The following discussion highlights significant factors influencing the consolidated financial position and results of operations of
The Allstate Corporation(referred to in this document as "we," "our," "us," the "Company" or "Allstate"). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporationannual report on Form 10-K for 2020, filed February 19, 2021. Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability (previously Discontinued Lines and Coverages), Protection Services and Allstate Healthand Benefits (previously Allstate Benefits), of Management's Discussion and Analysis ("MD&A"). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources. The Novel Coronavirus Pandemic or COVID-19 ("Coronavirus") The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated in 2021 as vaccines have become more widely available in the United Statesand Canada. There is no way of predicting with certainty how long the pandemic might last. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material. The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity, including: •Sales of new and retention of existing policies •Premium for transportation network products •Driving behavior and auto accident frequency •Supply chain disruptions and labor shortages could increase the cost of settling claims •Hospital and outpatient claim costs •Investment valuations and returns •Bad debt and credit allowance exposure •Consumer utilization of Milewise®, our pay-per-mile insurance product •Retail sales in Allstate Protection Plans This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2021 results. Corporate Strategy Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and other core capabilities. Transformative Growth is about creating business models, capabilities and culture to build growth businesses that deliver affordable, simple and connected protection solutions for consumers. In the personal property-liability businesses this has four key components: •Improving customer value •Expanding customer access •Increasing customer acquisition sophistication and investment •Building new technology applications The protection businesses are being expanded by leveraging enterprise capabilities and resources such as distribution, brand, analytics, claims, investment expertise, talent and capital. Enhancing strategic position in the independent agent channel On January 4, 2021, we completed the acquisition of National General Holdings Corp.("National General"), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology. It will significantly expand our distribution footprint, leading us to be a top five personal lines carrier in the independent agency distribution channel. As part of the acquisition, Allstate Independent Agencyand Encompass organizations will be integrated into National General by: •Migrating Encompass policyholders and business operations to National General and retiring Encompass's technology •Transitioning Allstate Independent Agent new business to National General as mid-market products roll out 52 www.allstate.com -------------------------------------------------------------------------------- Discontinued operations and held for sale During the first quarter of 2021, we announced the pending sales of Allstate Life Insurance Company("ALIC"), Allstate Life Insurance Company of New York("ALNY") and certain affiliates. We are no longer accepting new proprietary life insurance applications through Allstate exclusive agents. On October 1, 2021, we closed the sale of ALNY to Wilton Reassurance Companyfor $400 million. On November 1, 2021, we closed the sale of ALIC and certain affiliates to entities managed by Blackstonefor total proceeds of $4 billion, including purchase price of $2.8 billionas well as increases in statutory surplus. A loss on disposition of $4 billion, after-tax, was recorded in the first quarter of 2021 related to these transactions. For the nine months ended September 30, 2021, the loss on disposition was $3.8 billion, after-tax, and reflects purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreements, changes in statutory capital and surplus prior to the closing dates and the closing date equity of the sold entities determined under GAAP, excluding unrealized gains and losses on fixed income securities. Beginning in the first quarter of 2021, the assets and liabilities of the business were reclassified as held for sale and results are presented as discontinued operations. This change was applied on a retrospective basis. SafeAuto On June 1, 2021, we announced an agreement to acquire Safe Auto Insurance Group, Inc., a non-standard auto insurance carrier. On October 1, 2021, we completed the acquisition for $262 millionin cash. See Note 3 of the condensed consolidated financial statements for further information on acquisitions and dispositions. Measuring segment profit or loss The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Healthand Benefits and Corporate and Other segments. Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense ("losses"), Shelter-in-Place Payback expense, amortization of deferred policy acquisition costs ("DAC"), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America("GAAP"). We use this measure in our evaluation of results of operations to analyze profitability. Adjusted net income is net income (loss) applicable to common shareholders, excluding: • Realized capital gains and losses except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in adjusted net income • Pension and other postretirement remeasurement gains and losses • Business combination expenses and the amortization or impairment of purchased intangibles • Income or loss from discontinued operations • Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years • Income tax expense or benefit on reconciling items Third Quarter 2021 Form 10-Q 53
Consolidated net income ($ in millions) Q1 Q2 Q3
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Consolidated net income applicable to ordinary shareholders decreased by 54.9% for
in the third quarter of 2021 compared to the same period of 2020 mainly due to
non-catastrophic and catastrophic losses, lower realized capital gains, partially offset by
higher property and casualty insurance premiums and higher net investment income.
Consolidated net income applicable to ordinary shareholders decreased by 75.7% for
in the first nine months of 2021 compared to the same period of 2020 mainly due to a
higher losses from discontinued operations and non-catastrophe losses. Partial compensation
were higher P&C insurance premiums, net investment income and higher pension funds
and other post-retirement gains in 2021 compared to losses in 2020.
For the twelve months ended
shareholders’ equity stood at 13.2%, down 5.7 points compared to 18.9% for the twelve months ended
Total revenue ( ($ in millions)
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Total revenue increased by 16.9% to reach
quarter and nine months of 2021, respectively, compared to the same periods of 2020,
driven by the 13.7% and 12.9% increase in property and casualty insurance premiums in the third
quarter and first nine months of 2021, respectively, and higher net investment income.
Insurance premiums earned increased both in Damages-Liability, mainly due to the
acquisition of National General and Protection Services.
Net investment income ($ in millions)
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Net investment income increased
compared to the same period of 2020 and increased
first nine months of 2021 compared to the same period of 2020. The increase in both periods
mainly explained by the increase in performance-related income, mainly
54 www.allstate.com -------------------------------------------------------------------------------- Financial highlights Investments totaled
$61.84 billionas of September 30, 2021, increasing from $59.54 billionas of December 31, 2020. Allstate shareholders' equity As of September 30, 2021, Allstate shareholders' equity was $26.73 billion. Book value per common share (ratio of Allstate common shareholders' equity to total common shares outstanding and dilutive potential common shares outstanding) was $84.62, an increase of 2.7% from $82.39as of September 30, 2020, and a decrease of 7.5% from $91.50as of December 31, 2020. Return on average Allstate common shareholders' equity For the twelve months ended September 30, 2021, return on Allstate common shareholders' equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020. The decrease was primarily due to lower net income applicable to common shareholders for the trailing twelve-month period ended September 30, 2021and an increase in average Allstate common shareholders' equity. Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $40 millionin the third quarter of 2021 primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by an increase in the liability discount rate. Pension and other postretirement remeasurement gains of $404 millionin the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.