NEWS
FOR IMMEDIATE RELEASE
Contact:
Robert Block (847) 402-8885
Phil Dorn (847) 402-8240
Investor Relations
Allstate reports 2001 second quarter results
NORTHBROOK, Ill., July 19, 2001 -- The Allstate Corporation (NYSE: ALL) today
reported that operating income per diluted share for the second quarter of 2001
was $.31 compared to $.58 in the second quarter of 2000. The decline was
driven by catastrophe losses, by increased homeowners loss costs and market
conditions in the financial services sector.
“The quarter was a particularly trying one for Allstate, as we experienced the
highest level of quarterly catastrophe losses since the Northridge, California
earthquake in 1994,” said Chairman, President and CEO Edward M. Liddy. “The
impact of the spring storms and Tropical Storm Allison was significant, with
catastrophes this quarter at $537 million pre-tax, a full $170 million more than
last year’s second quarter. Also included in this total are $90 million of additional
reserves that were recorded to provide for the resolution of claims remaining
from the Northridge earthquake. The catastrophe impact aggravated an already
difficult environment in the property insurance market, where we continue to
experience significant loss cost pressure.
“The Good HandsSM Network continues to make encouraging progress, with the
rollout of three more states in the second quarter. In those states where the
Good Hands Network has been fully implemented, we see positive results from
the interaction and integration between the three channels of agencies, call
centers and the Internet for access to sales and servicing capabilities. We
continue to work to fine-tune the Network, to make sure that it is as responsive
as possible to the needs of the Allstate customer.”
Operating income was $230 million in the second quarter of 2001, compared to
$432 million in the second quarter of 2000. Consolidated revenues for the
second quarter were $7.20 billion, compared to the 2000 second quarter
consolidated revenues of $7.18 billion. Consolidated net income for the quarter
was $168 million or $.23 per diluted share, compared to $459 million or $.61 per
diluted share for the same period in 2000. The decline in consolidated net
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income reflects both decreased operating income and realized capital losses
resulting from market conditions affecting investment write-downs and portfolio
trading.
For the six months ended June 30, 2001, consolidated revenues were $14.33
billion, operating income was $782 million ($1.07 per diluted share), and net
income was $668 million ($.91 per diluted share), compared to consolidated
revenues of $14.47 billion, operating income of $895 million ($1.18 per diluted
share), and net income of $1.02 billion ($1.34 per diluted share) in the first six
months of 2000. Catastrophe losses for the first six months of 2001 were $402
million after-tax, compared to $487 million after-tax in the same period of the
previous year. Consolidated realized capital losses were $80 million after-tax
through June of 2001, compared to realized capital gains of $147 million after-tax
for the first six months of 2000.
Property-Liability Business
Property-Liability written premiums increased 2.6 percent in the second quarter
of 2001 to $5.73 billion compared to $5.58 billion during the same period of 2000.
For Allstate branded products, written premiums increased 4.3 percent compared
to the same period in the prior year. EncompassSM Insurance and DeerbrookSM
written premium declined as they continued to improve the profitability of these
businesses.
”We continue to see strong progress in the development of the Allstate standard
auto book of business,” Liddy said. “Allstate standard auto premiums written
increased nearly 5 percent over the second quarter of last year, the volume of
new business applications continued to accelerate during the quarter, retention
remains on a positive trend and in states where the strategic risk management
system has been implemented in connection with the rollout of the Good Hands
Network our new business productivity has shown good progress.
“As expected, the steps we have taken to address the adverse profitability trends
in our non-standard business continue to reduce written premiums in this line, but
the impact from these actions is expected to begin to moderate in the second
half. We have been actively pursuing appropriate rate increases for all Allstate
product categories.”
Property-Liability revenues in the second quarter of 2001 were $5.92 billion
compared to $6.06 billion for the 2000 second quarter. Operating income for the
quarter was $134 million versus 2000 second quarter operating income of $302
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million, due primarily to increased premiums being more than offset by higher
catastrophe losses and increased homeowners loss costs.
“Adverse severity trends in homeowners continue to be an issue,” Liddy said,
“and in many cases homeowners’ rates are lagging behind actual loss
experience. We are currently examining a range of possible remedial actions in
this area, including changes to our product design and our underwriting
approach, as well as appropriate rate initiatives.”
The combined ratio for the quarter was 106.3, compared to the 2000 second
quarter ratio of 100.9. Excluding catastrophe losses and restructuring charges,
the combined ratio was 96.5, compared to 93.9 in the second quarter of 2000.
Property-Liability realized capital losses were $11 million after-tax in the second
quarter of 2001, compared to realized capital gains of $91 million after-tax for the
same period in 2000. Net income was $117 million for the quarter, compared to
$393 million for the same period in the previous year.
For the first six months of 2001, Property-Liability written premiums increased 1.9
percent to $11.17 billion compared to $10.96 billion in the first six months of
2000. Revenues for the first six months of 2001 were $11.86 billion, operating
income was $579 million, realized capital gains were $6 million after-tax and net
income was $576 million, compared to revenues of $12.14 billion, operating
income of $644 million, realized capital gains of $210 million after-tax and net
income of $854 million in the first six months of 2000.
Allstate Financial Business
For the second quarter of 2001, Allstate Financial GAAP revenues increased
14.1 percent to $1.27 billion, compared to $1.11 billion for the same period in the
previous year. Allstate Financial operating income for the quarter was $119
million compared to $145 million for the same period in 2000; with increased
investment margins being more than offset by the effects of restructuring
charges, decreased margins on fee-based products and increased operating
expenses intended to support the generation of future sales.
“Volatile market conditions continue to adversely impact the sales of our fixed
and variable annuity products,” Liddy said, “while we saw modest growth in our
life insurance and structured settlements business, as well as a strong response
to our institutional offerings during the quarter.
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“Operating income was also adversely impacted by higher than normal expenses
for the business, due in part to the increased servicing cost of the higher number
of policies, and in part to the investment in new products currently being brought
to market. We are monitoring these expense issues carefully, and will take
relevant actions as appropriate.”
Net income for the second quarter of 2001 was $84 million compared to $101
million for the second quarter of 2000, reflecting lower operating income.
Statutory premiums and deposits were $2.94 billion in the quarter compared to
$3.23 billion in the second quarter of 2000, as increased sales of funding
agreements were more than offset by lower annuity sales primarily due to market
conditions.
Allstate Financial statutory premiums and deposits for the first six months of 2001
were $5.80 billion, revenues were $2.43 billion, operating income was $246
million, realized capital losses were $87 million after-tax and net income was
$153 million. These totals compare to statutory premiums and deposits of $6.24
billion, revenues of $2.31 billion, operating income of $272 million, realized
capital losses of $40 million after-tax and net income of $232 million for the first
six months of 2000.
This press release contains a forward-looking statement about the steps Allstate
has taken to address adverse profitability trends in its non-standard auto
insurance business and the impact that those steps will have on written
premiums in the second half of 2001. The statement is subject to the Private
Securities Litigation Reform Act of 1995 and is based on management’s
estimates, assumptions and projections. While management believes that the
impact will begin to moderate in the second half of 2001, the negative impact
could continue at current rates or increase due to a variety of factors, including
unforeseen flaws in Allstate’s pricing model.
The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held
personal lines insurer. Widely known through the “You’re In Good Hands With
Allstate®” slogan, Allstate provides insurance products to more than 14 million
households and has approximately 13,000 exclusive agents in the U.S. and
Canada. Customers can access Allstate products and services through Allstate
agents, or in select states at allstate.com and 1-800-Allstate. Encompasssm and
Deerbrooksm Insurance brand property and casualty products are sold exclusively
through independent agents. Allstate Financial Group includes the businesses
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that provide life insurance, retirement and investment products, through Allstate
agents, workplace marketing, independent agents, banks and securities firms.
The Allstate Corporation prepares an interim investor supplement, containing
standard information that is not available at the time of the earnings release. A
supplement will be posted to the company’s website in approximately 10 days,
and can be accessed by going to the Allstate web site at allstate.com and
clicking on “About Allstate.” From there, go to the “Find Financial Information”
button.
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Summary of results for the quarter and six months ended June 30, 2001:
Consolidated Highlights
Quarter Ended
Six Months Ended
June 30
June 30
($ in millions, except per-share amounts)
Est.
Est.
2001 2000 Change
2001
2000
Change
$
$
%
$
$
%
Consolidated Revenues
7,203 7,183
0.3 14,334 14,469
(0.9)
Operating Income Before Restructuring
Charges
233
435
(46.4)
790
916
(13.8)
Operating Income Per Share (Diluted)
Before Restructuring Charges
.32
.59
(45.8)
1.08
1.21
(10.7)
Restructuring Charges After-tax
3
3
-8
21
(61.9)
Operating Income
230
432
(46.8)
782
895
(12.6)
Operating Income Per Share (Diluted)
.31
.58
(46.6)
1.07
1.18
(9.3)
Realized Capital (Losses) Gains After-tax
(47)
38
-(80)
147
(154.4)
Loss on Disposition of Operations
(6)
--(6)
--Dividends on Preferred Securities of
Subsidiary Trusts
(9)
(11)
(18.2)
(19)
(22)
(13.6)
Cumulative Effect of a Change in
Accounting Principle, After-tax
---(9)
--Net Income
168
459
(63.4)
668
1,020
(34.5)
Net Income per share (Diluted)
.23
.61
(62.3)
.91
1.34
(32.1)
Weighted Average Shares Outstanding
(Diluted)
728.5 747.8
(2.6)
729.4
760.0
(4.0)


For the second quarter of 2001, consolidated revenues were $7.20 billion,
compared to $7.18 billion in the second quarter of 2000. This increase was
due to increased investment income and Allstate Financial premiums and
contract charges offset by realized capital losses in the second quarter of
2001 as compared to realized capital gains in the second quarter of 2000.
Consolidated operating income was $230 million for the second quarter of
2001, or $.31 per share on a diluted basis, compared to prior year second
quarter operating income of $432 million, or $.58 per diluted share.
Property-Liability written premiums totaled $5.73 billion during the second
quarter of 2001 versus $5.58 billion during the same period in 2000.
Excluding the impacts of Encompass Insurance, which continues to pursue
profit improvement actions, Property-Liability written premiums totaled $5.25
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



billion during the second quarter of 2001, an increase from $5.08 billion
during the same period of 2000. This increase is due to growth in Allstate’s
standard auto and homeowners business, partially offset by decreases in its
non-standard auto business resulting from planned profitability actions.
Through the first six months of 2001, standard auto rate changes have been
approved in 33 states with a projected average premium written increase in
those states of 2.7% on an annual basis, non-standard rate actions have
been approved in 27 states with a projected average premium written
increase in those states of 9.1% on an annual basis, and homeowners rate
changes have been approved in 25 states with a projected average premium
written increase in those states of 9.8% on an annual basis.
Although investment margins for Allstate Financial were better than those in
the second quarter of 2000, Allstate Financial operating income was $119
million compared to $145 million in the same period of 2000. The decrease
reflects the fact that operating income in the second quarter of 2000 was
affected by a non-cash pension curtailment and settlement credit and that in
the second quarter of 2001 Allstate Financial faced decreased margins on
fee-based products and increased operating expenses intended to support
the generation of future sales.
During the second quarter of 2001, Allstate disposed of its operations in the
Philippines and Indonesia. During the quarter the Company also announced
a definitive agreement to sell operations in Italy and Germany, which is
currently awaiting regulatory approval. These announcements reflect
Allstate’s intention to focus its efforts on business in North America.
During the second quarter of 2001, the company acquired approximately 1.89
million shares of its stock at a cost of $80 million as part of the current stock
repurchase program. The total cost of shares repurchased under this $2
billion program is $1.64 billion.
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Property-Liability Highlights
Quarter Ended
June 30
($ in millions, except ratios)
Est.
2001
2000
Change
$
$
%
Property-Liability Premiums Written
5,728
5,581
2.6
Property-Liability Revenues
5,918
6,062
(2.4)
Operating Income before Restructuring
Charges
135
314
(57.0)
Restructuring Charges After-tax
1
12
(91.7)
Operating Income
134
302
(55.6)
Realized Capital (Losses) Gains After-tax
(11)
91
(112.1)
Loss on Disposition of Operations
(6)
--Cumulative Effect of a Change in
Accounting Principle, After-tax
---Net Income
117
393
(70.2)
Catastrophes After-tax
349
239
46.0
Combined Ratio before impacts of
catastrophes and restructuring charges
96.5
93.9
2.6 pts
Impact of catastrophes
Impact of restructuring charges
Combined Ratio
Six Months Ended
June 30
Est.
2001
2000
Change
$
$
%
11,168
10,960
1.9
11,864
12,141
(2.3)
584
5
579
6
(6)
673
29
644
210
--
(13.2)
(82.8)
(10.1)
(97.1)
--
(3)
576
402
-854
487
-(32.6)
(17.5)
96.4
93.1
3.3 pts
9.8
--
6.7
0.3
3.1 pts
(0.3) pts
5.6
0.1
6.8
0.4
(1.2) pts
(0.3) pts
106.3
100.9
5.4 pts
102.1
100.3
1.8 pts
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Allstate Financial Highlights
Quarter Ended
June 30
Est.
2001
2000
Change
($ in millions)
$
$
%
Statutory Premiums and Deposits
2,936
3,233
(9.2)
Allstate Financial GAAP Revenues
1,266
1,110
14.1
Operating Income before
Restructuring Charges
121
136
(11.0)
Restructuring Charges after tax
2
(9)
(122.2)
Operating Income
119
145
(17.9)
Realized Capital (Losses)Gains
after-tax
(35)
(44)
(20.5)
Cumulative Effect of a Change in
Accounting Principle, After-tax
---Net Income
84
101
(16.8)
Investments including Separate
Accounts
58,618 52,479
11.7
Six Months Ended
June 30
Est.
2001
2000
Change
$
$
%
5,803
6,242
(7.0)
2,427
2,310
5.1
249
3
246
264
(8)
272
(5.7)
(137.5)
(9.6)
(87)
(40)
117.5
(6)
153
-232
-(34.1)
58,618
52,479
11.7