
default contracts | ( i 8 | ) | i — | i — | i — | ( i 8 | ) | |||||||||||||
Total
return swaps - fixed income | ( i 9 | ) | i — | i — | i — | ( i 9 | ) | |||||||||||||
Total
return swaps - equity index | i 2 | i — | i — | i — | i 2 | |||||||||||||||
Total | $ | i 88 | $ | ( i 24 | ) | $ | i 19 | $ | ( i 45 | ) | $ | i 38 | ||||||||
Three
months ended March 31, 2019 | ||||||||||||||||||||
Interest
rate contracts | $ | i 7 | $ | i — | $ | i — | $ | i — | $ | i 7 | ||||||||||
Equity
and index contracts | ( i 71 | ) | i — | i 31 | i 21 | ( i 19 | ) | |||||||||||||
Embedded
derivative financial instruments | i — | i 8 | ( i 35 | ) | i — | ( i 27 | ) | |||||||||||||
Foreign
currency contracts | i 5 | i — | i — | i — | i 5 | |||||||||||||||
Credit
default contracts | ( i 4 | ) | i — | i — | i — | ( i 4 | ) | |||||||||||||
Total
return swaps - fixed income | i 2 | i — | i — | i — | i 2 | |||||||||||||||
Total
return swaps - equity index | i 15 | i — | i — | i — | i 15 | |||||||||||||||
Total | $ | ( i 46 | ) | $ | i 8 | $ | ( i 4 | ) | $ | i 21 | $ | ( i 21 | ) |
OTC
derivatives counterparty credit exposure by counterparty credit rating | ||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||
Rating (1) | Number of counter- parties | Notional amount (2) | Credit exposure (2) | Exposure,
net of collateral (2) | Number of counter- parties | Notional amount (2) | Credit exposure (2) | Exposure,
net of collateral (2) | ||||||||||||||||||||||
A+ | i 4 | $ | i 718 | $ | i 40 | $ | i 2 | i 6 | $ | i 868 | $ | i 29 | $ | i — | ||||||||||||||||
A | i 1 | i 221 | i 6 | i — | i — | i — | i — | i — | ||||||||||||||||||||||
Total | i 5 | $ | i 939 | $ | i 46 | $ | i 2 | i 6 | $ | i 868 | $ | i 29 | $ | i — |
(1) | Allstate
uses the lower of S&P’s or Moody’s long-term debt issuer ratings. |
(2) | Only OTC derivatives with a net positive fair value are included for each counterparty. |
($ in
millions) | ||||||||
Gross liability fair value of contracts containing credit-risk-contingent features | $ | i 13 | $ | i 16 | ||||
Gross
asset fair value of contracts containing credit-risk-contingent features and subject to MNAs | ( i 10 | ) | ( i 11 | ) | ||||
Collateral
posted under MNAs for contracts containing credit-risk-contingent features | ( i 3 | ) | ( i 3 | ) | ||||
Maximum
amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently | $ | i — | $ | i 2 |
CDS
notional amounts by credit rating and fair value of protection sold | ||||||||||||||||||||||||||||
($ in millions) | Notional amount | |||||||||||||||||||||||||||
AAA | AA | A | BBB | BB
and lower | Total | Fair value | ||||||||||||||||||||||
Single
name | ||||||||||||||||||||||||||||
Corporate
debt | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 9 | $ | i 9 | $ | i — | ||||||||||||||
Index | ||||||||||||||||||||||||||||
Corporate
debt | i 6 | i 12 | i 168 | i 510 | i 54 | i 750 | ( i 2 | ) | ||||||||||||||||||||
Total | $ | i 6 | $ | i 12 | $ | i 168 | $ | i 510 | $ | i 63 | $ | i 759 | $ | ( i 2 | ) | |||||||||||||
Single
name | ||||||||||||||||||||||||||||
Corporate
debt | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 9 | $ | i 9 | $ | i — | ||||||||||||||
Total | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 9 | $ | i 9 | $ | i — |
Note 8 | Reserve
for Property and Casualty Insurance Claims and Claims Expense |
Rollforward of the reserve for property and casualty insurance claims and claims expense | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Balance
as of January 1 | $ | i 27,712 | $ | i 27,423 | ||||
Less
recoverables (1) | ( i 6,912 | ) | ( i 7,155 | ) | ||||
Net
balance as of January 1 | i 20,800 | i 20,268 | ||||||
Incurred
claims and claims expense related to: | ||||||||
Current year | i 5,333 | i 5,808 | ||||||
Prior
years | i 8 | i 12 | ||||||
Total
incurred | i 5,341 | i 5,820 | ||||||
Claims
and claims expense paid related to: | ||||||||
Current year | ( i 2,352 | ) | ( i 2,270 | ) | ||||
Prior
years | ( i 3,554 | ) | ( i 3,294 | ) | ||||
Total
paid | ( i 5,906 | ) | ( i 5,564 | ) | ||||
Net
balance as of March 31 | i 20,235 | i 20,524 | ||||||
Plus
recoverables | i 6,913 | i 7,020 | ||||||
Balance
as of March 31 | $ | i 27,148 | $ | i 27,544 |
(1) | Recoverables
comprises reinsurance and indemnification recoverables. |
Prior
year reserve reestimates included in claims and claims expense (1) | ||||||||||||||||||||||||
Three months ended March 31, | ||||||||||||||||||||||||
($ in millions) | Non-catastrophes losses | Catastrophes losses | Total | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019
(2) | 2020 | 2019 | |||||||||||||||||||
Auto | $ | i 22 | $ | ( i 53 | ) | $ | ( i 9 | ) | $ | ( i 1 | ) | $ | i 13 | $ | ( i 54 | ) | ||||||||
Homeowners | i 1 | i 7 | ( i 8 | ) | i 46 | ( i 7 | ) | i 53 | ||||||||||||||||
Other
personal lines | ( i 2 | ) | ( i 2 | ) | ( i 4 | ) | i 9 | ( i 6 | ) | i 7 | ||||||||||||||
Commercial
lines | i 5 | i 5 | i 1 | ( i 1 | ) | i 6 | i 4 | |||||||||||||||||
Discontinued
Lines and Coverages | i 2 | i 2 | i — | i — | i 2 | i 2 | ||||||||||||||||||
Service
Businesses | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Total
prior year reserve reestimates | $ | i 28 | $ | ( i 41 | ) | $ | ( i 20 | ) | $ | i 53 | $ | i 8 | $ | i 12 |
(1) | Favorable
reserve reestimates are shown in parentheses. |
(2) | Includes $ i 15
million of reinstatement reinsurance premiums incurred during the period related to the 2018 Camp Fire, which primarily impacted homeowners reestimates. |
Note
9 | Reinsurance and indemnification |
Effects of reinsurance ceded and indemnification programs on property and casualty premiums earned and life premiums and contract
charges | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Property and casualty insurance premiums earned | $ | ( i 289 | ) | $ | ( i 260 | ) | ||
Life
premiums and contract charges | ( i 44 | ) | ( i 63 | ) |
Effects
of reinsurance ceded and indemnification programs on property and casualty insurance claims and claims expense, life contract benefits and interest credited to contractholder funds | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Property and casualty insurance
claims and claims expense | $ | ( i 131 | ) | $ | ( i 91 | ) | ||
Life
contract benefits | ( i 91 | ) | ( i 23 | ) | ||||
Interest
credited to contractholder funds | ( i 5 | ) | ( i 3 | ) |
Reinsurance and indemnification recoverables, net | ||||||||
($ in millions) | ||||||||
Property and casualty | ||||||||
Paid and due from reinsurers and indemnitors | $ | i 101 | $ | i 112 | ||||
Unpaid
losses estimated (including IBNR) | i 6,913 | i 6,912 | ||||||
Total
property and casualty | $ | i 7,014 | $ | i 7,024 | ||||
Annuities | i 1,377 | i 1,305 | ||||||
Life
insurance | i 735 | i 794 | ||||||
Other | i 88 | i 88 | ||||||
Total | $ | i 9,214 | $ | i 9,211 |
Note 10 | Capital Structure |
Note 11 | Company Restructuring |
• | Employee - severance and relocation benefits |
• | Exit - contract termination penalties |
Restructuring
activity during the period | ||||||||||||
($ in millions) | Employee costs | Exit costs | Total liability | |||||||||
Restructuring liability as of December 31, 2019 | $ | i 14 | $ | i 8 | $ | i 22 | ||||||
Expense
incurred | i 2 | i 1 | i 3 | |||||||||
Adjustments
to liability | i 2 | i — | i 2 | |||||||||
Payments | ( i 4 | ) | ( i 2 | ) | ( i 6 | ) | ||||||
Restructuring
liability as of March 31, 2020 | $ | i 14 | $ | i 7 | $ | i 21 |
Note 12 | Guarantees and Contingent Liabilities |
Note
13 | Benefit Plans |
Components of net cost (benefit) for pension and other postretirement plans | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Pension benefits | ||||||||
Service cost | $ | i 28 | $ | i 28 | ||||
Interest
cost | i 56 | i 65 | ||||||
Expected
return on plan assets | ( i 104 | ) | ( i 93 | ) | ||||
Amortization
of prior service credit | ( i 14 | ) | ( i 14 | ) | ||||
Costs
and expenses | ( i 34 | ) | ( i 14 | ) | ||||
Remeasurement
of projected benefit obligation | ( i 116 | ) | i 387 | |||||
Remeasurement
of plan assets | i 434 | ( i 391 | ) | |||||
Remeasurement
(gains) losses | i 318 | ( i 4 | ) | |||||
Pension
net cost (benefit) | $ | i 284 | $ | ( i 18 | ) | |||
Postretirement
benefits | ||||||||
Service cost | $ | i 1 | $ | i 2 | ||||
Interest
cost | i 3 | i 4 | ||||||
Amortization
of prior service credit | ( i 1 | ) | ( i 1 | ) | ||||
Costs
and expenses | i 3 | i 5 | ||||||
Remeasurement
of projected benefit obligation | i — | i 19 | ||||||
Remeasurement
of plan assets | i — | i — | ||||||
Remeasurement
(gains) losses | i — | i 19 | ||||||
Postretirement
net cost | $ | i 3 | $ | i 24 | ||||
Pension
and postretirement benefits | ||||||||
Costs and expenses | $ | ( i 31 | ) | $ | ( i 9 | ) | ||
Remeasurement
(gains) losses | i 318 | i 15 | ||||||
Total
net cost | $ | i 287 | $ | i 6 |
Pension and postretirement benefits remeasurement gains and losses | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Remeasurement of projected benefit obligation (gains) losses - discount rate | $ | ( i 36 | ) | $ | i 265 | |||
Remeasurement
of projected benefit obligation (gains) losses - other assumptions | ( i 80 | ) | i 141 | |||||
Remeasurement
of plan assets (gains) losses | i 434 | ( i 391 | ) | |||||
Remeasurement
(gains) losses | $ | i 318 | $ | i 15 |
Note
14 | Supplemental Cash Flow Information |
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Net
change in proceeds managed | ||||||||
Net change in fixed income securities | $ | i — | $ | i 60 | ||||
Net
change in short-term investments | i 538 | ( i 575 | ) | |||||
Operating
cash flow provided (used) | $ | i 538 | $ | ( i 515 | ) | |||
Net
change in liabilities | ||||||||
Liabilities for collateral, beginning of period | $ | ( i 1,829 | ) | $ | ( i 1,458 | ) | ||
Liabilities
for collateral, end of period | ( i 1,291 | ) | ( i 1,973 | ) | ||||
Operating
cash flow (used) provided | $ | ( i 538 | ) | $ | i 515 |
Note
15 | Other Comprehensive Income |
Components
of other comprehensive income (loss) on a pre-tax and after-tax basis | ||||||||||||||||||||||||
($ in millions) | Three months ended March 31, | |||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | |||||||||||||||||||
Unrealized
net holding gains and losses arising during the period, net of related offsets | $ | ( i 1,433 | ) | $ | i 303 | $ | ( i 1,130 | ) | $ | i 1,287 | $ | ( i 273 | ) | $ | i 1,014 | |||||||||
Less:
reclassification adjustment of realized capital gains and losses | i 287 | ( i 60 | ) | i 227 | i 51 | ( i 11 | ) | i 40 | ||||||||||||||||
Unrealized
net capital gains and losses | ( i 1,720 | ) | i 363 | ( i 1,357 | ) | i 1,236 | ( i 262 | ) | i 974 | |||||||||||||||
Unrealized
foreign currency translation adjustments | ( i 49 | ) | i 10 | ( i 39 | ) | i 6 | ( i 1 | ) | i 5 | |||||||||||||||
Unamortized
pension and other postretirement prior service credit (1) | i 6 | ( i 2 | ) | i 4 | ( i 15 | ) | i 3 | ( i 12 | ) | |||||||||||||||
Other
comprehensive (loss) income | $ | ( i 1,763 | ) | $ | i 371 | $ | ( i 1,392 | ) | $ | i 1,227 | $ | ( i 260 | ) | $ | i 967 |
(1) | Represents
prior service credits reclassified out of other comprehensive income and amortized into operating costs and expenses. |
• | Announced a Shelter-in-Place Payback of over $600 million to customers, as the significant decline in the number of auto accidents contributed favorably to our underwriting results; $210 million of this cost was accrued in first quarter 2020 and the remainder will be recognized in second quarter 2020 |
• | Announced
the Allstate Special Payment plan to provide more flexible payment options, including the option to delay payments |
• | Extended auto insurance coverage to customers using their personal vehicles to deliver food, medicine and other goods for commercial purposes; coverage for these activities is typically excluded |
• | Offered free Allstate Identity Protection to U.S. residents through December 31, 2020, regardless of whether they are already Allstate customers |
• | Increased
the utilization of virtual tools such as QuickFoto Claim® and Virtual Assist® to allow for a simple, fast and safe claims handling process for customers and our employees |
• | Declines in auto new issued applications
due to lower car sales and reductions in consumer shopping for insurance |
• | Slower written premiums growth due to decreased consumer demand and fewer filings for rate increases |
• | Lower miles and usage in shared economy products |
• | Lower auto accident frequency from reduced miles driven |
• | Increased
auto claim severity due to more severe accidents or higher replacement parts inflation |
• | Increased exposure to allowances for uncollectible receivables |
• | Potential declines in Allstate Protection Plans growth of premiums
and PIF due to decreased consumer spending and decreases in retail sales resulting from increasing unemployment |
• | Reduced demand for Allstate Dealer Services products due to lower new and used car sales |
• | Decline in claims in Allstate Dealer Services and Allstate Roadside Services due to lower miles driven |
• | Decreased
Allstate Identity Protection revenue growth due to higher unemployment |
• | Increased costs from Allstate Identity Protection providing free identity protection to consumers through the end of the year |
• | Higher death benefit costs |
• | Decline
in sales due to temporary underwriting restrictions placed on new business; agents will be able to offer coverage to customers outside the new guidelines through non-proprietary carriers |
• | Accelerated amortization of deferred policy acquisition costs (“DAC”) due to lower expected future profits |
• | Increased claim cost exposure for our hospital indemnity, accident, disability and life products, partially offset
by lower sports related and auto accident injury claims and fewer elective surgeries reducing hospital product exposure |
• | Decreased sales and increased policy lapses due to higher unemployment and decreased spend on voluntary products |
• | Lower performance-based investment income |
• | Higher
reserves associated with prolonged low rate environment |
• | Adverse impact on the market values and valuations of fixed income securities, equity securities and performance-based investments |
• | Fixed income securities in certain sectors such as energy, automotive, retail, travel, lodging and airlines were more severely impacted than others |
• | State
and local government budgets may be strained by the costs of responding to the Coronavirus and reduced tax revenues from lower economic activity which may have an adverse impact on valuations and returns of our municipal bond portfolio |
• | Volatility in future investment results due to capital market conditions, including the pace of economic recovery and effectiveness of the fiscal and monetary policy responses |
• | Higher expected credit losses on loan portfolios |
• | Parent holding company deployable assets remains strong at $3.41 billion to meet our obligations |
• | We have highly liquid securities that are generally saleable within one week totaling $8.81 billion |
• | Through
February 2021, the maximum amount of AIC dividends payable is $3.73 billion, of which $2.06 billion was paid through March 31, 2020 |
• Better serve customers |
• Grow customer base |
• Achieve target returns on capital |
• Proactively manage investments |
• Build
long-term growth platforms |
• Realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in adjusted net income |
• Pension and other postretirement remeasurement gains and losses, after-tax |
• Valuation
changes on embedded derivatives not hedged, after-tax |
• Amortization of DAC and deferred sales inducement costs (“DSI”), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives not hedged, after-tax |
• Business combination expenses and the amortization or impairment of purchased intangible assets, after-tax |
• Gain (loss) on disposition of operations, after-tax |
• Adjustments for other significant non-recurring, infrequent or unusual items, when
(a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years |
Consolidated
net income | ||||
($ in millions) |
Consolidated net income applicable to common shareholders decreased 59.3% in the first quarter of 2020 compared to the same period of 2019 as higher underwriting income in Allstate Protection was more than offset by net realized capital losses in the first quarter of 2020 compared to gains in same period of 2019, pension and other postretirement remeasurement losses and lower net investment income. |
Total
revenue | ||||
($ in millions) |
Total revenue decreased 8.3% in the first quarter of 2020 compared to the first quarter of 2019, driven by net realized capital losses of $462 million in the first quarter of 2020 compared to gains of $662 million in the same period of 2019 and lower net investment income, partially offset by a 4.9% increase in property and casualty insurance premiums earned. Insurance premiums earned increased in Allstate Protection (Allstate, Esurance and Encompass
brands) and Service Businesses (Allstate Protection Plans and Allstate Dealer Services) segments. |
Net investment income | ||||
($ in millions) |
Net investment income decreased 35.0% in the first quarter of 2020 compared to the first
quarter of 2019, primarily due to a $214 million decrease in income from performance-based investments. |
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Revenues | ||||||||
Property
and casualty insurance premiums | $ | 9,235 | $ | 8,802 | ||||
Life premiums and contract charges | 617 | 628 | ||||||
Other
revenue | 265 | 250 | ||||||
Net investment income | 421 | 648 | ||||||
Realized
capital gains (losses) | (462 | ) | 662 | |||||
Total revenues | 10,076 | 10,990 | ||||||
Costs
and expenses | ||||||||
Property and casualty insurance claims and claims expense | (5,341 | ) | (5,820 | ) | ||||
Shelter-in-Place Payback expense | (210 | ) | — | |||||
Life
contract benefits and interest credited to contractholder funds | (633 | ) | (659 | ) | ||||
Amortization of deferred policy acquisition costs | (1,401 | ) | (1,364 | ) | ||||
Operating,
restructuring and interest expenses | (1,485 | ) | (1,481 | ) | ||||
Pension and other postretirement remeasurement gains (losses) | (318 | ) | (15 | ) | ||||
Amortization
of purchased intangibles | (28 | ) | (32 | ) | ||||
Total costs and expenses | (9,416 | ) | (9,371 | ) | ||||
Gain
on disposition of operations | 1 | 1 | ||||||
Income tax expense | (112 | ) | (328 | ) | ||||
Net
income | 549 | 1,292 | ||||||
Preferred stock dividends | (36 | ) | (31 | ) | ||||
Net
income applicable to common shareholders | $ | 513 | $ | 1,261 |
• | Loss ratio: the ratio of claims and claims expense to premiums earned. Loss ratios include the impact of catastrophe losses. |
• | Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization of purchased intangibles, restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned. |
• | Combined
ratio: the sum of the loss ratio and the expense ratio. The difference between 100% and the combined ratio represents underwriting income as a percentage of premiums earned, or underwriting margin. |
• | Effect of catastrophe losses on combined ratio: the ratio of catastrophe losses included in claims and claims expense to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses. |
• | Effect
of prior year reserve reestimates on combined ratio: the ratio of prior year reserve reestimates included in claims and claims expense to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses. |
• | Effect of amortization of purchased intangibles on combined ratio: the ratio of amortization of purchased intangibles to premiums earned. |
• | Effect of restructuring and related charges on combined ratio: the ratio of
restructuring and related charges to premiums earned. |
• | Effect of Discontinued Lines and Coverages on combined ratio: the ratio of claims and claims expense and operating 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. |
• | Effect of Shelter-in-Place
Payback expense on combined ratio: the ratio of Shelter-in-Place Payback expense to premiums earned. |
Summarized
financial data | ||||||||
Three months ended March 31, | ||||||||
($ in millions, except ratios) | 2020 | 2019 | ||||||
Premiums written | $ | 8,592 | $ | 8,327 | ||||
Revenues | ||||||||
Premiums
earned | $ | 8,881 | $ | 8,507 | ||||
Other revenue | 181 | 176 | ||||||
Net
investment income | 202 | 291 | ||||||
Realized capital gains (losses) | (103 | ) | 497 | |||||
Total
revenues | 9,161 | 9,471 | ||||||
Costs and expenses | ||||||||
Claims
and claims expense | (5,251 | ) | (5,730 | ) | ||||
Shelter-in-Place Payback expense (1) | (210 | ) | — | |||||
Amortization
of DAC | (1,167 | ) | (1,164 | ) | ||||
Operating costs and expenses | (1,085 | ) | (1,071 | ) | ||||
Restructuring
and related charges | (4 | ) | (18 | ) | ||||
Total costs and expenses | (7,717 | ) | (7,983 | ) | ||||
Income
tax expense | (282 | ) | (306 | ) | ||||
Net income applicable to common shareholders | $ | 1,162 | $ | 1,182 | ||||
Underwriting
income | $ | 1,345 | $ | 700 | ||||
Net investment income | 202 | 291 | ||||||
Income
tax expense on operations | (303 | ) | (202 | ) | ||||
Realized capital gains (losses), after-tax | (82 | ) | 393 | |||||
Net
income applicable to common shareholders | $ | 1,162 | $ | 1,182 | ||||
Catastrophe
losses | ||||||||
Catastrophe losses, excluding reserve reestimates | $ | 231 | $ | 627 | ||||
Catastrophe
reserve reestimates (2) (3) | (20 | ) | 53 | |||||
Total catastrophe losses | $ | 211 | $ | 680 | ||||
Non-catastrophe
reserve reestimates (2) | 28 | (41 | ) | |||||
Prior year reserve reestimates (2) | 8 | 12 | ||||||
GAAP
operating ratios | ||||||||
Loss ratio | 59.1 | 67.4 | ||||||
Expense
ratio (4) | 25.8 | 24.4 | ||||||
Combined ratio | 84.9 | 91.8 | ||||||
Effect
of catastrophe losses on combined ratio | 2.4 | 8.0 | ||||||
Effect of prior year reserve reestimates on combined ratio (3) | 0.1 | 0.2 | ||||||
Effect
of catastrophe losses included in prior year reserve reestimates on combined ratio | (0.2 | ) | 0.6 | |||||
Effect of restructuring and related charges on combined ratio | — | 0.2 | ||||||
Effect
of Discontinued Lines and Coverages on combined ratio | 0.1 | 0.1 | ||||||
Effect of Shelter-in-Place Payback expense on combined and expense ratios | 2.4 | — |
(1) | Due
to the significant declines in the number of auto accidents caused by mandated sequestration policies, Allstate, Esurance and Encompass auto insurance customers will receive a Shelter-in-Place Payback of over $600 million with $210 million recognized in the first quarter of 2020 and the remainder to be recognized in the second quarter of 2020. |
(2) | Favorable reserve reestimates are shown in parentheses. |
(3) | 2019
includes $15 million of reinstatement reinsurance premiums incurred during the period related to the 2018 Camp Fire. |
(4) | Other revenue is deducted from operating costs and expenses in the expense ratio calculation. |
Net
investment income | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Fixed
income securities | $ | 267 | $ | 259 | ||||
Equity securities | 6 | 23 | ||||||
Mortgage
loans | 6 | 4 | ||||||
Limited partnership interests | (77 | ) | 6 | |||||
Short-term
investments | 9 | 15 | ||||||
Other | 25 | 26 | ||||||
Investment
income, before expense | 236 | 333 | ||||||
Investment expense (1) (2) | (34 | ) | (42 | ) | ||||
Net
investment income | $ | 202 | $ | 291 |
(1) | Investment expense includes $8 million and $13 million of investee level expenses in the first
quarter of 2020 and 2019, respectively. Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments. Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses. |
(2) | Investment expense includes $4 million and $7 million related to the portion of reinvestment income on securities lending collateral paid to the counterparties
in the first quarter of 2020 and 2019, respectively. |
Realized capital gains (losses) | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
2020 | 2019 | |||||||
Sales (1) | $ | 366 | $ | 101 | ||||
Credit
losses (2) | (35 | ) | (7 | ) | ||||
Valuation of equity investments | (512 | ) | 453 | |||||
Valuation
and settlements of derivative instruments | 78 | (50 | ) | |||||
Realized capital gains (losses), pre-tax | (103 | ) | 497 | |||||
Income
tax benefit (expense) | 21 | (104 | ) | |||||
Realized capital gains (losses), after-tax | $ | (82 | ) | $ | 393 |
(1) | Beginning
January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses. |
(2) | Due to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as OTTI impairment write-downs are now presented as credit losses. |
Underwriting results | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Premiums written | $ | 8,592 | $ | 8,327 | ||||
Premiums
earned | $ | 8,881 | $ | 8,507 | ||||
Other revenue | 181 | 176 | ||||||
Claims
and claims expense | (5,249 | ) | (5,728 | ) | ||||
Shelter-in-Place Payback expense | (210 | ) | — | |||||
Amortization
of DAC | (1,167 | ) | (1,164 | ) | ||||
Other costs and expenses | (1,084 | ) | (1,070 | ) | ||||
Restructuring
and related charges | (4 | ) | (18 | ) | ||||
Underwriting income | $ | 1,348 | $ | 703 | ||||
Catastrophe
losses | $ | 211 | $ | 680 | ||||
Underwriting
income (loss) by line of business | ||||||||
Auto | $ | 656 | $ | 510 | ||||
Homeowners | 581 | 142 | ||||||
Other
personal lines (1) | 91 | 33 | ||||||
Commercial lines | 5 | 7 | ||||||
Other
business lines (2) | 14 | 11 | ||||||
Answer Financial | 1 | — | ||||||
Underwriting
income | $ | 1,348 | $ | 703 |
(1) | Other personal lines include renters, condominium, landlord and other personal lines products. |
(2) | Other
business lines primarily represent Ivantage, a general agency for Allstate exclusive agencies. Ivantage provides agencies a solution for their customers when coverage through Allstate brand underwritten products is not available. |
Changes
in underwriting results from prior year by component and by line of business (1) | ||||||||||||||||||||||||||||||||||||||||
Three months ended March 31, | ||||||||||||||||||||||||||||||||||||||||
Auto | Homeowners | Other personal lines | Commercial
lines | Allstate Protection (2) | ||||||||||||||||||||||||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||
Underwriting
income (loss) - prior period | $ | 510 | $ | 617 | $ | 142 | $ | 341 | $ | 33 | $ | 50 | $ | 7 | $ | (6 | ) | $ | 703 | $ | 1,008 | |||||||||||||||||||
Changes
in underwriting income (loss) from: | ||||||||||||||||||||||||||||||||||||||||
Increase
(decrease) premiums earned | 224 | 339 | 103 | 87 | 12 | 15 | 35 | 47 | 374 | 488 | ||||||||||||||||||||||||||||||
Increase
(decrease) other revenue | 4 | 3 | — | — | 1 | — | — | (1 | ) | 5 | 2 | |||||||||||||||||||||||||||||
(Increase)
decrease incurred claims and claims expense (“losses”): | ||||||||||||||||||||||||||||||||||||||||
Incurred
losses, excluding catastrophe losses and reserve reestimates | 130 | (268 | ) | (16 | ) | (49 | ) | (4 | ) | 8 | (31 | ) | (50 | ) | 79 | (359 | ) | |||||||||||||||||||||||
Catastrophe
losses, excluding reserve reestimates | 53 | (46 | ) | 302 | (200 | ) | 40 | (26 | ) | 1 | 2 | 396 | (270 | ) | ||||||||||||||||||||||||||
Catastrophe
reserve reestimates | 8 | (26 | ) | 54 | (12 | ) | 13 | (11 | ) | (2 | ) | — | 73 | (49 | ) | |||||||||||||||||||||||||
Non-catastrophe
reserve reestimates | (75 | ) | (20 | ) | 6 | (9 | ) | — | (2 | ) | — | 16 | (69 | ) | (15 | ) | ||||||||||||||||||||||||
Losses
subtotal | 116 | (360 | ) | 346 | (270 | ) | 49 | (31 | ) | (32 | ) | (32 | ) | 479 | (693 | ) | ||||||||||||||||||||||||
Shelter-in-Place
Payback expense | (210 | ) | — | — | — | — | — | — | — | (210 | ) | — | ||||||||||||||||||||||||||||
(Increase)
decrease expenses | 12 | (89 | ) | (10 | ) | (16 | ) | (4 | ) | (1 | ) | (5 | ) | (1 | ) | (3 | ) | (102 | ) | |||||||||||||||||||||
Underwriting
income | $ | 656 | $ | 510 | $ | 581 | $ | 142 | $ | 91 | $ | 33 | $ | 5 | $ | 7 | $ | 1,348 | $ | 703 |
(1) | The
2020 column presents changes relative to 2019. The 2019 column presents changes relative to 2018. |
(2) | Includes other business lines underwriting income of $14 million and $11 million in the first quarter of 2020 and 2019, respectively. Includes Answer Financial
underwriting income of $1 million and zero in the first quarter of 2020 and 2019, respectively. |
Premiums written and earned by line of business | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
Premiums written | 2020 | 2019 | ||||||
Auto | $ | 6,209 | $ | 6,047 | ||||
Homeowners
| 1,732 | 1,676 | ||||||
Other personal lines | 430 | 419 | ||||||
Subtotal
– Personal lines | 8,371 | 8,142 | ||||||
Commercial lines | 221 | 185 | ||||||
Total
premiums written | $ | 8,592 | $ | 8,327 | ||||
Reconciliation of premiums written to premiums earned: | ||||||||
Decrease
in unearned premiums | 370 | 179 | ||||||
Other | (81 | ) | 1 | |||||
Total
premiums earned | $ | 8,881 | $ | 8,507 | ||||
Auto | $ | 6,154 | $ | 5,930 | ||||
Homeowners | 2,038 | 1,935 | ||||||
Other
personal lines | 471 | 459 | ||||||
Subtotal – Personal lines | 8,663 | 8,324 | ||||||
Commercial
lines | 218 | 183 | ||||||
Total premiums earned | $ | 8,881 | $ | 8,507 |
Combined
ratios by line of business | ||||||||||||||||||
Loss ratio | Expense ratio (1) | Combined ratio | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Three
months ended March 31, | ||||||||||||||||||
Auto (2) | 62.2 | 66.5 | 27.1 | 24.9 | 89.3 | 91.4 | ||||||||||||
Homeowners | 48.8 | 69.3 | 22.7 | 23.4 | 71.5 | 92.7 | ||||||||||||
Other
personal lines | 54.4 | 66.4 | 26.3 | 26.4 | 80.7 | 92.8 | ||||||||||||
Commercial
lines | 78.4 | 76.0 | 19.3 | 20.2 | 97.7 | 96.2 | ||||||||||||
Total
(3) | 59.1 | 67.3 | 25.7 | 24.4 | 84.8 | 91.7 |
(1) | Other
revenue is deducted from operating costs and expenses in the expense ratio calculation. |
(2) | Excluding the impact of the Shelter-in-Place Payback expense, the first quarter of 2020 auto expense and combined ratios were 23.7 points and 85.9 points, reflecting decreases of 1.2 points and 5.5 points compared to the first quarter of 2019, respectively. |
(3) | Excluding the impact of the Shelter-in-Place
Payback expense, the first quarter of 2020 total expense and combined ratios were 23.3 points and 82.4 points, reflecting decreases of 1.1 points and 9.3 points compared to the first quarter of 2019, respectively. |
Loss ratios by line of business | ||||||||||||||||||||||||
Loss
ratio | Effect of catastrophe losses | Effect of prior year reserve reestimates | Effect of catastrophe losses included in prior year reserve reestimates | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Three
months ended March 31, | ||||||||||||||||||||||||
Auto | 62.2 | 66.5 | 0.2 | 1.3 | 0.2 | (0.9 | ) | (0.1 | ) | — | ||||||||||||||
Homeowners | 48.8 | 69.3 | 9.0 | 27.9 | (0.4 | ) | 2.8 | (0.4 | ) | 2.4 | ||||||||||||||
Other
personal lines | 54.4 | 66.4 | 2.8 | 14.4 | (1.3 | ) | 1.5 | (0.9 | ) | 2.0 | ||||||||||||||
Commercial
lines | 78.4 | 76.0 | 0.9 | 0.5 | 2.8 | 2.2 | 0.5 | (0.6 | ) | |||||||||||||||
Total | 59.1 | 67.3 | 2.4 | 8.0 | 0.1 | 0.1 | (0.2 | ) | 0.6 |
Catastrophe
losses by the size of event | ||||||||||||||||||||
Three months ended March 31, 2020 | ||||||||||||||||||||
($ in millions) | Number of events | Claims and claims expense | Combined ratio impact | Average
catastrophe loss per event | ||||||||||||||||
Size of catastrophe loss | ||||||||||||||||||||
Greater
than $250 million | — | — | % | $ | — | — | % | — | $ | — | ||||||||||
$101
million to $250 million | — | — | — | — | — | — | ||||||||||||||
$50
million to $100 million | 2 | 16.7 | 107 | 50.7 | 1.2 | 54 | ||||||||||||||
Less
than $50 million | 10 | 83.3 | 124 | 58.8 | 1.4 | 12 | ||||||||||||||
Total | 12 | 100.0 | % | 231 | 109.5 | 2.6 | 19 | |||||||||||||
Prior
year reserve reestimates | (20 | ) | (9.5 | ) | (0.2 | ) | ||||||||||||||
Total
catastrophe losses | $ | 211 | 100.0 | % | 2.4 |
Catastrophe
losses by the type of event | ||||||||||||||
Three months ended March 31, | ||||||||||||||
($ in millions) | Number of events | 2020 | Number of events | 2019 | ||||||||||
Hurricanes/Tropical
storms | — | $ | — | — | $ | — | ||||||||
Tornadoes | 2 | 42 | 1 | 19 | ||||||||||
Wind/Hail | 8 | 180 | 15 | 484 | ||||||||||
Wildfires | 1 | 2 | — | — | ||||||||||
Other
events | 1 | 7 | 6 | 124 | ||||||||||
Prior year reserve reestimates | (20 | ) | 53 | |||||||||||
Total
catastrophe losses | 12 | $ | 211 | 22 | $ | 680 |
Impact of specific costs and expenses on the expense ratio | ||||||
Three
months ended March 31, | ||||||
2020 | 2019 | |||||
Amortization of DAC | 13.1 | 13.7 | ||||
Advertising
expense | 2.3 | 2.2 | ||||
Other costs and expenses | 7.9 | 8.3 | ||||
Restructuring
and related charges | — | 0.2 | ||||
Subtotal | 23.3 | 24.4 | ||||
Shelter-in-Place
Payback expense | 2.4 | — | ||||
Total expense ratio | 25.7 | 24.4 |
Total
reserves, net of reinsurance (estimated cost of outstanding claims) as of January 1, by line of business | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Auto | $ | 14,728 | $ | 14,378 | ||||
Homeowners | 2,138 | 2,157 | ||||||
Other
personal lines | 1,458 | 1,489 | ||||||
Commercial lines | 1,072 | 801 | ||||||
Total
Allstate Protection | $ | 19,396 | $ | 18,825 |
Reserve
reestimates | ||||||||||||||
Three months ended March 31, | ||||||||||||||
Reserve reestimate (1) | Effect on combined ratio (2) | |||||||||||||
($ in millions, except ratios) | 2020 | 2019 | 2020 | 2019 | ||||||||||
Auto | $ | 13 | $ | (54 | ) | 0.2 | (0.6 | ) | ||||||
Homeowners | (7 | ) | 53 | (0.1 | ) | 0.6 | ||||||||
Other
personal lines | (6 | ) | 7 | (0.1 | ) | 0.1 | ||||||||
Commercial lines | 6 | 4 | 0.1 | — | ||||||||||
Total
Allstate Protection | $ | 6 | $ | 10 | 0.1 | 0.1 | ||||||||
Allstate
brand | $ | 7 | $ | 2 | 0.1 | — | ||||||||
Esurance
brand | 1 | 3 | — | — | ||||||||||
Encompass brand | (2 | ) | 5 | — | 0.1 | |||||||||
Total
Allstate Protection | $ | 6 | $ | 10 | 0.1 | 0.1 |
(1) | Favorable
reserve reestimates are shown in parentheses. |
(2) | Ratios are calculated using Allstate Protection premiums earned. |
Premiums
written, policies in force and underwriting income (loss) | ||||||||||||||||||||||||||||
($ in millions) | Allstate brand | Esurance brand | Encompass brand | Allstate Protection | ||||||||||||||||||||||||
Premiums written | Amount | Percent
to total brand | Amount | Percent to total brand | Amount | Percent to total brand | Amount | Percent to total | ||||||||||||||||||||
Auto | $ | 5,574 | 71.2 | % | $ | 517 | 94.7 | % | $ | 118 | 53.1 | % | $ | 6,209 | 72.3 | % | ||||||||||||
Homeowners | 1,618 | 20.7 | 27 | 4.9 | 87 | 39.2 | 1,732 | 20.1 | ||||||||||||||||||||
Other
personal lines | 411 | 5.3 | 2 | 0.4 | 17 | 7.7 | 430 | 5.0 | ||||||||||||||||||||
Commercial
lines | 221 | 2.8 | — | — | — | — | 221 | 2.6 | ||||||||||||||||||||
Total | $ | 7,824 | 100.0 | % | $ | 546 | 100.0 | % | $ | 222 | 100.0 | % | $ | 8,592 | 100.0 | % | ||||||||||||
Percent
to total Allstate Protection | 91.1 | % | 6.3 | % | 2.6 | % | 100.0 | % | ||||||||||||||||||||
PIF
(thousands) | ||||||||||||||||||||||||||||
Auto | 20,323 | 65.3 | % | 1,503 | 90.8 | % | 485 | 61.4 | % | 22,311 | 66.4 | % | ||||||||||||||||
Homeowners | 6,254 | 20.1 | 106 | 6.4 | 230 | 29.1 | 6,590 | 19.6 | ||||||||||||||||||||
Other
personal lines | 4,339 | 13.9 | 46 | 2.8 | 75 | 9.5 | 4,460 | 13.3 | ||||||||||||||||||||
Commercial
lines | 224 | 0.7 | — | — | — | — | 224 | 0.7 | ||||||||||||||||||||
Total
| 31,140 | 100.0 | % | 1,655 | 100.0 | % | 790 | 100.0 | % | 33,585 | 100.0 | % | ||||||||||||||||
Percent
to total Allstate Protection | 92.7 | % | 4.9 | % | 2.4 | % | 100.0 | % | ||||||||||||||||||||
Underwriting
income (loss) | ||||||||||||||||||||||||||||
Auto | $ | 652 | 49.6 | % | $ | 6 | 31.6 | % | $ | (2 | ) | (14.3 | )% | $ | 656 | 48.7 | % | |||||||||||
Homeowners | 555 | 42.2 | 12 | 63.1 | 14 | 100.0 | 581 | 43.1 | ||||||||||||||||||||
Other
personal lines | 88 | 6.7 | 1 | 5.3 | 2 | 14.3 | 91 | 6.7 | ||||||||||||||||||||
Commercial
lines | 5 | 0.4 | — | — | — | — | 5 | 0.4 | ||||||||||||||||||||
Other
business lines | 14 | 1.1 | — | — | — | — | 14 | 1.0 | ||||||||||||||||||||
Answer
Financial | — | — | — | — | — | — | 1 | 0.1 | ||||||||||||||||||||
Total | $ | 1,314 | 100.0 | % | $ | 19 | 100.0 | % | $ | 14 | 100.0 | % | $ | 1,348 | 100.0 | % |
• | PIF: Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy while Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers. |
• | New
issued applications: Item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the number allowed (currently 10) on a policy. |
• | Average premium-gross written (“average premium”): Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the
appropriate policy term for each line. Allstate and Esurance brand policy terms are 6 months for auto and 12 months for homeowners. |
• | Renewal ratio: Renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued 6 months prior for auto (generally 12 months prior for Encompass brand) or 12 months prior for homeowners. |
• | Approved
rate changes: Based on historical premiums written in locations where the brands operate, not including rate plan enhancements (such as the introduction of discounts and surcharges that result in no change in the overall rate level) and initial rates filed for insurance subsidiaries initially writing business in a location. Includes rate changes approved based on our net cost of reinsurance. The rate change percentages are calculated using approved rate changes during the period as a percentage of: |
– | Total brand premiums written |
– | Premiums
written in respective locations with rate changes |
Underwriting
results | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Premiums
written | $ | 7,824 | $ | 7,544 | ||||
Premiums earned | $ | 8,106 | $ | 7,752 | ||||
Other
revenue | 139 | 135 | ||||||
Claims and claims expense | (4,719 | ) | (5,170 | ) | ||||
Shelter-in-Place
Payback expense | (188 | ) | — | |||||
Amortization of DAC | (1,107 | ) | (1,105 | ) | ||||
Other
costs and expenses | (914 | ) | (894 | ) | ||||
Restructuring and related charges | (3 | ) | (16 | ) | ||||
Underwriting
income | $ | 1,314 | $ | 702 | ||||
Catastrophe losses | $ | 196 | $ | 644 | ||||
Underwriting
income (loss) by line of business | ||||||||
Auto | $ | 652 | $ | 512 | ||||
Homeowners | 555 | 142 | ||||||
Other
personal lines (1) | 88 | 30 | ||||||
Commercial lines | 5 | 7 | ||||||
Other
business lines (2) | 14 | 11 | ||||||
Underwriting income | $ | 1,314 | $ | 702 |
(1) | Other
personal lines include renters, condominium, landlord and other personal lines products. |
(2) | Other business lines primarily represent Ivantage. |
Changes in underwriting results from prior year by component (1) | ||||||||
($
in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Underwriting income (loss) - prior period | $ | 702 | $ | 1,001 | ||||
Changes
in underwriting income (loss) from: | ||||||||
Increase (decrease) premiums earned | 354 | 423 | ||||||
Increase (decrease) other revenue | 4 | (1 | ) | |||||
(Increase)
decrease incurred claims and claims expense (“losses”): | ||||||||
Incurred losses, excluding catastrophe losses and reserve reestimates | 75 | (298 | ) | |||||
Catastrophe
losses, excluding reserve reestimates | 381 | (262 | ) | |||||
Catastrophe reserve reestimates | 67 | (53 | ) | |||||
Non-catastrophe
reserve reestimates | (72 | ) | (9 | ) | ||||
Losses subtotal | 451 | (622 | ) | |||||
Shelter-in-Place
Payback expense | (188 | ) | — | |||||
(Increase) decrease expenses | (9 | ) | (99 | ) | ||||
Underwriting
income | $ | 1,314 | $ | 702 |
(1) | The 2020 column presents changes in 2020 compared to 2019. The
2019 column presents changes in 2019 compared to 2018. |
Premiums written and earned by line of business | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
Premiums written | 2020 | 2019 | ||||||
Auto | $ | 5,574 | $ | 5,395 | ||||
Homeowners
(1) | 1,618 | 1,565 | ||||||
Other personal lines | 411 | 399 | ||||||
Subtotal
– Personal lines | 7,603 | 7,359 | ||||||
Commercial lines | 221 | 185 | ||||||
Total | $ | 7,824 | $ | 7,544 | ||||
Premiums
earned | ||||||||
Auto | $ | 5,532 | $ | 5,321 | ||||
Homeowners | 1,907 | 1,811 | ||||||
Other
personal lines | 449 | 437 | ||||||
Subtotal – Personal lines | 7,888 | 7,569 | ||||||
Commercial
lines | 218 | 183 | ||||||
Total | $ | 8,106 | $ | 7,752 |
(1) | The
cost of our catastrophe reinsurance program increased $12 million to $75 million in the first quarter of 2020 from $63 million in the first quarter of 2019. Catastrophe placement premiums are recorded primarily in the Allstate brand and are a reduction of premium. For a more detailed discussion on reinsurance, see Note 9 of the condensed consolidated financial statements. |
Auto
premium measures and statistics | ||||||||||||
Three months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF
(thousands) | 20,323 | 20,145 | 0.9 | % | ||||||||
New issued applications (thousands) | 751 | 740 | 1.5 | % | ||||||||
Average
premium | $ | 598 | $ | 578 | 3.5 | % | ||||||
Renewal ratio (%) | 88.0 | 88.8 | (0.8 | ) | ||||||||
Approved
rate changes: | ||||||||||||
Impact of rate changes ($ in millions) | $ | 102 | $ | 120 | $ | (18 | ) | |||||
Number
of locations (1) | 16 | 19 | (3 | ) | ||||||||
Total brand (%) | 0.5 | 0.6 | (0.1 | ) | ||||||||
Location
specific (%) | 6.5 | 3.4 | 3.1 |
(1) | Allstate brand operates in 50 states, the District
of Columbia and 5 Canadian provinces. |
Homeowners premium measures and statistics | ||||||||||||
Three
months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF (thousands) | 6,254 | 6,198 | 0.9 | % | ||||||||
New
issued applications (thousands) | 199 | 197 | 1.0 | % | ||||||||
Average premium | $ | 1,314 | $ | 1,267 | 3.7 | % | ||||||
Renewal
ratio (%) | 87.6 | 88.4 | (0.8 | ) | ||||||||
Approved rate changes: | ||||||||||||
Impact
of rate changes ($ in millions) | $ | 99 | $ | 155 | $ | (56 | ) | |||||
Number of locations (1) | 15 | 20 | (5 | ) | ||||||||
Total
brand (%) | 1.3 | 2.1 | (0.8 | ) | ||||||||
Location specific (%) | 4.1 | 5.5 | (1.4 | ) |
(1) | Allstate
brand operates in 50 states, the District of Columbia and 5 Canadian provinces. |
Combined ratios by line of business | ||||||||||||||||||
Loss
ratio | Expense ratio (1) | Combined ratio | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Three
months ended March 31, | ||||||||||||||||||
Auto (2) | 61.1 | 65.5 | 27.1 | 24.9 | 88.2 | 90.4 | ||||||||||||
Homeowners | 48.6 | 69.3 | 22.3 | 22.9 | 70.9 | 92.2 | ||||||||||||
Other
personal lines | 54.1 | 66.8 | 26.3 | 26.3 | 80.4 | 93.1 | ||||||||||||
Commercial
lines | 78.4 | 76.0 | 19.3 | 20.2 | 97.7 | 96.2 | ||||||||||||
Total
(3) | 58.2 | 66.7 | 25.6 | 24.2 | 83.8 | 90.9 |
(1) | Other
revenue is deducted from operating costs and expenses in the expense ratio calculation. |
(2) | Excluding the impact of the Shelter-in-Place Payback expense, the first quarter of 2020 auto expense and combined ratios were 23.7 points and 84.8 points, reflecting decreases of 1.2 points and 5.6 points compared to the first quarter of 2019, respectively. |
(3) | Excluding the impact of the Shelter-in-Place Payback
expense, the first quarter of 2020 total expense and combined ratios were 23.3 points and 81.5 points, reflecting decreases of 0.9 points and 9.4 points compared to the first quarter of 2019, respectively. |
Loss ratios by line of business | ||||||||||||||||||||||||
Loss
ratio | Effect of catastrophe losses | Effect of prior year reserve reestimates | Effect of catastrophe losses included in prior year reserve reestimates | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Three
months ended March 31, | ||||||||||||||||||||||||
Auto | 61.1 | 65.5 | 0.2 | 1.3 | 0.2 | (1.1 | ) | (0.1 | ) | — | ||||||||||||||
Homeowners | 48.6 | 69.3 | 8.9 | 28.2 | (0.2 | ) | 2.6 | (0.4 | ) | 2.3 | ||||||||||||||
Other
personal lines | 54.1 | 66.8 | 2.7 | 14.6 | (0.9 | ) | 2.3 | (0.9 | ) | 2.1 | ||||||||||||||
Commercial
lines | 78.4 | 76.0 | 0.9 | 0.5 | 2.8 | 2.2 | 0.5 | (0.6 | ) | |||||||||||||||
Total | 58.2 | 66.7 | 2.4 | 8.3 | 0.1 | — | (0.2 | ) | 0.6 |
• Paid claim frequency (1) is calculated as annualized notice counts closed with payment in the period divided by the average
of PIF with the applicable coverage during the period. |
• Gross claim frequency (1) is calculated as annualized notice counts received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). |
• Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. |
• Percent
change in frequency or severity statistics is calculated as the amount of increase or decrease in the paid or gross claim frequency or severity in the current period compared to the same period in the prior year divided by the prior year paid or gross claim frequency or severity. |
(1) | Frequency statistics exclude counts associated with catastrophe events. |
Impact of specific costs
and expenses on the expense ratio | ||||||
Three months ended March 31, | ||||||
2020 | 2019 | |||||
Amortization
of DAC | 13.7 | 14.2 | ||||
Advertising expense | 2.0 | 1.9 | ||||
Other
costs and expenses | 7.6 | 7.9 | ||||
Restructuring and related charges | — | 0.2 | ||||
Subtotal | 23.3 | 24.2 | ||||
Shelter-in-Place
Payback expense | 2.3 | — | ||||
Total expense ratio | 25.6 | 24.2 |
Underwriting results | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
2020 | 2019 | |||||||
Premiums written | $ | 546 | $ | 559 | ||||
Premiums
earned | $ | 519 | $ | 502 | ||||
Other revenue | 23 | 20 | ||||||
Claims
and claims expense | (373 | ) | (384 | ) | ||||
Shelter-in-Place Payback expense | (17 | ) | — | |||||
Amortization
of DAC | (11 | ) | (11 | ) | ||||
Other costs and expenses | (121 | ) | (124 | ) | ||||
Restructuring
and related charges | (1 | ) | — | |||||
Underwriting income | $ | 19 | $ | 3 | ||||
Catastrophe
losses | $ | 3 | $ | 6 | ||||
Underwriting
income (loss) by line of business | ||||||||
Auto | $ | 6 | $ | (1 | ) | |||
Homeowners | 12 | 4 | ||||||
Other
personal lines | 1 | — | ||||||
Underwriting income | $ | 19 | $ | 3 |
Changes
in underwriting results from prior year by component (1) | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Underwriting
income (loss) - prior period | $ | 3 | $ | 3 | ||||
Changes in underwriting income (loss) from: | ||||||||
Increase
(decrease) premiums earned | 17 | 69 | ||||||
Increase (decrease) other revenue | 3 | — | ||||||
(Increase)
decrease incurred claims and claims expense (“losses”): | ||||||||
Incurred losses, excluding catastrophe losses and reserve reestimates | 6 | (57 | ) | |||||
Catastrophe
losses, excluding reserve reestimates | 3 | (3 | ) | |||||
Catastrophe reserve reestimates | — | — | ||||||
Non-catastrophe
reserve reestimates | 2 | (3 | ) | |||||
Losses subtotal | 11 | (63 | ) | |||||
Shelter-in-Place
Payback expense | (17 | ) | — | |||||
(Increase) decrease expenses | 2 | (6 | ) | |||||
Underwriting
income | $ | 19 | $ | 3 |
(1) | The 2020 column presents changes in 2020 compared to 2019. The
2019 column presents changes in 2019 compared to 2018. |
Premiums written and earned by line of business | ||||||||
($ in millions) | Three months ended March 31, | |||||||
Premiums
written | 2020 | 2019 | ||||||
Auto | $ | 517 | $ | 532 | ||||
Homeowners | 27 | 25 | ||||||
Other
personal lines | 2 | 2 | ||||||
Total | $ | 546 | $ | 559 | ||||
Premiums
earned | ||||||||
Auto | $ | 487 | $ | 475 | ||||
Homeowners | 30 | 25 | ||||||
Other
personal lines | 2 | 2 | ||||||
Total | $ | 519 | $ | 502 |
Auto
premium measures and statistics | ||||||||||||
Three months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF
(thousands) | 1,503 | 1,548 | (2.9 | )% | ||||||||
New issued applications (thousands) | 130 | 180 | (27.8 | )% | ||||||||
Average
premium | $ | 632 | $ | 625 | 1.1 | % | ||||||
Renewal ratio (%) | 82.0 | 83.9 | (1.9 | ) | ||||||||
Approved
rate changes: | ||||||||||||
Impact of rate changes ($ in millions) | $ | 50 | $ | 12 | $ | 38 | ||||||
Number
of locations (1) | 10 | 9 | 1 | |||||||||
Total brand (%) | 2.6 | 0.6 | 2.0 | |||||||||
Location
specific (%) | 7.2 | 4.1 | 3.1 |
(1) | Esurance brand operates in 43 states. |
Homeowners
premium measures and statistics | ||||||||||||
Three months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF
(thousands) | 106 | 98 | 8.2 | % | ||||||||
New issued applications (thousands) | 5 | 7 | (28.6 | )% | ||||||||
Average
premium | $ | 1,081 | $ | 1,016 | 6.4 | % | ||||||
Renewal ratio (%) (1) | 83.9 | 84.8 | (0.9 | ) | ||||||||
Approved
rate changes: | ||||||||||||
Impact of rate changes ($ in millions) | $ | — | $ | 2 | $ | (2 | ) | |||||
Number
of locations (2) | — | 2 | (2 | ) | ||||||||
Total brand (%) | — | 2.0 | (2.0 | ) | ||||||||
Location
specific (%) | — | 18.2 | (18.2 | ) |
(1) | Esurance’s
renewal ratios exclude the impact of risk related cancellations. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection the condition is unsatisfactory. |
(2) | Esurance brand operates in 31 states. |
Combined
ratios by line of business | ||||||||||||||||||
Loss ratio | Expense ratio (1) | Combined ratio | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Three
months ended March 31, | ||||||||||||||||||
Auto (2) | 73.7 | 77.3 | 25.1 | 22.9 | 98.8 | 100.2 | ||||||||||||
Homeowners | 43.3 | 60.0 | 16.7 | 24.0 | 60.0 | 84.0 | ||||||||||||
Total
(3) | 71.8 | 76.5 | 24.5 | 22.9 | 96.3 | 99.4 |
(1) | Other
revenue is deducted from operating costs and expenses in the expense ratio calculation. |
(2) | Excluding the impact of the Shelter-in-Place Payback expense, the first quarter of 2020 auto expense and combined ratios were 21.6 points and 95.3 points, reflecting decreases of 1.3 points and 4.9 points compared to the first quarter of 2019, respectively. |
(3) | Excluding the impact of the Shelter-in-Place Payback
expense, the first quarter of 2020 total expense and combined ratios were 21.2 points and 93.0 points, reflecting decreases of 1.7 points and 6.4 points compared to the first quarter of 2019, respectively. |
Loss ratios by line of business | ||||||||||||||||||||||||
Loss
ratio | Effect of catastrophe losses | Effect of prior year reserve reestimates | Effect of catastrophe losses included in prior year reserve reestimates | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Three
months ended March 31, | ||||||||||||||||||||||||
Auto | 73.7 | 77.3 | 0.2 | 0.6 | 0.7 | 0.9 | — | — | ||||||||||||||||
Homeowners | 43.3 | 60.0 | 6.7 | 12.0 | (6.7 | ) | (4.0 | ) | — | — | ||||||||||||||
Total | 71.8 | 76.5 | 0.6 | 1.2 | 0.1 | 0.6 | — | — |
Impact of specific costs and expenses on the expense ratio | ||||||
Three months ended March
31, | ||||||
2020 | 2019 | |||||
Amortization of DAC | 2.1 | 2.2 | ||||
Advertising expense | 8.5 | 8.2 | ||||
Amortization
of purchased intangibles | — | 0.2 | ||||
Other costs and expenses | 10.4 | 12.3 | ||||
Restructuring
and related charges | 0.2 | — | ||||
Subtotal | 21.2 | 22.9 | ||||
Shelter-in-Place
Payback expense | 3.3 | — | ||||
Total expense ratio | 24.5 | 22.9 |
Underwriting results | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Premiums
written | $ | 222 | $ | 224 | ||||
Premiums earned | $ | 256 | $ | 253 | ||||
Other
revenue | 1 | 1 | ||||||
Claims and claims expense | (157 | ) | (174 | ) | ||||
Shelter-in-Place
Payback expense | (5 | ) | — | |||||
Amortization of DAC | (49 | ) | (48 | ) | ||||
Other
costs and expenses | (32 | ) | (32 | ) | ||||
Restructuring and related charges | — | (2 | ) | |||||
Underwriting
income (loss) | $ | 14 | $ | (2 | ) | |||
Catastrophe losses | $ | 12 | $ | 30 | ||||
Underwriting
income (loss) by line of business | ||||||||
Auto | $ | (2 | ) | $ | (1 | ) | ||
Homeowners | 14 | (4 | ) | |||||
Other
personal lines | 2 | 3 | ||||||
Underwriting income (loss) | $ | 14 | $ | (2 | ) |
Changes
in underwriting results from prior year by component (1) | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Underwriting income (loss) - prior period | $ | (2 | ) | $ | 6 | |||
Changes
in underwriting loss from: | ||||||||
Increase (decrease) premiums earned | 3 | (4 | ) | |||||
Increase (decrease) other revenue | — | — | ||||||
(Increase)
decrease incurred claims and claims expense (“losses”): | ||||||||
Incurred losses, excluding catastrophe losses and reserve reestimates | (2 | ) | (4 | ) | ||||
Catastrophe
losses, excluding reserve reestimates | 12 | (5 | ) | |||||
Catastrophe reserve reestimates | 6 | 4 | ||||||
Non-catastrophe
reserve reestimates | 1 | (3 | ) | |||||
Losses subtotal | 17 | (8 | ) | |||||
Shelter-in-Place
Payback expense | (5 | ) | — | |||||
(Increase) decrease expenses | 1 | 4 | ||||||
Underwriting
income (loss) | $ | 14 | $ | (2 | ) |
(1) | The 2020 column presents changes in 2020 compared to 2019. The
2019 column presents changes in 2019 compared to 2018. |
Premiums written and earned by line of business | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Premiums
written | ||||||||
Auto | $ | 118 | $ | 120 | ||||
Homeowners | 87 | 86 | ||||||
Other
personal lines | 17 | 18 | ||||||
Total | $ | 222 | $ | 224 | ||||
Premiums
earned | ||||||||
Auto | $ | 135 | $ | 134 | ||||
Homeowners | 101 | 99 | ||||||
Other
personal lines | 20 | 20 | ||||||
Total | $ | 256 | $ | 253 |
Auto
premium measures and statistics | ||||||||||||
Three months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF
(thousands) | 485 | 499 | (2.8 | )% | ||||||||
New issued applications (thousands) | 16 | 20 | (20.0 | )% | ||||||||
Average
premium | $ | 1,162 | $ | 1,134 | 2.5 | % | ||||||
Renewal ratio (%) | 77.5 | 77.7 | (0.2 | ) | ||||||||
Approved
rate changes: | ||||||||||||
Impact of rate changes ($ in millions) | $ | — | $ | 2 | $ | (2 | ) | |||||
Number
of locations (1) | 5 | 3 | 2 | |||||||||
Total brand (%) | — | 0.5 | (0.5 | ) | ||||||||
Location
specific (%) | (0.2 | ) | 4.5 | (4.7 | ) |
(1) | Encompass brand operates in 40 states and the District of
Columbia. |
Homeowners premium measure and statistics | ||||||||||||
Three
months ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
PIF (thousands) | 230 | 237 | (3.0 | )% | ||||||||
New
issued applications (thousands) | 8 | 9 | (11.1 | )% | ||||||||
Average premium | $ | 1,880 | $ | 1,768 | 6.3 | % | ||||||
Renewal
ratio (%) | 81.9 | 82.1 | (0.2 | ) | ||||||||
Approved rate changes: | ||||||||||||
Impact
of rate changes ($ in millions) | $ | 7 | $ | 6 | $ | 1 | ||||||
Number of locations (1) | 6 | 4 | 2 | |||||||||
Total
brand (%) | 1.8 | 1.4 | 0.4 | |||||||||
Location specific (%) | 11.9 | 10.8 | 1.1 |
(1) | Encompass
brand operates in 40 states and the District of Columbia. |
Combined
ratios by line of business | ||||||||||||||||||
Loss ratio | Expense ratio (1) | Combined ratio | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Three
months ended March 31, | ||||||||||||||||||
Auto (2) | 66.7 | 67.9 | 34.8 | 32.8 | 101.5 | 100.7 | ||||||||||||
Homeowners | 54.4 | 72.7 | 31.7 | 31.3 | 86.1 | 104.0 | ||||||||||||
Other
personal lines | 60.0 | 55.0 | 30.0 | 30.0 | 90.0 | 85.0 | ||||||||||||
Total
(3) | 61.3 | 68.8 | 33.2 | 32.0 | 94.5 | 100.8 |
(1) | Other
revenue is deducted from operating costs and expenses in the expense ratio calculation. |
(2) | Excluding the impact of the Shelter-in-Place Payback expense, the first quarter of 2020 auto expense and combined ratios were 31.1 points and 97.8 points, reflecting decreases of 1.7 points and 2.9 points compared to the first quarter of 2019, respectively. |
(3) | Excluding the impact of the Shelter-in-Place Payback
expense, the first quarter of 2020 total expense and combined ratios were 31.2 points and 92.5 points, reflecting decreases of 0.8 points and 8.3 points compared to the first quarter of 2019, respectively. |
Loss ratios by line of business | ||||||||||||||||||||||||
Loss
ratio | Effect of catastrophe losses | Effect of prior year reserve reestimates | Effect of catastrophe losses included in prior year reserve reestimates | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Three
months ended March 31, | ||||||||||||||||||||||||
Auto | 66.7 | 67.9 | — | 2.2 | 0.8 | — | (0.7 | ) | — | |||||||||||||||
Homeowners | 54.4 | 72.7 | 10.9 | 25.3 | (1.0 | ) | 8.0 | (1.0 | ) | 4.0 | ||||||||||||||
Other
personal lines | 60.0 | 55.0 | 5.0 | 10.0 | (10.0 | ) | (15.0 | ) | — | — | ||||||||||||||
Total | 61.3 | 68.8 | 4.7 | 11.9 | (0.8 | ) | 2.0 | (0.8 | ) | 1.6 |
Impact
of specific costs and expenses on the expense ratio | ||||||
Three months ended March 31, | ||||||
2020 | 2019 | |||||
Amortization of DAC | 19.1 | 18.9 | ||||
Other
costs and expenses | 12.1 | 12.3 | ||||
Restructuring and related charges | — | 0.8 | ||||
Subtotal | 31.2 | 32.0 | ||||
Shelter-in-Place
Payback expense | 2.0 | — | ||||
Total expense ratio | 33.2 | 32.0 |
Underwriting results | ||||||||
($ in millions) | Three months ended March 31, | |||||||
2020 | 2019 | |||||||
Claims
and claims expense | $ | (2 | ) | $ | (2 | ) | ||
Operating costs and expenses | (1 | ) | (1 | ) | ||||
Underwriting
loss | $ | (3 | ) | $ | (3 | ) |
Reserves for asbestos, environmental and other discontinued
lines claims before and after the effects of reinsurance | ||||||||
($ in millions) | ||||||||
Asbestos claims | ||||||||
Gross
reserves | $ | 1,141 | $ | 1,172 | ||||
Reinsurance | (351 | ) | (362 | ) | ||||
Net
reserves | 790 | 810 | ||||||
Environmental claims | ||||||||
Gross reserves | 214 | 219 | ||||||
Reinsurance
| (39 | ) | (40 | ) | ||||
Net reserves | 175 | 179 | ||||||
Other
discontinued lines | ||||||||
Gross reserves | 417 | 427 | ||||||
Reinsurance | (47 | ) | (51 | ) | ||||
Net
reserves | 370 | 376 | ||||||
Total | ||||||||
Gross reserves | 1,772 | 1,818 | ||||||
Reinsurance | (437 | ) | (453 | ) | ||||
Net
reserves | $ | 1,335 | $ | 1,365 |
Reserves by type of exposure
before and after the effects of reinsurance | ||||||||
($ in millions) | ||||||||
Direct excess commercial insurance | ||||||||
Gross
reserves | $ | 918 | $ | 948 | ||||
Reinsurance | (321 | ) | (332 | ) | ||||
Net
reserves | 597 | 616 | ||||||
Assumed reinsurance coverage | ||||||||
Gross reserves | 597 | 606 | ||||||
Reinsurance
| (52 | ) | (53 | ) | ||||
Net reserves | 545 | 553 | ||||||
Direct
primary commercial insurance | ||||||||
Gross reserves | 161 | 169 | ||||||
Reinsurance | (49 | ) | (54 | ) | ||||
Net
reserves | 112 | 115 | ||||||
Other run-off business | ||||||||
Gross reserves | 16 | 15 | ||||||
Reinsurance | (14 | ) | (13 | ) | ||||
Net
reserves | 2 | 2 | ||||||
Unallocated loss adjustment expenses | ||||||||
Gross reserves | 80 | 80 | ||||||
Reinsurance | (1 | ) | (1 | ) | ||||
Net
reserves | 79 | 79 | ||||||
Total | ||||||||
Gross reserves | 1,772 | 1,818 | ||||||
Reinsurance | (437 | ) | (453 | ) | ||||
Net
reserves | $ | 1,335 | $ | 1,365 |
Percentage
of gross and ceded reserves by case and incurred but not reported (“IBNR”) | ||||||||||||
Case | IBNR | Case | IBNR | |||||||||
Direct
excess commercial insurance | ||||||||||||
Gross reserves (1) | 67 | % | 33 | % | 68 | % | 32 | % | ||||
Ceded
(2) | 77 | 23 | 78 | 22 | ||||||||
Assumed reinsurance coverage | ||||||||||||
Gross
reserves | 35 | 65 | 34 | 66 | ||||||||
Ceded | 38 | 62 | 35 | 65 | ||||||||
Direct
primary commercial insurance | ||||||||||||
Gross reserves | 55 | 45 | 56 | 44 | ||||||||
Ceded | 78 | 22 | 78 | 22 |
(1) | Approximately
72% of the total gross case reserves are subject to settlement agreements. |
(2) | Approximately 80% of the total ceded case reserves are subject to settlement agreements. |
Gross payments from case reserves by type of exposure | ||||||||
($
in millions) | ||||||||
Direct excess commercial insurance | ||||||||
Gross reserves (1) | $ | 29 | $ | 26 | ||||
Ceded
(2) | 11 | 11 | ||||||
Assumed reinsurance coverage | ||||||||
Gross reserves | 9 | 9 | ||||||
Ceded | 1 | 1 | ||||||
Direct
primary commercial insurance | ||||||||
Gross reserves | 2 | 3 | ||||||
Ceded | 1 | — |
Summarized financial information | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
2020 | 2019 | |||||||
Premiums written | $ | 379 | $ | 368 | ||||
Revenues | ||||||||
Premiums
| $ | 354 | $ | 295 | ||||
Other revenue | 52 | 47 | ||||||
Intersegment
insurance premiums and service fees (1) | 38 | 33 | ||||||
Net investment income | 10 | 9 | ||||||
Realized
capital gains (losses) | (24 | ) | 8 | |||||
Total revenues | 430 | 392 | ||||||
Costs
and expenses | ||||||||
Claims and claims expense | (92 | ) | (92 | ) | ||||
Amortization of DAC | (153 | ) | (127 | ) | ||||
Operating
costs and expenses | (161 | ) | (151 | ) | ||||
Amortization of purchased intangibles | (27 | ) | (31 | ) | ||||
Total
costs and expenses | (433 | ) | (401 | ) | ||||
Income tax benefit | — | 3 | ||||||
Net
loss applicable to common shareholders | $ | (3 | ) | $ | (6 | ) | ||
Adjusted
net income | $ | 37 | $ | 11 | ||||
Realized capital gains (losses), after-tax | (19 | ) | 7 | |||||
Amortization
of purchased intangibles, after-tax | (21 | ) | (24 | ) | ||||
Net loss applicable to common shareholders | $ | (3 | ) | $ | (6 | ) | ||
Allstate
Protection Plans | $ | 34 | $ | 14 | ||||
Allstate Dealer Services | 7 | 6 | ||||||
Allstate
Roadside Services | 2 | (6 | ) | |||||
Arity | (3 | ) | (2 | ) | ||||
Allstate
Identity Protection | (3 | ) | (1 | ) | ||||
Adjusted net income | $ | 37 | $ | 11 | ||||
Allstate
Protection Plans | 107,124 | 77,866 | ||||||
Allstate Dealer Services | 4,096 | 4,294 | ||||||
Allstate
Roadside Services | 576 | 649 | ||||||
Allstate Identity Protection | 1,932 | 1,211 | ||||||
Policies
in force as of March 31 (in thousands) | 113,728 | 84,020 |
(1) | Primarily related to Arity and Allstate Roadside Services and are eliminated in our condensed consolidated financial statements. |
Summarized financial information | ||||||||
($ in millions) | Three
months ended March 31, | |||||||
2020 | 2019 | |||||||
Revenues | ||||||||
Premiums and contract
charges | $ | 333 | $ | 337 | ||||
Other revenue | 32 | 27 | ||||||
Net
investment income | 128 | 127 | ||||||
Realized capital gains (losses) | (31 | ) | (5 | ) | ||||
Total
revenues | 462 | 486 | ||||||
Costs and expenses | ||||||||
Contract
benefits | (212 | ) | (214 | ) | ||||
Interest credited to contractholder funds | (56 | ) | (72 | ) | ||||
Amortization
of DAC | (34 | ) | (28 | ) | ||||
Operating costs and expenses | (84 | ) | (91 | ) | ||||
Restructuring
and related charges | (1 | ) | — | |||||
Total costs and expenses | (387 | ) | (405 | ) | ||||
Income
tax expense | (11 | ) | (14 | ) | ||||
Net income applicable to common shareholders | $ | 64 | $ | 67 | ||||
Adjusted
net income | $ | 80 | $ | 73 | ||||
Realized capital gains (losses), after-tax | (25 | ) | (4 | ) | ||||
Valuation
changes on embedded derivatives not hedged, after-tax | 12 | — | ||||||
DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives not hedged, after-tax | (3 | ) | (2 | ) | ||||
Net
income applicable to common shareholders | $ | 64 | $ | 67 | ||||
Reserve
for life-contingent contract benefits as of March 31 | $ | 2,691 | $ | 2,698 | ||||
Contractholder
funds as of March 31 | $ | 7,754 | $ | 7,686 | ||||
Policies
in force as of March 31 by distribution channel (in thousands) | ||||||||
Allstate agencies | 1,797 | 1,823 | ||||||
Closed channels | 105 | 113 | ||||||
Total | 1,902 | 1,936 |
(1) | Contract
charges related to the cost of insurance totaled $128 million and $129 million for the first quarter of 2020 and 2019, respectively. |
Investment
spread | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Investment
spread before valuation changes on embedded derivatives not hedged | $ | 58 | $ | 55 | ||||
Valuation changes on derivatives embedded in equity-indexed universal life contracts that are not hedged | 14 | — | ||||||
Total
investment spread | $ | 72 | $ | 55 |
Components
of amortization of DAC | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Amortization
of DAC before amortization relating to realized capital gains and losses, valuation changes on embedded derivatives that are not hedged and changes in assumptions | $ | 30 | $ | 26 | ||||
Amortization relating to realized capital gains and losses (1) and valuation changes
on embedded derivatives that are not hedged | 4 | 2 | ||||||
Amortization acceleration for changes in assumptions (‘‘DAC unlocking’’) | — | — | ||||||
Total
amortization of DAC | $ | 34 | $ | 28 |
(1) | The impact of realized capital gains and losses on amortization of DAC is dependent upon the relationship between the assets that give rise to the gain
or loss and the product liability supported by the assets. Fluctuations result from changes in the impact of realized capital gains and losses on actual and expected gross profits. |
Change
in contractholder funds | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Contractholder
funds, beginning balance | $ | 7,805 | $ | 7,656 | ||||
Deposits | 231 | 234 | ||||||
Interest
credited | 56 | 72 | ||||||
Benefits, withdrawals and other adjustments | ||||||||
Benefits | (63 | ) | (61 | ) | ||||
Surrenders
and partial withdrawals | (71 | ) | (70 | ) | ||||
Contract charges | (175 | ) | (176 | ) | ||||
Net
transfers from separate accounts | 2 | 2 | ||||||
Other adjustments (1) | (31 | ) | 29 | |||||
Total
benefits, withdrawals and other adjustments | (338 | ) | (276 | ) | ||||
Contractholder funds, ending balance | $ | 7,754 | $ | 7,686 |
(1) | The
table above illustrates the changes in contractholder funds, which are presented gross of reinsurance recoverables on the Condensed Consolidated Statements of Financial Position. The table above is intended to supplement our discussion and analysis of revenues, which are presented net of reinsurance on the Condensed Consolidated Statements of Operations. As a result, the net change in contractholder funds associated with products reinsured is reflected as a component of the other adjustments line. |
Summarized financial information | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Revenues | ||||||||
Premiums
and contract charges | $ | 282 | $ | 288 | ||||
Net investment income | 20 | 19 | ||||||
Realized
capital gains (losses) | (14 | ) | 4 | |||||
Total revenues | 288 | 311 | ||||||
Costs
and expenses | ||||||||
Contract benefits | (141 | ) | (145 | ) | ||||
Interest
credited to contractholder funds | (9 | ) | (9 | ) | ||||
Amortization of DAC | (45 | ) | (43 | ) | ||||
Operating
costs and expenses | (75 | ) | (71 | ) | ||||
Total costs and expenses | (270 | ) | (268 | ) | ||||
Income
tax expense | (4 | ) | (9 | ) | ||||
Net income applicable to common shareholders | $ | 14 | $ | 34 | ||||
Adjusted
net income | $ | 24 | $ | 31 | ||||
Realized capital gains (losses), after-tax | (10 | ) | 3 | |||||
Net
income applicable to common shareholders | $ | 14 | $ | 34 | ||||
Benefit
ratio (1) | 50.0 | 50.3 | ||||||
Operating expense ratio (2) | 26.6 | 24.7 | ||||||
Reserve
for life-contingent contract benefits as of March 31 | $ | 1,031 | $ | 1,005 | ||||
Contractholder
funds as of March 31 | $ | 877 | $ | 904 | ||||
Policies
in force as of March 31 (in thousands) | 4,309 | 4,322 |
(1) |
(2) | Operating expense ratio is calculated as operating costs and expenses divided by premiums and contract charges. |
Operating costs and expenses | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Non-deferrable commissions | $ | 26 | $ | 26 | ||||
General
and administrative expenses | 49 | 45 | ||||||
Total operating costs and expenses | $ | 75 | $ | 71 |
Summarized financial information | ||||||||
Three
months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Revenues | ||||||||
Contract
charges | $ | 2 | $ | 3 | ||||
Net investment income | 47 | 190 | ||||||
Realized
capital gains (losses) | (269 | ) | 156 | |||||
Total revenues | (220 | ) | 349 | |||||
Costs
and expenses | ||||||||
Contract benefits | (148 | ) | (138 | ) | ||||
Interest
credited to contractholder funds | (67 | ) | (81 | ) | ||||
Amortization of DAC | (2 | ) | (2 | ) | ||||
Operating
costs and expenses | (6 | ) | (7 | ) | ||||
Total costs and expenses | (223 | ) | (228 | ) | ||||
Gain
on disposition of operations | 1 | 1 | ||||||
Income tax benefit (expense) | 93 | (25 | ) | |||||
Net
(loss) income applicable to common shareholders | $ | (349 | ) | $ | 97 | |||
Adjusted
net loss | $ | (139 | ) | $ | (25 | ) | ||
Realized capital gains (losses), after-tax | (213 | ) | 124 | |||||
Valuation
changes on embedded derivatives not hedged, after-tax | 2 | (3 | ) | |||||
Gain on disposition of operations, after-tax | 1 | 1 | ||||||
Net
(loss) income applicable to common shareholders | $ | (349 | ) | $ | 97 | |||
Reserve
for life-contingent contract benefits as of March 31 | $ | 8,522 | $ | 8,497 | ||||
Contractholder
funds as of March 31 | $ | 8,773 | $ | 9,571 | ||||
Policies
in force as of March 31 (in thousands) | ||||||||
Deferred annuities | 111 | 123 | ||||||
Immediate annuities | 77 | 83 | ||||||
Total | 188 | 206 |
Investment
spread | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Investment
spread before valuation changes on embedded derivatives not hedged | $ | (141 | ) | $ | (9 | ) | ||
Valuation changes on derivatives embedded in equity-indexed annuity contracts that are not hedged | 3 | (3 | ) | |||||
Total
investment spread | $ | (138 | ) | $ | (12 | ) |
Analysis
of investment spread | ||||||||||||||||||
Three months ended March 31, | ||||||||||||||||||
Weighted average investment yield | Weighted average interest crediting rate | Weighted average investment spreads | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Deferred
fixed annuities | 4.2 | % | 4.2 | % | 2.7 | % | 2.7 | % | 1.5 | % | 1.5 | % | ||||||
Immediate
fixed annuities with and without life contingencies | (1.0 | ) | 3.6 | 5.9 | 5.9 | (6.9 | ) | (2.3 | ) |
Product
liabilities | ||||||||
($ in millions) | ||||||||
Immediate fixed annuities with life contingencies: | ||||||||
Sub-standard
structured settlements and group pension terminations (1) | $ | 5,071 | $ | 5,085 | ||||
Standard structured settlements and SPIA (2) | 3,336 | 3,367 | ||||||
Other | 115 | 78 | ||||||
Reserve
for life-contingent contract benefits | $ | 8,522 | $ | 8,530 | ||||
Deferred
fixed annuities | $ | 6,293 | $ | 6,499 | ||||
Immediate fixed annuities without life contingencies | 2,304 | 2,346 | ||||||
Other | 176 | 127 | ||||||
Contractholder
funds | $ | 8,773 | $ | 8,972 |
(1) | Comprises structured settlement annuities for annuitants with severe injuries or other health impairments which increased their expected mortality rate at the time
the annuity was issued (“sub-standard structured settlements”) and group annuity contracts issued to sponsors of terminated pension plans. |
(2) | Comprises structured settlement annuities for annuitants with standard life expectancy (“standard structured settlements”) and single premium immediate annuities (“SPIA”) with life contingencies. |
Changes
in contractholder funds | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Contractholder
funds, beginning balance | $ | 8,972 | $ | 9,817 | ||||
Deposits | 4 | 5 | ||||||
Interest
credited | 67 | 80 | ||||||
Benefits, withdrawals and other adjustments | ||||||||
Benefits | (139 | ) | (141 | ) | ||||
Surrenders
and partial withdrawals | (151 | ) | (181 | ) | ||||
Contract charges | (2 | ) | (2 | ) | ||||
Net
transfers from separate accounts | — | (1 | ) | |||||
Other adjustments (1) | 22 | (6 | ) | |||||
Total
benefits, withdrawals and other adjustments | (270 | ) | (331 | ) | ||||
Contractholder funds, ending balance | $ | 8,773 | $ | 9,571 |
(1) | The
table above illustrates the changes in contractholder funds, which are presented gross of reinsurance recoverables on the Condensed Consolidated Statements of Financial Position. The table above is intended to supplement our discussion and analysis of revenues, which are presented net of reinsurance on the Condensed Consolidated Statements of Operations. As a result, the net change in contractholder funds associated with products reinsured is reflected as a component of the other adjustments line. |
Portfolio composition and strategy by reporting segment (1) | ||||||||||||||||||||||||||||
($ in millions) | Property-Liability | Service Businesses | Allstate Life | Allstate Benefits | Allstate Annuities | Corporate
and Other | Total | |||||||||||||||||||||
Fixed income securities (2) | $ | 34,577 | $ | 1,410 | $ | 7,824 | $ | 1,275 | $ | 13,586 | $ | 1,185 | $ | 59,857 | ||||||||||||||
Equity
securities (3) | 1,842 | 111 | 157 | 64 | 1,213 | 314 | 3,701 | |||||||||||||||||||||
Mortgage
loans, net | 568 | — | 1,792 | 198 | 2,201 | — | 4,759 | |||||||||||||||||||||
Limited
partnership interests | 4,154 | — | — | — | 2,933 | — | 7,087 | |||||||||||||||||||||
Short-term
investments (4) | 2,507 | 83 | 485 | 30 | 606 | 1,960 | 5,671 | |||||||||||||||||||||
Other,
net | 1,540 | — | 1,309 | 300 | 617 | 1 | 3,767 | |||||||||||||||||||||
Total | $ | 45,188 | $ | 1,604 | $ | 11,567 | $ | 1,867 | $ | 21,156 | $ | 3,460 | $ | 84,842 | ||||||||||||||
Percent
to total | 53.3 | % | 1.9 | % | 13.6 | % | 2.2 | % | 24.9 | % | 4.1 | % | 100.0 | % | ||||||||||||||
Market-based | $ | 40,089 | $ | 1,604 | $ | 11,567 | $ | 1,867 | $ | 17,875 | $ | 3,459 | $ | 76,461 | ||||||||||||||
Performance-based | 5,099 | — | — | — | 3,281 | 1 | 8,381 | |||||||||||||||||||||
Total | $ | 45,188 | $ | 1,604 | $ | 11,567 | $ | 1,867 | $ | 21,156 | $ | 3,460 | $ | 84,842 |
(1) | Balances
reflect the elimination of related party investments between segments. |
(2) | Fixed income securities are carried at fair value. Amortized cost, net for these securities was $34.56 billion, $1.38 billion, $7.47 billion, $1.26 billion, $13.13 billion, $1.16 billion and $58.95 billion for Property-Liability, Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities, Corporate and Other, and in
total, respectively. |
(3) | Equity securities are carried at fair value. The fair value of equity securities held as of March 31, 2020, was $70 million in excess of cost. These net gains were primarily concentrated in the technology, consumer goods and banking sectors. Equity securities include $1.39 billion of funds with underlying investments in fixed income securities as of March 31, 2020. |
(4) | Short-term
investments are carried at fair value. |
• | Market
volatility has materially impacted our first quarter 2020 results: |
– | Net realized capital losses for valuation changes of equity investments of $859 million |
– | Unrealized net capital gains and losses on fixed income securities decreased by $1.84 billion from December 31, 2019, and included gross unrealized losses of $1.28 billion
as of March 31, 2020 |
– | Fixed income securities in certain sectors such as energy, automotive, retail, travel, lodging and airlines were more severely impacted than others |
– | Performance-based investment income was reduced by $214 million due to lower valuations |
• | In
the first quarter of 2020, we took the following actions in our investment portfolio: |
– | In February, we reduced our equity exposure by approximately $4 billion, primarily through the sale of public equity securities, at an average sale price equivalent to 3,281 on the S&P 500 compared to 2,585 at March 31, 2020. The proceeds from the sale of public equities were invested in investment grade fixed income securities. |
– | We
reduced our securities lending program to a carrying value of $1.19 billion of securities on loan as of March 31, 2020 from $1.74 billion as of December 31, 2019. By reducing the securities lending program, we increased unrestricted access to our liquid investments. |
Portfolio
composition by investment strategy | ||||||||||||
($ in millions) | Market-based | Performance-based | Total | |||||||||
Fixed income securities | $ | 59,763 | $ | 94 | $ | 59,857 | ||||||
Equity
securities | 3,392 | 309 | 3,701 | |||||||||
Mortgage loans, net | 4,759 | — | 4,759 | |||||||||
Limited
partnership interests | 216 | 6,871 | 7,087 | |||||||||
Short-term investments | 5,671 | — | 5,671 | |||||||||
Other,
net | 2,660 | 1,107 | 3,767 | |||||||||
Total | $ | 76,461 | $ | 8,381 | $ | 84,842 | ||||||
Percent
to total | 90.1 | % | 9.9 | % | 100.0 | % | ||||||
Unrealized
net capital gains and losses | ||||||||||||
Fixed income securities | $ | 912 | $ | — | $ | 912 | ||||||
Limited
partnership interests | — | (2 | ) | (2 | ) | |||||||
Other | (3 | ) | — | (3 | ) | |||||||
Total | $ | 909 | $ | (2 | ) | $ | 907 |
Fixed
income securities by type | ||||||||
Fair value as of | ||||||||
($ in millions) | ||||||||
U.S. government and agencies | $ | 5,399 | $ | 5,086 | ||||
Municipal | 8,709 | 8,620 | ||||||
Corporate | 43,635 | 43,078 | ||||||
Foreign
government | 911 | 979 | ||||||
Asset-backed securities (“ABS”) | 836 | 862 | ||||||
Mortgage-backed
securities (“MBS”) | 367 | 419 | ||||||
Total fixed income securities | $ | 59,857 | $ | 59,044 |
Fair
value and unrealized net capital gains (losses) for fixed income securities by credit rating | ||||||||||||||||||||||||
A and above | BBB | BB | ||||||||||||||||||||||
($ in millions) | Fair value | Unrealized gain
(loss) | Fair value | Unrealized gain (loss) | Fair value | Unrealized gain (loss) | ||||||||||||||||||
U.S. government and agencies | $ | 5,399 | $ | 295 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Municipal | 8,291 | 503 | 369 | 31 | — | — | ||||||||||||||||||
Corporate | ||||||||||||||||||||||||
Public | 13,809 | 505 | 14,864 | (78 | ) | 2,420 | (195 | ) | ||||||||||||||||
Privately
placed | 3,932 | 164 | 4,735 | (58 | ) | 2,026 | (122 | ) | ||||||||||||||||
Total
corporate | 17,741 | 669 | 19,599 | (136 | ) | 4,446 | (317 | ) | ||||||||||||||||
Foreign
government | 904 | 27 | 1 | — | 6 | — | ||||||||||||||||||
ABS | 657 | (8 | ) | 113 | (5 | ) | 40 | (2 | ) | |||||||||||||||
MBS | 71 | 3 | 45 | — | 5 | — | ||||||||||||||||||
Total
fixed income securities | $ | 33,063 | $ | 1,489 | $ | 20,127 | $ | (110 | ) | $ | 4,497 | $ | (319 | ) | ||||||||||
B | CCC
and lower | Total | ||||||||||||||||||||||
Fair value | Unrealized gain (loss) | Fair value | Unrealized gain
(loss) | Fair value | Unrealized gain (loss) | |||||||||||||||||||
U.S. government and agencies | $ | — | $ | — | $ | — | $ | — | $ | 5,399 | $ | 295 | ||||||||||||
Municipal | 10 | — | 39 | (7 | ) | 8,709 | 527 | |||||||||||||||||
Corporate | ||||||||||||||||||||||||
Public | 551 | (73 | ) | 37 | (14 | ) | 31,681 | 145 | ||||||||||||||||
Privately
placed | 1,115 | (93 | ) | 146 | (25 | ) | 11,954 | (134 | ) | |||||||||||||||
Total
corporate | 1,666 | (166 | ) | 183 | (39 | ) | 43,635 | 11 | ||||||||||||||||
Foreign
government | — | — | — | — | 911 | 27 | ||||||||||||||||||
ABS | — | — | 26 | (1 | ) | 836 | (16 | ) | ||||||||||||||||
MBS | 4 | — | 242 | 65 | 367 | 68 | ||||||||||||||||||
Total
fixed income securities | $ | 1,680 | $ | (166 | ) | $ | 490 | $ | 18 | $ | 59,857 | $ | 912 |
Types of properties collateralizing the mortgage loan portfolio | |||
(% of mortgage loan portfolio carrying value) | |||
Apartment complex | 37.2 | % | |
Office buildings | 22.3 | ||
Warehouse | 15.5 | ||
Retail | 12.6 | ||
Other | 12.4 | ||
Total | 100.0 | % |
Private equity limited partnerships by sector | |||
(% of carrying value) | |||
Industrial | 17.1 | % | |
Consumer
discretionary | 11.6 | ||
Consumer staples | 11.4 | ||
Utilities | 10.2 | ||
Information technology | 9.7 | ||
Energy | 8.8 | ||
Other | 31.2 | ||
Total | 100.0 | % |
Real
estate limited partnerships by sector | |||
(% of carrying value) | |||
Residential | 27.6 | % | |
Industrial | 24.9 | ||
Office | 13.7 | ||
Other | 33.8 | ||
Total | 100.0 | % |
Unrealized net capital gains (losses) | ||||||||
March 31, | December
31, | |||||||
($ in millions) | 2020 | 2019 | ||||||
U.S. government and agencies | $ | 295 | $ | 115 | ||||
Municipal | 527 | 540 | ||||||
Corporate | 11 | 1,988 | ||||||
Foreign
government | 27 | 11 | ||||||
ABS | (16 | ) | 2 | |||||
MBS | 68 | 95 | ||||||
Fixed
income securities | 912 | 2,751 | ||||||
Derivatives | (3 | ) | (3 | ) | ||||
EMA
limited partnerships | (2 | ) | (4 | ) | ||||
Unrealized net capital gains and losses, pre-tax | $ | 907 | $ | 2,744 |
Gross
unrealized gains (losses) on fixed income securities | ||||||||
March 31, | December 31, | |||||||
($ in millions) | 2020 | 2019 | ||||||
Gross unrealized gains | $ | 2,196 | $ | 2,847 | ||||
Gross
unrealized losses | (1,284 | ) | (96 | ) | ||||
Unrealized net capital gains and losses | $ | 912 | $ | 2,751 |
Gross
unrealized gains (losses) on fixed income securities by type and sector | ||||||||||||||||
($ in millions) | Amortized cost, net | Gross unrealized | Fair value | |||||||||||||
Gains | Losses | |||||||||||||||
Corporate: | ||||||||||||||||
Energy | ||||||||||||||||
Midstream | $ | 1,697 | $ | 12 | $ | (238 | ) | $ | 1,471 | |||||||
Integrated | 468 | 17 | (7 | ) | 478 | |||||||||||
Independent/upstream | 305 | 1 | (118 | ) | 188 | |||||||||||
Other | 207 | — | (25 | ) | 182 | |||||||||||
Total
energy | 2,677 | 30 | (388 | ) | 2,319 | |||||||||||
Consumer goods | ||||||||||||||||
Cyclical | ||||||||||||||||
Automotive | 1,524 | 10 | (58 | ) | 1,476 | |||||||||||
Gaming,
lodging and leisure | 530 | 1 | (52 | ) | 479 | |||||||||||
Retailers | 1,191 | 55 | (12 | ) | 1,234 | |||||||||||
Restaurants | 456 | 12 | (7 | ) | 461 | |||||||||||
Other | 1,080 | 15 | (44 | ) | 1,051 | |||||||||||
Total
cyclical | 4,781 | 93 | (173 | ) | 4,701 | |||||||||||
Non-cyclical | 7,418 | 245 | (80 | ) | 7,583 | |||||||||||
Total
consumer goods | 12,199 | 338 | (253 | ) | 12,284 | |||||||||||
Capital goods | 5,092 | 132 | (110 | ) | 5,114 | |||||||||||
Financial
services | ||||||||||||||||
Finance companies | 594 | 5 | (72 | ) | 527 | |||||||||||
Life
insurance | 808 | 19 | (10 | ) | 817 | |||||||||||
Other | 1,166 | 35 | (16 | ) | 1,185 | |||||||||||
Total
financial services | 2,568 | 59 | (98 | ) | 2,529 | |||||||||||
Banking | 5,014 | 79 | (89 | ) | 5,004 | |||||||||||
Utilities | 5,679 | 285 | (80 | ) | 5,884 | |||||||||||
Basic
industry | 2,032 | 42 | (79 | ) | 1,995 | |||||||||||
Transportation | ||||||||||||||||
Airlines | 345 | — | (28 | ) | 317 | |||||||||||
Railroad
and other | 1,650 | 79 | (12 | ) | 1,717 | |||||||||||
Total transportation | 1,995 | 79 | (40 | ) | 2,034 | |||||||||||
Technology
| 3,089 | 81 | (39 | ) | 3,131 | |||||||||||
Communications | 2,996 | 112 | (38 | ) | 3,070 | |||||||||||
Other | 283 | 5 | (17 | ) | 271 | |||||||||||
Total
corporate fixed income portfolio | 43,624 | 1,242 | (1,231 | ) | 43,635 | |||||||||||
U.S.
government and agencies | 5,104 | 295 | — | 5,399 | ||||||||||||
Municipal | 8,182 | 555 | (28 | ) | 8,709 | |||||||||||
Foreign
government | 884 | 30 | (3 | ) | 911 | |||||||||||
ABS | 852 | 3 | (19 | ) | 836 | |||||||||||
MBS | 299 | 71 | (3 | ) | 367 | |||||||||||
Total
fixed income securities | $ | 58,945 | $ | 2,196 | $ | (1,284 | ) | $ | 59,857 |
Gross unrealized gains (losses) on fixed income securities by type and sector | ||||||||||||||||
($ in millions) | Amortized cost | Gross unrealized | Fair value | |||||||||||||
Gains | Losses | |||||||||||||||
Corporate: | ||||||||||||||||
Energy | ||||||||||||||||
Midstream | $ | 1,570 | $ | 77 | $ | (4 | ) | $ | 1,643 | |||||||
Integrated | 406 | 32 | — | 438 | ||||||||||||
Independent/upstream | 422 | 19 | (10 | ) | 431 | |||||||||||
Other | 237 | 11 | — | 248 | ||||||||||||
Total
energy | 2,635 | 139 | (14 | ) | 2,760 | |||||||||||
Consumer goods | ||||||||||||||||
Cyclical | ||||||||||||||||
Automotive | 1,463 | 42 | (1 | ) | 1,504 | |||||||||||
Gaming,
lodging and leisure | 596 | 28 | — | 624 | ||||||||||||
Retailers | 920 | 52 | — | 972 | ||||||||||||
Restaurants | 390 | 19 | — | 409 | ||||||||||||
Other | 1,056 | 49 | (3 | ) | 1,102 | |||||||||||
Total
cyclical | 4,425 | 190 | (4 | ) | 4,611 | |||||||||||
Non-cyclical | 7,112 | 316 | (1 | ) | 7,427 | |||||||||||
Total
consumer goods | 11,537 | 506 | (5 | ) | 12,038 | |||||||||||
Capital goods | 4,945 | 229 | (1 | ) | 5,173 | |||||||||||
Financial
services | ||||||||||||||||
Finance companies | 582 | 24 | — | 606 | ||||||||||||
Life
insurance | 725 | 30 | — | 755 | ||||||||||||
Other | 1,169 | 53 | (2 | ) | 1,220 | |||||||||||
Total
financial services | 2,476 | 107 | (2 | ) | 2,581 | |||||||||||
Banking | 4,610 | 143 | (14 | ) | 4,739 | |||||||||||
Utilities | 5,197 | 385 | (6 | ) | 5,576 | |||||||||||
Basic
industry | 1,897 | 114 | (2 | ) | 2,009 | |||||||||||
Transportation | ||||||||||||||||
Airlines | 418 | 12 | — | 430 | ||||||||||||
Railroad
and other | 1,613 | 120 | — | 1,733 | ||||||||||||
Total transportation | 2,031 | 132 | — | 2,163 | ||||||||||||
Technology
| 2,765 | 112 | (1 | ) | 2,876 | |||||||||||
Communications | 2,721 | 158 | (2 | ) | 2,877 | |||||||||||
Other | 276 | 10 | — | 286 | ||||||||||||
Total
corporate fixed income portfolio | 41,090 | 2,035 | (47 | ) | 43,078 | |||||||||||
U.S. government
and agencies | 4,971 | 141 | (26 | ) | 5,086 | |||||||||||
Municipal | 8,080 | 551 | (11 | ) | 8,620 | |||||||||||
Foreign
government | 968 | 16 | (5 | ) | 979 | |||||||||||
ABS | 860 | 8 | (6 | ) | 862 | |||||||||||
MBS | 324 | 96 | (1 | ) | 419 | |||||||||||
Total
fixed income securities | $ | 56,293 | $ | 2,847 | $ | (96 | ) | $ | 59,044 |
Equity
securities by sector | ||||||||||||||||||||||||
($ in millions) | Cost | Over (under) cost | Fair value | Cost | Over
(under) cost | Fair value | ||||||||||||||||||
Energy | $ | 132 | $ | (48 | ) | $ | 84 | $ | 275 | $ | 15 | $ | 290 | |||||||||||
Capital
goods | 171 | (28 | ) | 143 | 331 | 91 | 422 | |||||||||||||||||
Basic
industry | 52 | 1 | 53 | 135 | 40 | 175 | ||||||||||||||||||
REITs | 264 | 3 | 267 | 320 | 60 | 380 | ||||||||||||||||||
Transportation | 38 | 4 | 42 | 81 | 32 | 113 | ||||||||||||||||||
Other
(1) | 1,011 | 247 | 1,258 | 2,322 | 1,040 | 3,362 | ||||||||||||||||||
Funds | ||||||||||||||||||||||||
Bonds | 1,446 | (56 | ) | 1,390 | 1,727 | 62 | 1,789 | |||||||||||||||||
Equities | 517 | (53 | ) | 464 | 1,377 | 254 | 1,631 | |||||||||||||||||
Total
funds | 1,963 | (109 | ) | 1,854 | 3,104 | 316 | 3,420 | |||||||||||||||||
Total
equity securities | $ | 3,631 | $ | 70 | $ | 3,701 | $ | 6,568 | $ | 1,594 | $ | 8,162 |
(1) | Other
is comprised of the technology, consumer goods, banking, financial services, communications and utilities sectors. |
Net investment income | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Fixed
income securities | $ | 525 | $ | 538 | ||||
Equity securities | 6 | 30 | ||||||
Mortgage
loans | 60 | 53 | ||||||
Limited partnership interests | (192 | ) | 9 | |||||
Short-term
investments | 17 | 26 | ||||||
Other | 63 | 63 | ||||||
Investment
income, before expense | 479 | 719 | ||||||
Investment expense (1) (2) | (58 | ) | (71 | ) | ||||
Net
investment income | $ | 421 | $ | 648 | ||||
Market-based | 675 | 695 | ||||||
Performance-based | (196 | ) | 24 | |||||
Investment
income, before expense | $ | 479 | $ | 719 |
(1) | Investment expense includes $13 million and $20 million
of investee level expenses in the first quarter of 2020 and 2019, respectively. Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments. Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses. |
(2) | Investment expense includes $6 million and $11 million
related to the portion of reinvestment income on securities lending collateral paid to the counterparties in the first quarter of 2020 and 2019, respectively. |
Performance-based investment income | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Limited
partnerships | ||||||||
Private equity | $ | (199 | ) | $ | (5 | ) | ||
Real
estate | 7 | 12 | ||||||
Performance-based - limited partnerships | (192 | ) | 7 | |||||
Non-limited
partnerships | ||||||||
Private equity | (21 | ) | 3 | |||||
Real estate | 17 | 14 | ||||||
Performance-based
- non-limited partnerships | (4 | ) | 17 | |||||
Total | ||||||||
Private
equity | (220 | ) | (2 | ) | ||||
Real estate | 24 | 26 | ||||||
Total
performance-based income before investee level expenses | $ | (196 | ) | $ | 24 | |||
Investee
level expenses (1) | (12 | ) | (18 | ) | ||||
Total performance-based income | $ | (208 | ) | $ | 6 |
(1) | Investee
level expenses include asset level operating expenses reported in investment expense. Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses. |
Components
of realized capital gains (losses) and the related tax effect | ||||||||
Three months ended March 31, | ||||||||
($ in millions) | 2020 | 2019 | ||||||
Sales (1) | $ | 388 | $ | 95 | ||||
Credit
losses (2) | ||||||||
Fixed income securities | (4 | ) | (2 | ) | ||||
Mortgage Loans | (41 | ) | — | |||||
Limited
partnership interests | (7 | ) | (1 | ) | ||||
Other investments | (27 | ) | (11 | ) | ||||
Total
credit losses | (79 | ) | (14 | ) | ||||
Valuation of equity investments - appreciation (decline): | ||||||||
Equity securities | (750 | ) | 553 | |||||
Limited
partnerships (3) | (109 | ) | 74 | |||||
Total valuation of equity investments | (859 | ) | 627 | |||||
Valuation
and settlements of derivative instruments | 88 | (46 | ) | |||||
Realized capital gains (losses), pre-tax | (462 | ) | 662 | |||||
Income
tax benefit (expense) | 96 | (138 | ) | |||||
Realized capital gains (losses), after-tax | $ | (366 | ) | $ | 524 | |||
Market-based | (493 | ) | 605 | |||||
Performance-based | 31 | 57 | ||||||
Realized
capital gains (losses), pre-tax | $ | (462 | ) | $ | 662 |
(1) | Beginning January 1, 2020, depreciation previously included in investee level expenses is reported
as realized capital gains or losses. |
(2) | Due to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as OTTI impairment write-downs are now presented as credit losses. |
(3) | Relates to limited partnerships where the underlying assets are predominately public equity securities. |
Realized capital gains (losses) for performance-based investments | ||||||||
Three months ended March 31, | ||||||||
($
in millions) | 2020 | 2019 | ||||||
Sales (1) | $ | 10 | $ | 29 | ||||
Credit
losses (2) | (8 | ) | (1 | ) | ||||
Valuation of equity investments | (7 | ) | 25 | |||||
Valuation
and settlements of derivative instruments | 36 | 4 | ||||||
Total performance-based | $ | 31 | $ | 57 |
(1) | Beginning
January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses. |
(2) | Due to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as OTTI impairment write-downs are now presented as credit losses. |
Capital
resources | ||||||||
($ in millions) | ||||||||
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items | $ | 23,615 | $ | 24,048 | ||||
Accumulated
other comprehensive income | 558 | 1,950 | ||||||
Total shareholders’ equity | 24,173 | 25,998 | ||||||
Debt | 6,633 | 6,631 | ||||||
Total
capital resources | $ | 30,806 | $ | 32,629 | ||||
Ratio
of debt to shareholders’ equity | 27.4 | % | 25.5 | % | ||||
Ratio of debt to capital resources | 21.5 | 20.3 |
Debt
maturities for each of the next five years and thereafter (excluding issuance costs) | ||||
($ in millions) | ||||
2020 | $ | — | ||
2021 | 250 | |||
2022 | — | |||
2023 | 750 | |||
2024 | — | |||
2025 | — | |||
Thereafter | 5,691 | |||
Total
long-term debt principal | $ | 6,691 |
Intercompany dividends | ||||
($ in millions) | ||||
AIC to AIH | $ | 2,061 | ||
AIH
to the Corporation | 2,061 |
• | The Corporation, AIC and ALIC have access to a $1.00 billion unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is April 2021. The facility is fully subscribed
among 11 lenders with the largest commitment being $115 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 16.1% as of March 31, 2020. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2020. |
• | The
Corporation has access to the commercial paper market for short-term borrowings up to $1.00 billion. The combined total amount outstanding at any one point from commercial paper borrowings and the credit facility cannot exceed the amount that can be borrowed under the credit facility. As of March 31, 2020, there were no commercial paper borrowings outstanding. |
• | The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2021. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 585 million shares of treasury stock
as of March 31, 2020), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration |
Contractholder funds by contractual withdrawal provisions | |||||||
($ in millions) | Percent to total | ||||||
Not
subject to discretionary withdrawal | $ | 2,677 | 15.4 | % | |||
Subject to discretionary withdrawal with adjustments: | |||||||
Specified
surrender charges (1) | 4,714 | 27.1 | |||||
Market value adjustments (2) | 758 | 4.3 | |||||
Subject
to discretionary withdrawal without adjustments (3) | 9,255 | 53.2 | |||||
Total contractholder funds (4) | $ | 17,404 | 100.0 | % |
(1) | Includes
$1.38 billion of liabilities with a contractual surrender charge of less than 5% of the account balance. |
(2) | $330 million of the contracts with market value adjusted surrenders have a 30-45 day period at the end of their initial and subsequent interest rate guarantee periods (which are typically 1, 5, 7 or 10 years) during which there is no surrender charge or market value adjustment. |
(3) | 89%
of these contracts have a minimum interest crediting rate guarantee of 3% or higher. |
(4) | Includes $742 million of contractholder funds on variable annuities reinsured to The Prudential Insurance Company of America, a subsidiary of Prudential Financial Inc., in 2006. |
Period | Total number of shares (or units) purchased (1) | Average
price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs (3) | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (4) | ||||||||||
Open
Market Purchases | 2,045,902 | $ | 116.44 | 1,592,213 | ||||||||||
ASR Agreement (2) | 552,679 | $ | 109.51 | 552,679 | ||||||||||
Open Market Purchases | 1,030,865 | $ | 121.67 | 680,300 | ||||||||||
Open Market Purchases | 1,941,478 | $ | 88.22 | 1,928,332 | ||||||||||
Total | 5,570,924 | $ | 106.89 | 4,753,524 | $ | 2.75 | billion |
(1) | In
accordance with the terms of its equity compensation plans, Allstate acquired the following shares in connection with the vesting of restricted stock units and performance stock awards and the exercise of stock options held by employees and/or directors. The shares were acquired in satisfaction of withholding taxes due upon exercise or vesting and in payment of the exercise price of the options. |
(2) | On November 1, 2019, Allstate entered into an accelerated share repurchase
agreement (“ASR agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”) to purchase $500 million of our outstanding common stock, which settled on January 8, 2020. Under this ASR agreement, we repurchased a total of 4.6 million shares at an average price of $109.51. |
(3) | From time to time, repurchases under our programs are executed under the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. |
(4) | In
February 2020, we announced the approval of a common share repurchase program for $3 billion, which is expected to be completed by the end of 2021. |
(a) | Exhibits |
Exhibit Number | Exhibit Description | Form | File Number | Exhibit | Filing Date | Filed or Furnished Herewith |
4 | The
Allstate Corporation hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of it and its consolidated subsidiaries | |||||
10.1 | X | |||||
10.2 | X | |||||
10.3 | X | |||||
10.4 | X | |||||
10.5 | X | |||||
10.6 | X | |||||
15 | X | |||||
31(i) | X | |||||
31(i) | X | |||||
32 | X | |||||
101.INS | Inline
XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | X | ||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||
101.CAL | Inline
XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||
101.LAB | Inline
XBRL Taxonomy Extension Label Linkbase Document | X | ||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||
104 | Cover
Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | X |
The Allstate Corporation | ||
(Registrant) | ||
By | /s/ John C. Pintozzi | |
Senior Vice President, Controller, and Chief Accounting Officer | ||
(Authorized
Signatory and Principal Accounting Officer) |
This ‘10-Q’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/15/21 | ||||
12/31/20 | ||||
12/15/20 | ||||
6/1/20 | 4 | |||
Filed on: | 5/5/20 | 8-K | ||
4/20/20 | ||||
4/1/20 | 4 | |||
For Period end: | 3/31/20 | 13F-HR | ||
3/1/20 | ||||
2/29/20 | ||||
2/21/20 | 10-K, 4 | |||
2/20/20 | 8-K | |||
2/12/20 | SC 13G/A | |||
2/1/20 | ||||
1/31/20 | ||||
1/15/20 | 25-NSE | |||
1/8/20 | ||||
1/2/20 | ||||
1/1/20 | 4 | |||
12/31/19 | 10-K, 11-K, 13F-HR | |||
11/8/19 | 8-A12B, 8-K | |||
11/1/19 | 4, 8-K | |||
9/18/19 | ||||
9/17/19 | ||||
7/31/19 | ||||
6/11/19 | ||||
6/3/19 | ||||
5/14/19 | ||||
4/25/19 | ||||
4/9/19 | 4 | |||
3/31/19 | 10-Q, 13F-HR | |||
3/26/19 | ||||
3/6/19 | ||||
2/12/19 | 4 | |||
1/11/19 | ||||
12/31/18 | 10-K, 11-K, 13F-HR | |||
12/14/18 | 8-K | |||
12/4/18 | ||||
9/24/18 | ||||
9/12/18 | ||||
8/7/18 | 4, CORRESP, UPLOAD | |||
6/29/18 | ||||
6/22/18 | ||||
5/21/18 | ||||
4/12/18 | ||||
2/27/18 | ||||
8/3/17 | ||||
11/11/16 | ||||
8/3/15 | 10-Q, 8-K | |||
10/29/14 | 10-Q, 8-K | |||
4/1/14 | 4, 8-K | |||
List all Filings |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/21/24 Allstate Corp. 10-K 12/31/23 235:48M 2/16/23 Allstate Corp. 10-K 12/31/22 220:85M 2/18/22 Allstate Corp. 10-K 12/31/21 212:48M 2/22/21 Allstate Corp. 10-K 12/31/20 205:49M 11/20/20 Allstate Corp. 424B2 1:1.5M Toppan Merrill/FA 11/19/20 Allstate Corp. 424B2 1:1.5M Toppan Merrill/FA |