filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
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 Corporation annual report on Form 10-K for 2023, filed February 21, 2024.
Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection, Run-off Property-Liability, Protection Services and Allstate Health and 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.
Macroeconomic Impacts
Macroeconomic factors have and may continue to impact the results of our operations, financial condition and liquidity, such as U.S. government fiscal and monetary policies, the Russia/Ukraine and Israel/Hamas conflicts, supply chain disruptions and labor shortages.These factors should be considered when comparing the current period to prior periods. This 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 macroeconomic impacts on our 2024 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 capabilities.
Transformative Growth is about creating a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution methods. The ultimate objective is to enhance customer value to drive growth in all businesses.
In the personal property-liability businesses, this has five key components:
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Improving customer value
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Expanding customer access
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Increasing sophistication and investment in customer acquisition
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Deploying new technology ecosystem
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Driving organizational transformation
We are expanding protection services businesses utilizing enterprise capabilities and resources such as the Allstate brand, distribution, analytics, claims, investment expertise, talent and capital.
Disposition
On August 13, 2024, we entered into a share purchase agreement with StanCorp Financial Group, Inc. to sell American Heritage Life Insurance Company and American Heritage Service Company, comprising our employer voluntary benefits business for approximately $2.0 billion in cash. The employer voluntary benefits business is reported in the Allstate Health and Benefits segment, and as of September 30, 2024, the assets and liabilities of the business are classified as held for sale. The transaction price less costs to sell exceeds the carrying value of net assets related to this transaction, resulting in an expected gain that will be recognized at closing of the transaction. The ultimate amount of the anticipated gain on the sale will be impacted by purchase price adjustments associated with certain pre-close transactions, changes in the carrying value of net assets, changes in accumulated other comprehensive income and the related tax effects.
The transaction is expected to close in the first half of 2025, subject to regulatory approvals and other customary closing conditions. We continue to pursue the sale of the group health and individual health businesses but have not completed the sale process. Once the criteria for these businesses to be classified as held for sale is met, the entire Health and Benefits segment will be reported in discontinued operations.
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 Health and Benefits and Corporate and Other segments. We use these measures in our evaluation of results of operations to analyze profitability.
Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), 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”).
Adjusted net income is net income (loss) applicable to common shareholders, excluding:
| • | Net gains and losses on investments and derivatives | ||||
| • | Pension and other postretirement remeasurement gains and losses | ||||
| • | Amortization or impairment of purchased intangibles | ||||
| • | Gain or loss on disposition | ||||
| • | 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 |
Highlights
| Q1 | Q2 | Q3 |
| Consolidated net income (loss) applicable to common shareholders | ||||||||||||||
| ($ in millions) | ||||||||||||||
| Consolidated net income applicable to common shareholders was $1.16 billion and $2.65 billion in the third quarter and first nine months of 2024, respectively, compared to a loss of $41 million and $1.78 billion in the third quarter and first nine months of 2023, respectively, primarily due to improved underwriting results from increased earned premium and improved loss trends. For the twelve months ended September 30, 2024, return on Allstate common shareholders’ equity was 26.1%. | ||
| Total revenues | ||||||||||||||
| ($ in millions) |
| Total revenues increased 14.7% to $16.63 billion and increased 12.6% to $47.60 billion in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023 due to premium rate increases and higher realized capital gains on investments compared to the prior year. |
| Net investment income | ||||||||||||||
| ($ in millions) |
| Net investment income increased $94 million to $783 million in the third quarter of 2024 primarily due to higher market-based investment results, partially offset by lower performance-based investment results. Net investment income increased $385 million to $2.26 billion in the first nine months of 2024 compared to the same period of 2023, primarily due to higher market-based investment results. Market-based results continue to benefit from portfolio repositioning into higher yielding fixed income securities and higher investment balances. |
Third Quarter 2024 Form 10-Q 47
Financial highlights
Investments totaled $73.60 billion as of September 30, 2024, increasing from $66.68 billion as of December 31, 2023.
Allstate shareholders’ equity was $20.88 billion as of September 30, 2024, increasing from $17.77 billion as of December 31, 2023, primarily due to net income and unrealized net capital gains, partially offset by dividends to shareholders.
Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common
shares outstanding) was $70.35, an increase of 47.2% from $47.79 as of September 30, 2023, and an increase of 18.5% from $59.39 as of December 31, 2023.
Return on average Allstate common shareholders’ equity for the twelve months ended September 30, 2024 was 26.1%, an increase of 40.8 points from (14.7)% for the twelve months ended September 30, 2023. The increase was primarily due to net income applicable to common shareholders for the trailing twelve-month period ending September 30, 2024 compared to a net loss for the twelve-month period ending September 30, 2023.
Summarized consolidated financial results
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Property and casualty insurance premiums | $ | 14,333 | $ | 12,839 | $ | 41,797 | $ | 37,482 | ||||||||||||||||||
| Accident and health insurance premiums and contract charges | 487 | 463 | 1,439 | 1,379 | ||||||||||||||||||||||
| Other revenue | 781 | 592 | 2,129 | 1,750 | ||||||||||||||||||||||
| Net investment income | 783 | 689 | 2,259 | 1,874 | ||||||||||||||||||||||
| Net gains (losses) on investments and derivatives | 243 | (86) | (24) | (223) | ||||||||||||||||||||||
| Total revenues | 16,627 | 14,497 | 47,600 | 42,262 | ||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||
| Property and casualty insurance claims and claims expense | (10,409) | (10,237) | (30,711) | (32,290) | ||||||||||||||||||||||
| Accident, health and other policy benefits | (317) | (262) | (904) | (785) | ||||||||||||||||||||||
| Amortization of deferred policy acquisition costs | (2,037) | (1,841) | (5,977) | (5,374) | ||||||||||||||||||||||
| Operating, restructuring and interest expenses | (2,349) | (1,946) | (6,471) | (5,686) | ||||||||||||||||||||||
| Pension and other postretirement remeasurement gains (losses) | (26) | (149) | (15) | (56) | ||||||||||||||||||||||
| Amortization of purchased intangibles | (71) | (83) | (210) | (246) | ||||||||||||||||||||||
| Total costs and expenses | (15,209) | (14,518) | (44,288) | (44,437) | ||||||||||||||||||||||
| Income (loss) from operations before income tax expense | 1,418 | (21) | 3,312 | (2,175) | ||||||||||||||||||||||
| Income tax (expense) benefit | (254) | 17 | (603) | 475 | ||||||||||||||||||||||
| Net income (loss) | 1,164 | (4) | 2,709 | (1,700) | ||||||||||||||||||||||
| Less: Net (loss) income attributable to noncontrolling interest | (26) | 1 | (30) | (23) | ||||||||||||||||||||||
| Net income (loss) attributable to Allstate | 1,190 | (5) | 2,739 | (1,677) | ||||||||||||||||||||||
| Preferred stock dividends | (29) | (36) | (88) | (99) | ||||||||||||||||||||||
| Net income (loss) applicable to common shareholders | $ | 1,161 | $ | (41) | $ | 2,651 | $ | (1,776) |
Segment highlights
Allstate Protection underwriting income was $555 million in the third quarter of 2024 compared to an underwriting loss of $331 million in the third quarter of 2023 due to increased premiums earned and lower non-catastrophe losses, partially offset by higher catastrophe losses and advertising costs. Underwriting income totaled $1.32 billion in the first nine months of 2024 compared to an underwriting loss of $3.42 billion in the first nine months of 2023, primarily due to increased premiums earned and lower losses, partially offset by higher advertising costs. As auto profitability improves, we are increasing advertising, expanding customer access and delivering personalized affordable, simple and connected consumer offerings to support growth.
Catastrophe losses were $1.70 billion and $4.55 billion in the third quarter and first nine months of 2024, respectively, compared to $1.18 billion and $5.57 billion in the third quarter and first nine months of 2023, respectively.
Premiums written increased 10.5% to $14.71 billion and increased 11.8% to $42.17 billion in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023, reflecting higher premiums in both Allstate and National General brands.
Protection Services adjusted net income was $58 million in the third quarter of 2024 compared to $27 million in the third quarter of 2023, primarily due to revenue growth and improved claim frequency at Allstate Protection Plans. Adjusted net income was $167 million the first nine months of 2024 compared to $102 million in the first nine months of 2023, primarily due to growth at Allstate Protection Plans and improved claim severity at Allstate Roadside.
Premiums and other revenue increased 16.3% to $749 million and increased 13.6% to $2.16 billion in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023, primarily due to Allstate Protection Plans.
Allstate Health and Benefits adjusted net income was $37 million in the third quarter of 2024 compared to adjusted net income of $69 million in the third quarter of 2023, and adjusted net income was $151 million in the first nine months of 2024 compared to $182 million in the first nine months of 2023. The decline in adjusted net income from the third quarter of 2023 was primarily due to increased benefit utilization across all lines of business.
Premiums and contract charges increased 5.2% to $487 million in the third quarter of 2024 and increased 4.4% to $1.44 billion in the first nine months of 2024 compared to the same periods of 2023, primarily due to growth in individual health and group health, partially offset by a decline in employer voluntary benefits.
Third Quarter 2024 Form 10-Q 49
Property-Liability Operations
Property-Liability Operations
Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources.
We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.
GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows:
*•*Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates.
*•*Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, less other revenue to premiums earned.
*•*Combined ratio: the sum of the loss ratio and the expense ratio.
We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned:
*•*Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses included in claims and claims expense
*•*Effect of prior year reserve reestimates on combined ratio
*•*Effect of amortization of purchased intangibles on combined ratio
*•*Effect of restructuring and related charges on combined ratio
*•*Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment
Premium measures and statistics are used to analyze our premium trends and are calculated as follows:
*•*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. Commercial lines PIF counts for shared economy agreements reflected contracts that covered multiple rather than individual drivers. Lender-placed policies are excluded from policy counts because relationships are with the lenders.
*•*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 brand.
*•*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.
*•*Renewal ratio: renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners.
*•*Implemented rate changes: represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written.
Property-Liability Operations
| Underwriting results | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions, except ratios) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Premiums written | $ | 14,707 | $ | 13,304 | $ | 42,169 | $ | 37,707 | ||||||||||||||||||
| Premiums earned | $ | 13,694 | $ | 12,270 | $ | 39,933 | $ | 35,826 | ||||||||||||||||||
| Other revenue | 531 | 393 | 1,402 | 1,135 | ||||||||||||||||||||||
| Claims and claims expense | (10,249) | (10,077) | (30,247) | (31,832) | ||||||||||||||||||||||
| Amortization of DAC | (1,696) | (1,533) | (4,977) | (4,481) | ||||||||||||||||||||||
| Other costs and expenses | (1,710) | (1,333) | (4,664) | (3,861) | ||||||||||||||||||||||
| Restructuring and related charges (1) | (23) | (74) | (45) | (121) | ||||||||||||||||||||||
| Amortization of purchased intangibles | (52) | (60) | (154) | (175) | ||||||||||||||||||||||
| Underwriting income (loss) | $ | 495 | $ | (414) | $ | 1,248 | $ | (3,509) | ||||||||||||||||||
| Catastrophe losses | ||||||||||||||||||||||||||
| Catastrophe losses, excluding reserve reestimates | $ | 1,717 | $ | 1,164 | $ | 4,868 | $ | 5,562 | ||||||||||||||||||
| Catastrophe reserve reestimates (2) | (14) | 17 | (314) | 6 | ||||||||||||||||||||||
| Total catastrophe losses | $ | 1,703 | $ | 1,181 | $ | 4,554 | $ | 5,568 | ||||||||||||||||||
| Non-catastrophe reserve reestimates (2) | $ | 45 | $ | 166 | $ | (8) | $ | 375 | ||||||||||||||||||
| Prior year reserve reestimates (2) | 31 | 183 | (322) | 381 | ||||||||||||||||||||||
| GAAP operating ratios | ||||||||||||||||||||||||||
| Loss ratio | 74.9 | 82.2 | 75.8 | 88.9 | ||||||||||||||||||||||
| Expense ratio (3) | 21.5 | 21.2 | 21.1 | 20.9 | ||||||||||||||||||||||
| Combined ratio | 96.4 | 103.4 | 96.9 | 109.8 | ||||||||||||||||||||||
| Effect of catastrophe losses on combined ratio | 12.4 | 9.6 | 11.4 | 15.5 | ||||||||||||||||||||||
| Effect of prior year reserve reestimates on combined ratio | 0.3 | 1.5 | (0.8) | 1.1 | ||||||||||||||||||||||
| Effect of catastrophe losses included in prior year reserve reestimates on combined ratio | (0.1) | 0.1 | (0.8) | — | ||||||||||||||||||||||
| Effect of restructuring and related charges on combined ratio (1) | 0.1 | 0.6 | 0.1 | 0.3 | ||||||||||||||||||||||
| Effect of amortization of purchased intangibles on combined ratio | 0.4 | 0.5 | 0.4 | 0.5 | ||||||||||||||||||||||
| Effect of Run-off Property-Liability business on combined ratio | 0.5 | 0.7 | 0.2 | 0.3 |
(1)Restructuring and related charges for the third quarter and first nine months of 2024 primarily relate to the organizational transformation component of the Transformative Growth plan. See Note 14 of the condensed consolidated financial statements for additional details.
(2)Favorable reserve reestimates are shown in parentheses.
(3)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
Third Quarter 2024 Form 10-Q 51
Segment Results Allstate Protection
Allstate Protection Segment
| Underwriting results | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Premiums written | $ | 14,707 | $ | 13,304 | $ | 42,169 | $ | 37,707 | ||||||||||||||||||
| Premiums earned | $ | 13,694 | $ | 12,270 | $ | 39,933 | $ | 35,826 | ||||||||||||||||||
| Other revenue | 531 | 393 | 1,402 | 1,135 | ||||||||||||||||||||||
| Claims and claims expense | (10,190) | (9,995) | (30,182) | (31,747) | ||||||||||||||||||||||
| Amortization of DAC | (1,696) | (1,533) | (4,977) | (4,481) | ||||||||||||||||||||||
| Other costs and expenses | (1,709) | (1,332) | (4,661) | (3,858) | ||||||||||||||||||||||
| Restructuring and related charges | (23) | (74) | (45) | (121) | ||||||||||||||||||||||
| Amortization of purchased intangibles | (52) | (60) | (154) | (175) | ||||||||||||||||||||||
| Underwriting income (loss) | $ | 555 | $ | (331) | $ | 1,316 | $ | (3,421) | ||||||||||||||||||
| Catastrophe losses | $ | 1,703 | $ | 1,181 | $ | 4,554 | $ | 5,568 | ||||||||||||||||||
Underwriting income was $555 million in the third quarter of 2024 compared to underwriting loss of $331 million in the third quarter of 2023 due to increased premiums earned and lower non-catastrophe losses, partially offset by higher catastrophe losses and advertising costs. Underwriting income was $1.32 billion in the first nine months of 2024 compared to underwriting loss of $3.42 billion in the first nine months of 2023 due to increased premiums earned and lower losses, partially offset by higher advertising costs. As auto profitability improves, we are increasing advertising, expanding customer access and delivering personalized affordable, simple and connected consumer offerings to support growth.
| Change in underwriting results from prior year period - three months ended | ||||||||||||||
| ($ in millions) |
| Change in underwriting results from prior year period - nine months ended | ||||||||||||||
| ($ in millions) |
Allstate Protection Segment Results
| Underwriting income (loss) by line of business | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Auto | $ | 486 | $ | (178) | $ | 1,207 | $ | (1,202) | ||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 60 | (131) | 249 | (1,972) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | (18) | 6 | (66) | (153) | ||||||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | (16) | (60) | (224) | (181) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other business lines (1) | 40 | 28 | 140 | 78 | ||||||||||||||||||||||||||||||||||||||||||||||
| Answer Financial | 3 | 4 | 10 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 555 | $ | (331) | $ | 1,316 | $ | (3,421) | ||||||||||||||||||||||||||||||||||||||||||
(1)Other business lines represents commissions earned and other costs and expenses for Ivantage, non-proprietary life and annuity products, and lender-placed products.
Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a reporting period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position.
| Premiums written by line of business | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Auto | $ | 9,539 | $ | 8,770 | $ | 28,180 | $ | 25,388 | ||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 4,073 | 3,525 | 10,792 | 9,440 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | 817 | 676 | 2,322 | 1,899 | ||||||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | 104 | 140 | 411 | 567 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other business lines | 174 | 193 | 464 | 413 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total premiums written | $ | 14,707 | $ | 13,304 | $ | 42,169 | $ | 37,707 | ||||||||||||||||||||||||||||||||||||||||||
| Premiums earned by line of business | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Auto | $ | 9,270 | $ | 8,345 | $ | 27,127 | $ | 24,374 | ||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 3,403 | 2,969 | 9,812 | 8,662 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | 718 | 608 | 2,078 | 1,757 | ||||||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | 151 | 194 | 478 | 628 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other business lines | 152 | 154 | 438 | 405 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total premiums earned | $ | 13,694 | $ | 12,270 | $ | 39,933 | $ | 35,826 | ||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of premiums written to premiums earned | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Total premiums written | $ | 14,707 | $ | 13,304 | $ | 42,169 | $ | 37,707 | ||||||||||||||||||
| (Increase) decrease in unearned premiums | (1,075) | (1,082) | (2,233) | (1,962) | ||||||||||||||||||||||
| Other | 62 | 48 | (3) | 81 | ||||||||||||||||||||||
| Total premiums earned | $ | 13,694 | $ | 12,270 | $ | 39,933 | $ | 35,826 |
| Policies in force by line of business | ||||||||||||||||||||||||||||||||||||||
| As of September 30, | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Auto | 24,998 | 25,376 | ||||||||||||||||||||||||||||||||||||
| Homeowners | 7,483 | 7,297 | ||||||||||||||||||||||||||||||||||||
| Other personal lines | 4,877 | 4,884 | ||||||||||||||||||||||||||||||||||||
| Commercial lines | 238 | 296 | ||||||||||||||||||||||||||||||||||||
| Total | 37,596 | 37,853 |
Third Quarter 2024 Form 10-Q 53
Segment Results Allstate Protection
Auto insurance premiums written increased 8.8% or $769 million in the third quarter of 2024 compared to the third quarter of 2023 and 11.0% or $2.79 billion in the first nine months of 2024 compared to the first nine months of 2023, primarily due to the following factors:
- Increased average premiums driven by rate increases. In the nine months ended September 30, 2024:
–Rate increases of 9.1% were taken for Allstate brand in 49 locations, resulting in total estimated Allstate brand insurance premium impact of 6.3%
–Rate increases of 10.1% were taken for National General brand in 44 locations, resulting in total estimated National General brand insurance premium impact of 7.8%
- In 2024, we have removed underwriting restrictions in areas that represent the majority of Allstate brand countrywide premiums, which is expected to increase premiums written and PIF. In locations not
achieving acceptable returns, we expect to continue to pursue targeted rate increases for both Allstate and National General brands. In states where we are achieving acceptable returns, we plan to take rates that keep pace with increasing costs. See Note 8 for additional details on actions taken related to Adirondack Insurance Exchange and New Jersey Skylands Insurance Association
- PIF decreased 1.5% or 378 thousand to 24,998 thousand as of September 30, 2024 compared to September 30, 2023
*•*Renewal ratio for Allstate brand decreased 0.2 points and increased 0.1 point in the third quarter and the first nine months of 2024, respectively, compared to the third quarter and first nine months of 2023
- Increased new issued applications in all channels
| Auto premium measures and statistics | ||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||||||||||||||||||||||||
| New issued applications (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Allstate Protection by channel | ||||||||||||||||||||||||||||||||||||||
| Exclusive agency channel | 675 | 582 | 16.0 | % | 1,908 | 1,745 | 9.3 | % | ||||||||||||||||||||||||||||||
| Direct channel | 620 | 398 | 55.8 | 1,668 | 1,276 | 30.7 | ||||||||||||||||||||||||||||||||
| Independent agency channel | 597 | 525 | 13.7 | 1,714 | 1,496 | 14.6 | ||||||||||||||||||||||||||||||||
| Total new issued applications | 1,892 | 1,505 | 25.7 | % | 5,290 | 4,517 | 17.1 | % | ||||||||||||||||||||||||||||||
| Allstate brand average premium | $ | 852 | $ | 772 | 10.4 | % | $ | 839 | $ | 745 | 12.6 | % | ||||||||||||||||||||||||||
| Allstate brand renewal ratio (%) | 84.7 | 84.9 | (0.2) | 85.5 | 85.4 | 0.1 |
Homeowners insurance premiums written increased 15.5% or $548 million in the third quarter of 2024 compared to the third quarter of 2023 and increased 14.3% or $1.35 billion in the first nine months of 2024 compared to the first nine months of 2023, primarily due to the following factors:
-
Higher Allstate brand average premiums from implemented rate increases, combined with policies in force growth
-
In the nine months ended September 30, 2024, rate increases of 14.0% were taken for Allstate brand in 34 locations, resulting in total estimated Allstate brand insurance premium impact of 7.6%
-
In the nine months ended September 30, 2024, rate increases of 14.5% were taken for National General brand in 30 locations, resulting in total estimated National General brand insurance premium impact of 6.1%
-
Increased new issued applications in the exclusive agency and direct channels
-
Renewal ratio for Allstate brand increased 0.4 points and 0.7 points in the third quarter and the
first nine months of 2024, respectively, compared to the third quarter and first nine months of 2023
Policy growth is being reduced in states and lines of business that are underperforming. We are no longer writing new homeowners business in California, New Jersey and Florida, and are non-renewing certain policies in Florida. We may not be able to grow in certain states without regulatory or legislative reforms that enable customers to be provided coverage at appropriate risk adjusted returns.
National General policy growth may be negatively impacted to improve underwriting margins to targeted levels through underwriting and rate actions. See Note 8 for additional details on actions taken related to Adirondack Insurance Exchange and New Jersey Skylands Insurance Association.
Allstate Protection Segment Results
| Homeowners premium measures and statistics | ||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||||||||||||||||||||||||
| New issued applications (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Allstate Protection by channel | ||||||||||||||||||||||||||||||||||||||
| Exclusive agency channel | 260 | 211 | 23.2 | % | 719 | 609 | 18.1 | % | ||||||||||||||||||||||||||||||
| Direct channel | 39 | 22 | 77.3 | 96 | 60 | 60.0 | ||||||||||||||||||||||||||||||||
| Independent agency channel | 63 | 69 | (8.7) | 172 | 178 | (3.4) | ||||||||||||||||||||||||||||||||
| Total new issued applications | 362 | 302 | 19.9 | % | 987 | 847 | 16.5 | % | ||||||||||||||||||||||||||||||
| Allstate brand average premium | $ | 2,050 | $ | 1,851 | 10.8 | % | $ | 1,991 | $ | 1,792 | 11.1 | % | ||||||||||||||||||||||||||
| Allstate brand renewal ratio (%) | 87.2 | 86.8 | 0.4 | 87.2 | 86.5 | 0.7 | ||||||||||||||||||||||||||||||||
Other personal lines premiums written increased 20.9% or $141 million in the third quarter of 2024 compared to the third quarter of 2023 and increased 22.3% or $423 million in the first nine months of 2024 compared to the first nine months of 2023 primarily due to increases in involuntary auto policies purchased from other carriers by National General and landlords policies for Allstate brand. We are no longer writing new condominium business in California and Florida, and we are non-renewing certain policies in Florida, which may negatively impact premiums.
Commercial lines premiums written decreased 25.7% or $36 million in the third quarter of 2024 compared to the third quarter of 2023 and decreased 27.5% or $156 million in the first nine months of 2024 compared to the first nine months of 2023 primarily due to the strategic decision for the Allstate brand to stop writing new business and non-renew certain policies. We are committed to offering comprehensive
commercial products to customers through our exclusive agency, independent agency and direct channels, with solutions offered by the National General brand, NEXT Insurance and other brokered solutions.
Other business lines premiums written decreased 9.8% or $19 million in the third quarter of 2024 compared to the third quarter of 2023 primarily driven by the loss of certain direct lender clients. Other business lines premiums written increased 12.3% or $51 million in the first nine months of 2024 compared to the first nine months of 2023 due to growth in business placed by agents.
GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs.
| Combined ratios by line of business | ||||||||||||||||||||||||||||||||||||||
| Loss ratio | Expense ratio (2) | Combined ratio | ||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Three months ended September 30, | ||||||||||||||||||||||||||||||||||||||
| Auto | 71.9 | 81.4 | 22.9 | 20.7 | 94.8 | 102.1 | ||||||||||||||||||||||||||||||||
| Homeowners | 76.3 | 82.4 | 21.9 | 22.0 | 98.2 | 104.4 | ||||||||||||||||||||||||||||||||
| Other personal lines (1) | 96.2 | 78.6 | 6.3 | 20.4 | 102.5 | 99.0 | ||||||||||||||||||||||||||||||||
| Commercial lines | 84.8 | 102.0 | 25.8 | 28.9 | 110.6 | 130.9 | ||||||||||||||||||||||||||||||||
| Other business lines | 72.4 | 49.3 | 1.3 | (3) | 32.5 | 73.7 | 81.8 | |||||||||||||||||||||||||||||||
| Total | 74.4 | 81.5 | 21.5 | 21.2 | 95.9 | 102.7 | ||||||||||||||||||||||||||||||||
| Impact of amortization of purchased intangibles | 0.4 | 0.5 | 0.4 | 0.5 | ||||||||||||||||||||||||||||||||||
| Impact of restructuring and related charges | 0.1 | 0.6 | 0.1 | 0.6 | ||||||||||||||||||||||||||||||||||
| Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||
| Auto | 73.8 | 84.2 | 21.8 | 20.7 | 95.6 | 104.9 | ||||||||||||||||||||||||||||||||
| Homeowners | 75.9 | 101.8 | 21.6 | 21.0 | 97.5 | 122.8 | ||||||||||||||||||||||||||||||||
| Other personal lines (1) | 91.5 | 88.4 | 11.7 | 20.3 | 103.2 | 108.7 | ||||||||||||||||||||||||||||||||
| Commercial lines | 120.1 | 103.2 | 26.8 | 25.6 | 146.9 | 128.8 | ||||||||||||||||||||||||||||||||
| Other business lines | 55.7 | 48.1 | 12.3 | 32.6 | 68.0 | 80.7 | ||||||||||||||||||||||||||||||||
| Total | 75.6 | 88.6 | 21.1 | 20.9 | 96.7 | 109.5 | ||||||||||||||||||||||||||||||||
| Impact of amortization of purchased intangibles | 0.4 | 0.5 | 0.4 | 0.5 | ||||||||||||||||||||||||||||||||||
| Impact of restructuring and related charges | 0.1 | 0.3 | 0.1 | 0.3 |
(1)Expense ratio includes other revenue of $97 million and $161 million for the three and nine months ended September 30, 2024, respectively, compared to $16 million and $33 million for the three and nine months ended September 30, 2023, respectively, for fees on involuntary auto policies.
(2)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
(3)Includes anticipated return commissions on lender-placed business due to increased losses.
Third Quarter 2024 Form 10-Q 55
Segment Results Allstate Protection
| Loss ratios by line of business | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss ratio | Effect of catastrophe losses (1) | Effect of prior year reserve reestimates | Effect of catastrophe losses included in prior year reserve reestimates | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | 71.9 | 81.4 | 3.0 | 2.6 | (0.7) | 0.4 | (0.1) | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 76.3 | 82.4 | 36.2 | 29.6 | (0.4) | 2.1 | — | 0.6 | ||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | 96.2 | 78.6 | 23.8 | 9.7 | 7.1 | (2.3) | (0.4) | (1.8) | ||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | 84.8 | 102.0 | 5.3 | 5.2 | 0.7 | 9.8 | — | 3.1 | ||||||||||||||||||||||||||||||||||||||||||
| Other business lines | 72.4 | 49.3 | 9.2 | 13.0 | (1.9) | 0.7 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total | 74.4 | 81.5 | 12.4 | 9.6 | (0.2) | 0.8 | (0.1) | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | 73.8 | 84.2 | 2.7 | 2.7 | (1.1) | 0.4 | (0.1) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 75.9 | 101.8 | 34.7 | 52.1 | (3.9) | 1.6 | (2.8) | 0.7 | ||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | 91.5 | 88.4 | 17.0 | 19.1 | 7.9 | (0.5) | (0.3) | (1.3) | ||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | 120.1 | 103.2 | 2.9 | 4.3 | 33.3 | 8.1 | (1.0) | 1.4 | ||||||||||||||||||||||||||||||||||||||||||
| Other business lines | 55.7 | 48.1 | 9.8 | 9.4 | 0.2 | 2.9 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total | 75.6 | 88.6 | 11.4 | 15.5 | (1.0) | 0.8 | (0.8) | — |
(1)The ten-year average effect of catastrophe losses on the total combined ratio was 9.0 points and 9.9 points in the third quarter and first nine months of 2024, respectively.
| Auto underwriting quarterly results | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, except ratios) | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Underwriting income (loss) | $ | 486 | $ | 370 | $ | 351 | $ | 93 | $ | (178) | $ | (678) | $ | (346) | $ | (974) | $ | (1,315) | $ | (578) | $ | (147) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss ratio | 71.9 | 74.2 | 75.4 | 78.5 | 81.4 | 87.9 | 83.4 | 90.6 | 95.3 | 84.9 | 77.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of prior year non-catastrophe reserve reestimates on combined ratio | (0.6) | (1.9) | (0.7) | 1.7 | 0.3 | 1.4 | (0.1) | 2.3 | 8.5 | 3.8 | 2.1 |
Frequency and severity are influenced by:
-
Supply chain disruptions and labor shortages
-
Mix of repairable losses and total losses
-
Value of total losses due to changes in used car prices
-
Changes in medical inflation and consumption
-
Number of claims with attorney representation
-
Labor and part cost increases
-
Changes in commuting activity
-
Driving behavior (e.g., speed, time of day) impacting severity and mix of claim types
-
Organizational and process changes impacting claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods
The quarterly auto loss ratio has been more variable due to these and additional factors discussed below.
Auto loss ratio decreased 9.5 and 10.4 points in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023 driven by increased earned premiums and lower non-catastrophe losses. Estimated report year 2024 incurred claim severity for Allstate brand increased compared to report year 2023 for major coverages due to higher repair costs, a higher mix of total losses, an
increase in claims with attorney representation, higher medical consumption, and inflation. Gross claim frequency decreased relative to the prior year. We continue to enhance our claims practices to manage loss costs by increasing resources and expanding re-inspections, accelerating resolution of bodily injury claims, and negotiating improved vendor services and parts agreements.
Homeowners loss ratio decreased 6.1 points in the third quarter of 2024 compared to the same period of 2023 primarily due to increased premiums earned and lower non-catastrophe losses. Homeowners loss ratio decreased 25.9 points in the first nine months of 2024 compared to the same period of 2023 primarily due to lower losses and increased premiums earned.
Gross claim frequency decreased in the third quarter and first nine months of 2024 compared to the same periods of 2023 due to fewer claims reported related to water and wind/hail perils. Paid claim severity decreased in the third quarter of 2024 compared to the same period of 2023 due to lower losses from water and wind/hail perils. Paid claim severity increased in the first nine months of 2024 compared to the same period of 2023 due to inflationary loss cost pressure driven by increases in labor and materials costs. Homeowners paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter.
Allstate Protection Segment Results
Other personal lines loss ratio increased 17.6 and 3.1 points in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023 primarily due to higher losses and unfavorable reserve development, partially offset by increased premiums earned.
Commercial lines loss ratio decreased 17.2 points in the third quarter of 2024 compared to the same period of 2023, primarily due to lower non-catastrophe losses, partially offset by premiums earned decreasing as a result of the strategic decision for the Allstate brand to stop writing new business and non-renew certain policies. Commercial lines loss ratio increased 16.9 points in the first nine months of 2024 compared to the same period of 2023, primarily due to Allstate brand strategy changes and unfavorable reserve development related to the shared economy business, partially offset by lower non-catastrophe losses.
Other business lines loss ratio increased 23.1 and 7.6 points in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023, primarily due to higher losses.
Catastrophe losses increased $522 million to $1.70 billion in the third quarter of 2024 compared to the third quarter of 2023 due to larger losses per event, primarily from hurricanes, including $630 million related to Hurricane Helene and $220 million related to Hurricane Beryl. Catastrophe losses decreased $1.01 billion to $4.55 billion in the first nine months of 2024 compared to the first nine months of 2023, primarily due to lower losses per event for wind and hail events.
We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events
including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.
We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.
Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserving for hurricane losses is complicated by the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or specifically excluded coverage caused by flood, exposure to mold damage, and the effects of numerous other considerations, including the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe.
Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by managing policies in force, utilizing reinsurance and participating in various state facilities.
| Catastrophe losses by the type of event | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Number of events | 2024 | Number of events | 2023 | Number of events | 2024 | Number of events | 2023 | ||||||||||||||||||||||||||||||||||||||||||
| Hurricanes/tropical storms | 5 | $ | 953 | 3 | $ | 76 | 5 | $ | 953 | 3 | $ | 76 | ||||||||||||||||||||||||||||||||||||||
| Tornadoes | — | — | — | — | 1 | 57 | 3 | 133 | ||||||||||||||||||||||||||||||||||||||||||
| Wind/hail | 39 | 666 | 48 | 997 | 98 | 3,638 | 111 | 5,009 | ||||||||||||||||||||||||||||||||||||||||||
| Wildfires | 5 | 25 | 2 | 305 | 8 | 54 | 4 | 340 | ||||||||||||||||||||||||||||||||||||||||||
| Freeze/other events | 1 | 3 | — | — | 2 | 166 | 2 | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Prior year reserve reestimates | (14) | 17 | (314) | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
| Prior quarter reserve reestimates | 70 | (214) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total catastrophe losses | 50 | $ | 1,703 | 53 | $ | 1,181 | 114 | $ | 4,554 | 123 | $ | 5,568 |
Catastrophe reinsurance The catastrophe reinsurance program is part of our catastrophe management strategy, which is intended to provide our shareholders with an acceptable return on the risks assumed in our personal lines business, reduce earnings variability, and provide protection to our customers. Our current catastrophe reinsurance program supports our risk and return framework which
incorporates our robust economic capital model and is informed by catastrophe risk models including hurricanes, earthquakes and wildfires and adjusts based on premium and insured value growth. As of September 30, 2024, the modeled 1-in-100 probable maximum loss for hurricane, wildfire and earthquake perils is approximately $2.9 billion, net of reinsurance. We continually review our aggregate risk appetite and
Third Quarter 2024 Form 10-Q 57
Segment Results Allstate Protection
the cost and availability of reinsurance to optimize the risk and return profile of this exposure.
The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2024 was $298 million and $880 million, respectively, compared to $268 million and $729 million in the third quarter and first nine months of 2023, respectively. Catastrophe placement premiums reduce net written and earned premium with approximately 80% of the reduction related to homeowners premium.
Prior year reserve reestimates Favorable reserve reestimates, including catastrophes, were $28 million
in the third quarter of 2024 primarily due to favorable reserve reestimates in personal auto lines and homeowners lines, partially offset by unfavorable reserve reestimates in other personal lines. Favorable reserve reestimates, including catastrophes, were $387 million in the first nine months of 2024 primarily due to favorable reserve reestimates in homeowners and personal auto lines, partially offset by unfavorable reserve reestimates in other personal lines and commercial lines.
For a more detailed discussion on reinsurance and reserve reestimates, see Note 9 of the condensed consolidated financial statements.
| Prior year reserve reestimates | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| Prior year reserve reestimates (1) | Effect on combined ratio (2) | Prior year reserve reestimates (1) | Effect on combined ratio (2) | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, except ratios) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||
| Auto | $ | (65) | $ | 33 | (0.5) | 0.3 | $ | (319) | $ | 105 | (0.8) | 0.3 | ||||||||||||||||||||||||||||||||||||||
| Homeowners | (12) | 62 | (0.1) | 0.5 | (392) | 136 | (1.0) | 0.4 | ||||||||||||||||||||||||||||||||||||||||||
| Other personal lines | 51 | (14) | 0.4 | (0.1) | 164 | (8) | 0.4 | — | ||||||||||||||||||||||||||||||||||||||||||
| Commercial lines | 1 | 19 | — | 0.1 | 159 | 51 | 0.4 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Other business lines | (3) | 1 | — | — | 1 | 12 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total Allstate Protection | $ | (28) | $ | 101 | (0.2) | 0.8 | $ | (387) | $ | 296 | (1.0) | 0.8 | ||||||||||||||||||||||||||||||||||||||
(1)Favorable reserve reestimates are shown in parentheses.
(2)Ratios are calculated using Allstate Protection premiums earned.
Expense ratio increased 0.3 points and 0.2 points in the third quarter and first nine months of 2024, respectively, compared to the third quarter and first nine months of 2023, primarily due to an increase in advertising costs, partially offset by higher earned premium growth relative to fixed costs.
| Impact of specific costs and expenses on the expense ratio | ||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||
| ($ in millions, except ratios) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||||
| Amortization of DAC | $ | 1,696 | $ | 1,533 | $ | 163 | $ | 4,977 | $ | 4,481 | $ | 496 | ||||||||||||||||||||||||||
| Advertising expense | 519 | 175 | 344 | 1,204 | 446 | 758 | ||||||||||||||||||||||||||||||||
| Other costs and expenses, net of other revenue | 659 | 764 | (105) | 2,055 | 2,277 | (222) | ||||||||||||||||||||||||||||||||
| Amortization of purchased intangibles | 52 | 60 | (8) | 154 | 175 | (21) | ||||||||||||||||||||||||||||||||
| Restructuring and related charges | 23 | 74 | (51) | 45 | 121 | (76) | ||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,949 | $ | 2,606 | $ | 343 | $ | 8,435 | $ | 7,500 | $ | 935 | ||||||||||||||||||||||||||
| Premiums earned | $ | 13,694 | $ | 12,270 | $ | 1,424 | $ | 39,933 | $ | 35,826 | $ | 4,107 | ||||||||||||||||||||||||||
| Expense ratio | ||||||||||||||||||||||||||||||||||||||
| Amortization of DAC | 12.4 | 12.5 | (0.1) | 12.5 | 12.5 | — | ||||||||||||||||||||||||||||||||
| Advertising expense | 3.8 | 1.4 | 2.4 | 3.0 | 1.2 | 1.8 | ||||||||||||||||||||||||||||||||
| Other costs and expenses, net of other revenue | 4.8 | 6.2 | (1.4) | 5.1 | 6.4 | (1.3) | ||||||||||||||||||||||||||||||||
| Subtotal | 21.0 | 20.1 | 0.9 | 20.6 | 20.1 | 0.5 | ||||||||||||||||||||||||||||||||
| Amortization of purchased intangibles | 0.4 | 0.5 | (0.1) | 0.4 | 0.5 | (0.1) | ||||||||||||||||||||||||||||||||
| Restructuring and related charges | 0.1 | 0.6 | (0.5) | 0.1 | 0.3 | (0.2) | ||||||||||||||||||||||||||||||||
| Total expense ratio | 21.5 | 21.2 | 0.3 | 21.1 | 20.9 | 0.2 |
Run-off Property-Liability Segment Results
Run-off Property-Liability Segment
| Underwriting results | ||||||||||||||||||||||||||
| ($ in millions) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Claims and claims expense | ||||||||||||||||||||||||||
| Asbestos claims | $ | (19) | $ | (44) | $ | (19) | $ | (44) | ||||||||||||||||||
| Environmental claims | (10) | (18) | (10) | (18) | ||||||||||||||||||||||
| Other run-off lines | (30) | (20) | (36) | (23) | ||||||||||||||||||||||
| Total claims and claims expense | (59) | (82) | (65) | (85) | ||||||||||||||||||||||
| Operating costs and expenses | (1) | (1) | (3) | (3) | ||||||||||||||||||||||
| Underwriting income (loss) | $ | (60) | $ | (83) | $ | (68) | $ | (88) |
Annual reserve review In the third quarter of 2024 and 2023, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $58 million and $80 million in 2024 and 2023, respectively. The reserve reestimates are included as part of claims and claims expense.
The reserve reestimates in 2024 primarily related to new reported information for asbestos related claims and adverse developments within the other run-off lines.
The reserve reestimates in 2023 primarily related to new reported information and defense costs for asbestos related claims and other run-off exposures
and higher than expected environmental reported losses.
We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.
| Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance | ||||||||||||||
| ($ in millions) | September 30, 2024 | December 31, 2023 | ||||||||||||
| Asbestos claims | ||||||||||||||
| Gross reserves | $ | 1,145 | $ | 1,166 | ||||||||||
| Reinsurance | (356) | (362) | ||||||||||||
| Net reserves | 789 | 804 | ||||||||||||
| Environmental claims | ||||||||||||||
| Gross reserves | 326 | 331 | ||||||||||||
| Reinsurance | (61) | (64) | ||||||||||||
| Net reserves | 265 | 267 | ||||||||||||
| Other run-off claims | ||||||||||||||
| Gross reserves | 447 | 445 | ||||||||||||
| Reinsurance | (62) | (72) | ||||||||||||
| Net reserves | 385 | 373 | ||||||||||||
| Total | ||||||||||||||
| Gross reserves | 1,918 | 1,942 | ||||||||||||
| Reinsurance | (479) | (498) | ||||||||||||
| Net reserves | $ | 1,439 | $ | 1,444 |
Third Quarter 2024 Form 10-Q 59
Segment Results Run-off Property-Liability
| Reserves by type of exposure before and after the effects of reinsurance | ||||||||||||||
| ($ in millions) | September 30, 2024 | December 31, 2023 | ||||||||||||
| Direct excess commercial insurance | ||||||||||||||
| Gross reserves | $ | 1,098 | $ | 1,114 | ||||||||||
| Reinsurance | (368) | (382) | ||||||||||||
| Net reserves | 730 | 732 | ||||||||||||
| Assumed reinsurance coverage | ||||||||||||||
| Gross reserves | 592 | 603 | ||||||||||||
| Reinsurance | (54) | (54) | ||||||||||||
| Net reserves | 538 | 549 | ||||||||||||
| Direct primary commercial insurance | ||||||||||||||
| Gross reserves | 140 | 140 | ||||||||||||
| Reinsurance | (56) | (61) | ||||||||||||
| Net reserves | 84 | 79 | ||||||||||||
| Other run-off business | ||||||||||||||
| Gross reserves | — | 1 | ||||||||||||
| Reinsurance | — | — | ||||||||||||
| Net reserves | — | 1 | ||||||||||||
| Unallocated loss adjustment expenses | ||||||||||||||
| Gross reserves | 88 | 84 | ||||||||||||
| Reinsurance | (1) | (1) | ||||||||||||
| Net reserves | 87 | 83 | ||||||||||||
| Total | ||||||||||||||
| Gross reserves | 1,918 | 1,942 | ||||||||||||
| Reinsurance | (479) | (498) | ||||||||||||
| Net reserves | $ | 1,439 | $ | 1,444 | ||||||||||
| Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”) | ||||||||||||||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Case | IBNR | Case | IBNR | |||||||||||||||||||||||
| Direct excess commercial insurance | ||||||||||||||||||||||||||
| Gross reserves (1) | 59 | % | 41 | % | 57 | % | 43 | % | ||||||||||||||||||
| Ceded (2) | 63 | 37 | 63 | 37 | ||||||||||||||||||||||
| Assumed reinsurance coverage | ||||||||||||||||||||||||||
| Gross reserves | 31 | 69 | 32 | 68 | ||||||||||||||||||||||
| Ceded | 41 | 59 | 43 | 57 | ||||||||||||||||||||||
| Direct primary commercial insurance | ||||||||||||||||||||||||||
| Gross reserves | 55 | 45 | 59 | 41 | ||||||||||||||||||||||
| Ceded | 86 | 14 | 83 | 17 |
(1)Approximately 66% and 68% of gross case reserves as of September 30, 2024 and December 31, 2023, respectively, are subject to settlement agreements.
(2)Approximately 73% and 72% of ceded case reserves as of September 30, 2024 and December 31, 2023, respectively, are subject to settlement agreements.
Run-off Property-Liability Segment Results
| Gross payments from case reserves by type of exposure | ||||||||||||||||||||||||||
| ($ in millions) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Direct excess commercial insurance | ||||||||||||||||||||||||||
| Gross (1) | $ | 19 | $ | 13 | $ | 51 | $ | 45 | ||||||||||||||||||
| Ceded (2) | (7) | (7) | (20) | (16) | ||||||||||||||||||||||
| Assumed reinsurance coverage | ||||||||||||||||||||||||||
| Gross | 6 | 6 | 33 | 25 | ||||||||||||||||||||||
| Ceded | 1 | — | (1) | (3) | ||||||||||||||||||||||
| Direct primary commercial insurance | ||||||||||||||||||||||||||
| Gross | 1 | 1 | 4 | 3 | ||||||||||||||||||||||
| Ceded | (1) | — | (2) | — | ||||||||||||||||||||||
(1)In the third quarter and first nine months of 2024, 94% and 89% of payments related to settlement agreements, respectively, compared to 82% and 84% of the third quarter and first nine months of 2023, respectively.
(2)In the third quarter and first nine months of 2024, 98% and 95% of payments related to settlement agreements, respectively, compared to 56% and 77% of the third quarter and first nine months of 2023, respectively.
Total net reserves as of September 30, 2024, included $748 million or 52% of estimated IBNR reserves compared to $762 million or 53% of estimated IBNR reserves as of December 31, 2023.
Total gross payments were $26 million and $88 million for the third quarter and first nine months of 2024, respectively, compared to $20 million and $73 million for the third quarter and first nine months of 2023, respectively. Payments primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $5 million and $31 million for the third quarter and first nine months of 2024, respectively, compared to $6 million and $30 million for the third quarter and first nine months of 2023, respectively.
Third Quarter 2024 Form 10-Q 61
Segment Results Protection Services
Protection Services Segment
| Summarized financial information | ||||||||||||||||||||||||||
| ($ in millions) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Premiums written | $ | 678 | $ | 658 | $ | 1,981 | $ | 1,935 | ||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Premiums | $ | 639 | $ | 569 | $ | 1,864 | $ | 1,656 | ||||||||||||||||||
| Other revenue | 110 | 75 | 293 | 243 | ||||||||||||||||||||||
| Intersegment insurance premiums and service fees (1) | 49 | 34 | 123 | 102 | ||||||||||||||||||||||
| Net investment income | 24 | 19 | 68 | 53 | ||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||
| Claims and claims expense | (166) | (166) | (481) | (472) | ||||||||||||||||||||||
| Amortization of DAC | (304) | (269) | (889) | (779) | ||||||||||||||||||||||
| Operating costs and expenses | (280) | (225) | (760) | (664) | ||||||||||||||||||||||
| Restructuring and related charges | — | (3) | (1) | (4) | ||||||||||||||||||||||
| Income tax expense on operations | (15) | (8) | (51) | (34) | ||||||||||||||||||||||
| Less: noncontrolling interest | (1) | (1) | (1) | (1) | ||||||||||||||||||||||
| Adjusted net income | $ | 58 | $ | 27 | $ | 167 | $ | 102 | ||||||||||||||||||
| Allstate Protection Plans | $ | 39 | $ | 20 | $ | 120 | $ | 79 | ||||||||||||||||||
| Allstate Dealer Services | 5 | 5 | 17 | 18 | ||||||||||||||||||||||
| Allstate Roadside | 10 | 7 | 29 | 17 | ||||||||||||||||||||||
| Arity | 1 | (6) | (5) | (13) | ||||||||||||||||||||||
| Allstate Identity Protection | 3 | 1 | 6 | 1 | ||||||||||||||||||||||
| Adjusted net income | $ | 58 | $ | 27 | $ | 167 | $ | 102 | ||||||||||||||||||
| Policies in force | ||||||||||||||||||||||||||
| Allstate Protection Plans | 156,818 | 140,648 | ||||||||||||||||||||||||
| Allstate Dealer Services | 3,703 | 3,813 | ||||||||||||||||||||||||
| Allstate Roadside | 670 | 554 | ||||||||||||||||||||||||
| Allstate Identity Protection | 2,538 | 2,965 | ||||||||||||||||||||||||
| Policies in force as of September 30 (in thousands) | 163,729 | 147,980 |
(1)Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements.
Premiums written increased 3.0% or $20 million in the third quarter of 2024 compared to the third quarter of 2023, primarily due to growth at Allstate Protection Plans, partially offset by lower sales at Allstate Roadside. Premiums written increased 2.4% or $46 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to growth at Allstate Protection Plans, partially offset by lower sales at Allstate Dealer Services and Allstate Roadside.
Adjusted net income increased 114.8% or $31 million in the third quarter of 2024 compared to the third quarter of 2023, primarily due to revenue growth and improved claim frequency at Allstate Protection Plans. Adjusted net income increased 63.7% or $65 million in the first nine months of 2024 compared to the same periods of 2023, due to growth at Allstate Protection Plans and improved claim severity at Allstate Roadside.
PIF increased 10.6% or 16 million as of September 30, 2024 compared to September 30, 2023 due to growth at Allstate Protection Plans.
Other revenue increased 46.7% or $35 million in the third quarter of 2024 and increased 20.6% or $50 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to higher revenue from increased customer advertising at Arity.
Intersegment premiums and service fees increased 44.1% or $15 million in the third quarter of 2024 due to increased advertising at Arity and increased 20.6% or $21 million in the first nine months of 2024 compared to the same periods of 2023, driven by increased advertising and higher software revenue at Arity.
Protection Services Segment Results
Claims and claims expense in the third quarter of 2024 were comparable to the third quarter of 2023. Claims and claims expense increased 1.9% or $9 million in the first nine months of 2024 compared to the same periods of 2023, primarily driven by growth at Allstate Protection Plans, partially offset by improved margins at Allstate Protection Plans due to lower frequency and lower claim severity at Allstate Roadside.
Amortization of DAC increased 13.0% or $35 million in the third quarter of 2024 and increased 14.1% or $110 million in the first nine months of 2024 compared to the same periods of 2023, driven by growth at Allstate Protection Plans.
Operating costs and expenses increased 24.4% or $55 million in the third quarter of 2024 and increased 14.5% or $96 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to growth at Arity and Allstate Protection Plans, partially offset by lower expenses at Allstate Roadside and Allstate Identity Protection.
Third Quarter 2024 Form 10-Q 63
Segment Results Allstate Health and Benefits
Allstate Health and Benefits Segment
On August 13, 2024, we entered into a share purchase agreement with StanCorp Financial Group, Inc. to sell American Heritage Life Insurance Company and American Heritage Service Company, comprising the Company’s employer voluntary benefits business, reported within this segment. The transaction is expected to close in the first half of 2025, subject to regulatory approvals and other customary closing conditions.
| Summarized financial information | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Accident and health insurance premiums and contract charges | $ | 487 | $ | 463 | $ | 1,439 | $ | 1,379 | ||||||||||||||||||
| Other revenue | 123 | 104 | 378 | 306 | ||||||||||||||||||||||
| Net investment income | 26 | 20 | 74 | 60 | ||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||
| Accident, health and other policy benefits | (317) | (262) | (904) | (785) | ||||||||||||||||||||||
| Amortization of DAC | (37) | (39) | (111) | (114) | ||||||||||||||||||||||
| Operating costs and expenses | (232) | (197) | (681) | (610) | ||||||||||||||||||||||
| Restructuring and related charges | (2) | (2) | (3) | (6) | ||||||||||||||||||||||
| Income tax expense on operations | (11) | (18) | (41) | (48) | ||||||||||||||||||||||
| Adjusted net income | $ | 37 | $ | 69 | $ | 151 | $ | 182 | ||||||||||||||||||
| Benefit ratio (1) | 63.4 | 54.9 | 61.1 | 55.1 | ||||||||||||||||||||||
| Employer voluntary benefits (2) | $ | 19 | $ | 28 | $ | 64 | $ | 76 | ||||||||||||||||||
| Group health and individual health (3) (4) | 18 | 41 | 87 | 106 | ||||||||||||||||||||||
| Adjusted net income | $ | 37 | $ | 69 | $ | 151 | $ | 182 | ||||||||||||||||||
| Policies in force | ||||||||||||||||||||||||||
| Employer voluntary benefits (2) | 3,556 | 3,710 | ||||||||||||||||||||||||
| Group health (3) | 140 | 134 | ||||||||||||||||||||||||
| Individual health (4) | 462 | 412 | ||||||||||||||||||||||||
| Policies in force as of September 30 (in thousands) | 4,158 | 4,256 |
(1)Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $8 million for both the three months ended September 30, 2024 and 2023, and $25 million for both the nine months ended September 30, 2024 and 2023, divided by premiums and contract charges.
(2)Employer voluntary benefits include supplemental life and health products offered through workplace enrollment.
(3)Group health includes health products and administrative services sold to employers.
(4)Individual health includes short-term medical and other health products sold directly to individuals.
Premiums and contract charges increased 5.2% or $24 million in the third quarter of 2024 and increased 4.4% or $60 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to growth in individual health and group health, partially offset by a decline in employer voluntary benefits.
Adjusted net income decreased $32 million and $31 million in the third quarter and first nine months of 2024, respectively, compared to the same periods of 2023, primarily due to increased benefit utilization across all lines of business.
| Premiums and contract charges by line of business | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Employer voluntary benefits | $ | 248 | $ | 253 | $ | 742 | $ | 753 | ||||||||||||||||||
| Group health | 120 | 111 | 358 | 328 | ||||||||||||||||||||||
| Individual health | 119 | 99 | 339 | 298 | ||||||||||||||||||||||
| Premiums and contract charges | $ | 487 | $ | 463 | $ | 1,439 | $ | 1,379 |
Allstate Health and Benefits Segment Results
Other revenue increased $19 million in the third quarter of 2024 and increased $72 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to an increase in individual health and group health administrative fees.
Accident, health and other policy benefits increased 21.0% or $55 million in the third quarter of 2024 and increased 15.2% or $119 million in the first nine months of 2024 compared to the same periods of 2023, primarily from higher benefit utilization in all businesses and growth in group health and individual health.
Accident, health and other policy benefits include changes in the reserve for future policy benefits,
expected development on reported claims, and reserves for incurred but not reported claims as shown in Note 10.
Benefit ratio increased 8.6 points to 63.4 in the third quarter of 2024 compared to 54.9 in the third quarter of 2023 and increased 6.0 points to 61.1 in the first nine months of 2024 compared to 55.1 in the same period of 2023, primarily due to higher claims experience across all lines of business.
Amortization of DAC decreased 5.1% or $2 million in the third quarter of 2024 and decreased 2.6% or $3 million in the first nine months of 2024 compared to the same periods of 2023.
| Operating costs and expenses | ||||||||||||||||||||
| ($ in millions) | Employer voluntary benefits | Group health and individual health | Total | |||||||||||||||||
| Three months ended September 30, 2024 | ||||||||||||||||||||
| Non-deferrable commissions | $ | 20 | $ | 60 | $ | 80 | ||||||||||||||
| Operating costs and expenses | 56 | 96 | 152 | |||||||||||||||||
| Total | $ | 76 | $ | 156 | $ | 232 | ||||||||||||||
| Nine months ended September 30, 2024 | ||||||||||||||||||||
| Non-deferrable commissions | $ | 64 | $ | 193 | $ | 257 | ||||||||||||||
| Operating costs and expenses | 158 | 266 | 424 | |||||||||||||||||
| Total | $ | 222 | $ | 459 | $ | 681 | ||||||||||||||
| Three months ended September 30, 2023 | ||||||||||||||||||||
| Non-deferrable commissions | $ | 19 | $ | 47 | $ | 66 | ||||||||||||||
| Operating costs and expenses | 51 | 80 | 131 | |||||||||||||||||
| Total | $ | 70 | $ | 127 | $ | 197 | ||||||||||||||
| Nine months ended September 30, 2023 | ||||||||||||||||||||
| Non-deferrable commissions | $ | 66 | $ | 157 | $ | 223 | ||||||||||||||
| Operating costs and expenses | 152 | 235 | 387 | |||||||||||||||||
| Total | $ | 218 | $ | 392 | $ | 610 |
Operating costs and expenses increased $35 million in the third quarter of 2024 and increased $71 million in the first nine months of 2024 compared to the same periods of 2023, primarily due to growth in individual and group health.
Third Quarter 2024 Form 10-Q 65
Investments
Investments
| Portfolio composition and strategy by reporting segment (1) | ||||||||||||||||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||||||||
| ($ in millions) | Property-Liability | Protection Services | Allstate Health and Benefits | Corporate and Other | Total | |||||||||||||||||||||||||||
| Fixed income securities (2) | $ | 50,414 | $ | 2,065 | $ | 359 | $ | 1,123 | $ | 53,961 | ||||||||||||||||||||||
| Equity securities (3) | 1,456 | 242 | — | 393 | 2,091 | |||||||||||||||||||||||||||
| Mortgage loans, net | 649 | — | 116 | — | 765 | |||||||||||||||||||||||||||
| Limited partnership interests | 8,915 | — | — | 10 | 8,925 | |||||||||||||||||||||||||||
| Short-term investments (4) | 5,959 | 160 | 21 | 854 | 6,994 | |||||||||||||||||||||||||||
| Other investments, net | 866 | — | — | — | 866 | |||||||||||||||||||||||||||
| Total | $ | 68,259 | $ | 2,467 | $ | 496 | $ | 2,380 | $ | 73,602 | ||||||||||||||||||||||
| Percent to total | 92.7 | % | 3.4 | % | 0.7 | % | 3.2 | % | 100.0 | % | ||||||||||||||||||||||
| Market-based | $ | 58,224 | $ | 2,467 | $ | 496 | $ | 2,108 | $ | 63,295 | ||||||||||||||||||||||
| Performance-based | 10,035 | — | — | 272 | 10,307 | |||||||||||||||||||||||||||
| Total | $ | 68,259 | $ | 2,467 | $ | 496 | $ | 2,380 | $ | 73,602 |
(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 $49.91 billion, $2.06 billion, $359 million, $1.12 billion and $53.45 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.
(3) Equity securities are carried at fair value. The fair value of equity securities held as of September 30, 2024, was $262 million in excess of cost. These net gains were primarily concentrated in the technology, equity index funds and banking sectors. Equity securities include $633 million of funds with underlying investments in fixed income securities as of September 30, 2024.
(4) Short-term investments are carried at fair value.
Investments totaled $73.60 billion as of September 30, 2024, increasing from $66.68 billion as of December 31, 2023, primarily due to positive operating cash flows and higher fixed income valuations.
Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change.
Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities.
Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, including infrastructure investments, and real estate with a majority being limited partnerships. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.
| Portfolio composition by investment strategy | ||||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||
| ($ in millions) | Market- based | Performance-based | Total | |||||||||||||||||
| Fixed income securities | $ | 53,840 | $ | 121 | $ | 53,961 | ||||||||||||||
| Equity securities | 1,400 | 691 | 2,091 | |||||||||||||||||
| Mortgage loans, net | 765 | — | 765 | |||||||||||||||||
| Limited partnership interests | 148 | 8,777 | 8,925 | |||||||||||||||||
| Short-term investments | 6,994 | — | 6,994 | |||||||||||||||||
| Other investments, net | 148 | 718 | 866 | |||||||||||||||||
| Total | $ | 63,295 | $ | 10,307 | $ | 73,602 | ||||||||||||||
| Percent to total | 86.0 | % | 14.0 | % | 100.0 | % | ||||||||||||||
| Unrealized net capital gains and losses | ||||||||||||||||||||
| Fixed income securities | $ | 513 | $ | 1 | $ | 514 | ||||||||||||||
| Short-term investments | (1) | — | (1) | |||||||||||||||||
| Other | (2) | — | (2) | |||||||||||||||||
| Total | $ | 510 | $ | 1 | $ | 511 |
Investments
Fixed income securities
| Fixed income securities by type | ||||||||||||||
| Fair value as of | ||||||||||||||
| ($ in millions) | September 30, 2024 | December 31, 2023 | ||||||||||||
| U.S. government and agencies | $ | 9,246 | $ | 8,619 | ||||||||||
| Municipal | 8,258 | 6,006 | ||||||||||||
| Corporate | 33,796 | 31,205 | ||||||||||||
| Foreign government | 1,477 | 1,290 | ||||||||||||
| Asset-backed securities (“ABS”) | 1,184 | 1,745 | ||||||||||||
| Total fixed income securities | $ | 53,961 | $ | 48,865 |
Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations (“NRSRO”) provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings (“Fitch”), or a comparable internal rating.
As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date and the categorization of these securities is based on the expected ratings indicated by internal analysis.
As of September 30, 2024, 91.4% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds.
Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issuer.
Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 5 of the condensed consolidated financial statements.
Third Quarter 2024 Form 10-Q 67
Investments
The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating.
| Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating | ||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||||||||||||||
| NAIC 1 | NAIC 2 | NAIC 3 | ||||||||||||||||||||||||||||||||||||
| 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 | $ | 9,246 | $ | 121 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
| Municipal | 8,108 | 32 | 145 | 2 | 3 | — | ||||||||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||||||||||||||
| Public | 6,860 | 161 | 16,759 | 91 | 605 | (2) | ||||||||||||||||||||||||||||||||
| Privately placed | 2,087 | 9 | 3,514 | 28 | 2,416 | 23 | ||||||||||||||||||||||||||||||||
| Total corporate | 8,947 | 170 | 20,273 | 119 | 3,021 | 21 | ||||||||||||||||||||||||||||||||
| Foreign government | 1,476 | 31 | 1 | — | — | — | ||||||||||||||||||||||||||||||||
| ABS | 1,089 | 1 | 16 | — | 30 | — | ||||||||||||||||||||||||||||||||
| Total fixed income securities | $ | 28,866 | $ | 355 | $ | 20,435 | $ | 121 | $ | 3,054 | $ | 21 | ||||||||||||||||||||||||||
| NAIC 4 | NAIC 5-6 | Total | ||||||||||||||||||||||||||||||||||||
| B | CCC and lower | |||||||||||||||||||||||||||||||||||||
| Fair value | Unrealized gain (loss) | Fair value | Unrealized gain (loss) | Fair value | Unrealized gain (loss) | |||||||||||||||||||||||||||||||||
| U.S. government and agencies | $ | — | $ | — | $ | — | $ | — | $ | 9,246 | $ | 121 | ||||||||||||||||||||||||||
| Municipal | — | — | 2 | 1 | 8,258 | 35 | ||||||||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||||||||||||||
| Public | 95 | — | 1 | — | 24,320 | 250 | ||||||||||||||||||||||||||||||||
| Privately placed | 1,346 | 14 | 113 | (8) | 9,476 | 66 | ||||||||||||||||||||||||||||||||
| Total corporate | 1,441 | 14 | 114 | (8) | 33,796 | 316 | ||||||||||||||||||||||||||||||||
| Foreign government | — | — | — | — | 1,477 | 31 | ||||||||||||||||||||||||||||||||
| ABS | 1 | — | 48 | 10 | 1,184 | 11 | ||||||||||||||||||||||||||||||||
| Total fixed income securities | $ | 1,442 | $ | 14 | $ | 164 | $ | 3 | $ | 53,961 | $ | 514 |
Municipal bonds, including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds.
Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by public entities in unregistered form.
ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance. ABS also includes residential mortgage-backed securities and commercial mortgage-backed securities.
Equity securities of $2.09 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments.
Mortgage loans of $765 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements.
Limited partnership interests include $7.53 billion of interests in private equity funds, $1.25 billion of interests in real estate funds and $148 million of interests in other funds as of September 30, 2024. We have commitments to invest additional amounts in limited partnership interests totaling $3.18 billion as of September 30, 2024.
Other investments include $187 million of bank loans, net, and $677 million of direct investments in real estate as of September 30, 2024.
Investments
| Unrealized net capital gains (losses) | ||||||||||||||
| September 30, | December 31, | |||||||||||||
| ($ in millions) | 2024 | 2023 | ||||||||||||
| U.S. government and agencies | $ | 121 | $ | (5) | ||||||||||
| Municipal | 35 | (43) | ||||||||||||
| Corporate | 316 | (746) | ||||||||||||
| Foreign government | 31 | 4 | ||||||||||||
| ABS | 11 | 6 | ||||||||||||
| Fixed income securities | 514 | (784) | ||||||||||||
| Short-term investments | (1) | (1) | ||||||||||||
| Derivatives | (2) | (2) | ||||||||||||
| Equity method of accounting (“EMA”) limited partnerships | — | (4) | ||||||||||||
| Investments classified as held for sale | (50) | — | ||||||||||||
| Unrealized net capital gains and losses, pre-tax | $ | 461 | $ | (791) |
| Gross unrealized gains (losses) on fixed income securities by type and sector | ||||||||||||||||||||||||||
| ($ in millions) | Amortized cost, net | Gross unrealized | Fair value | |||||||||||||||||||||||
| Gains | Losses | |||||||||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||
| Banking | $ | 4,417 | $ | 110 | $ | (49) | $ | 4,478 | ||||||||||||||||||
| Basic industry | 968 | 16 | (16) | 968 | ||||||||||||||||||||||
| Capital goods | 2,911 | 65 | (41) | 2,935 | ||||||||||||||||||||||
| Communications | 2,633 | 53 | (53) | 2,633 | ||||||||||||||||||||||
| Consumer goods (cyclical and non-cyclical) | 7,459 | 171 | (106) | 7,524 | ||||||||||||||||||||||
| Energy | 3,020 | 73 | (28) | 3,065 | ||||||||||||||||||||||
| Financial services | 2,302 | 43 | (37) | 2,308 | ||||||||||||||||||||||
| Technology | 2,909 | 47 | (72) | 2,884 | ||||||||||||||||||||||
| Transportation | 831 | 18 | (12) | 837 | ||||||||||||||||||||||
| Utilities | 5,582 | 193 | (52) | 5,723 | ||||||||||||||||||||||
| Other | 448 | 10 | (17) | 441 | ||||||||||||||||||||||
| Total corporate fixed income portfolio | 33,480 | 799 | (483) | 33,796 | ||||||||||||||||||||||
| U.S. government and agencies | 9,125 | 162 | (41) | 9,246 | ||||||||||||||||||||||
| Municipal | 8,223 | 131 | (96) | 8,258 | ||||||||||||||||||||||
| Foreign government | 1,446 | 37 | (6) | 1,477 | ||||||||||||||||||||||
| ABS | 1,173 | 14 | (3) | 1,184 | ||||||||||||||||||||||
| Total fixed income securities | $ | 53,447 | $ | 1,143 | $ | (629) | $ | 53,961 |
| December 31, 2023 | ||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||
| Banking | $ | 4,189 | $ | 31 | $ | (135) | $ | 4,085 | ||||||||||||||||||
| Basic industry | 1,007 | 7 | (42) | 972 | ||||||||||||||||||||||
| Capital goods | 2,800 | 33 | (97) | 2,736 | ||||||||||||||||||||||
| Communications | 2,767 | 33 | (115) | 2,685 | ||||||||||||||||||||||
| Consumer goods (cyclical and non-cyclical) | 6,813 | 93 | (251) | 6,655 | ||||||||||||||||||||||
| Energy | 2,645 | 35 | (63) | 2,617 | ||||||||||||||||||||||
| Financial services | 2,111 | 17 | (88) | 2,040 | ||||||||||||||||||||||
| Technology | 2,800 | 21 | (153) | 2,668 | ||||||||||||||||||||||
| Transportation | 1,104 | 13 | (45) | 1,072 | ||||||||||||||||||||||
| Utilities | 5,330 | 109 | (123) | 5,316 | ||||||||||||||||||||||
| Other | 385 | 5 | (31) | 359 | ||||||||||||||||||||||
| Total corporate fixed income portfolio | 31,951 | 397 | (1,143) | 31,205 | ||||||||||||||||||||||
| U.S. government and agencies | 8,624 | 114 | (119) | 8,619 | ||||||||||||||||||||||
| Municipal | 6,049 | 109 | (152) | 6,006 | ||||||||||||||||||||||
| Foreign government | 1,286 | 17 | (13) | 1,290 | ||||||||||||||||||||||
| ABS | 1,739 | 13 | (7) | 1,745 | ||||||||||||||||||||||
| Total fixed income securities | $ | 49,649 | $ | 650 | $ | (1,434) | $ | 48,865 |
Third Quarter 2024 Form 10-Q 69
Investments
Gross unrealized losses are related to an increase in market yields which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase.
| Equity securities by sector | ||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| ($ in millions) | Cost | Over (under) cost | Fair value | Cost | Over (under) cost | Fair value | ||||||||||||||||||||||||||||||||
| Banking | $ | 34 | $ | 46 | $ | 80 | $ | 30 | $ | 38 | $ | 68 | ||||||||||||||||||||||||||
| Basic industry | 8 | 3 | 11 | 9 | 2 | 11 | ||||||||||||||||||||||||||||||||
| Capital goods | 77 | (18) | 59 | 77 | (27) | 50 | ||||||||||||||||||||||||||||||||
| Energy | 29 | 5 | 34 | 32 | 3 | 35 | ||||||||||||||||||||||||||||||||
| Financial services | 209 | 14 | 223 | 210 | 12 | 222 | ||||||||||||||||||||||||||||||||
| Funds | ||||||||||||||||||||||||||||||||||||||
| Equities | 282 | 54 | 336 | 258 | 12 | 270 | ||||||||||||||||||||||||||||||||
| Fixed income | 627 | 6 | 633 | 1,038 | (15) | 1,023 | ||||||||||||||||||||||||||||||||
| Other | 65 | 6 | 71 | 58 | 5 | 63 | ||||||||||||||||||||||||||||||||
| Total funds | 974 | 66 | 1,040 | 1,354 | 2 | 1,356 | ||||||||||||||||||||||||||||||||
| REITs | 155 | 36 | 191 | 179 | 21 | 200 | ||||||||||||||||||||||||||||||||
| Technology | 160 | 78 | 238 | 138 | 50 | 188 | ||||||||||||||||||||||||||||||||
| Utilities | 56 | 3 | 59 | 59 | 1 | 60 | ||||||||||||||||||||||||||||||||
| Other (1) | 127 | 29 | 156 | 156 | 65 | 221 | ||||||||||||||||||||||||||||||||
| Total equity securities | $ | 1,829 | $ | 262 | $ | 2,091 | $ | 2,244 | $ | 167 | $ | 2,411 |
(1)As of September 30, 2024, other is generally comprised of consumer goods and communications sectors.
| Net investment income | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Fixed income securities | $ | 587 | $ | 457 | $ | 1,684 | $ | 1,269 | ||||||||||||||||||
| Equity securities | 17 | 15 | 50 | 47 | ||||||||||||||||||||||
| Mortgage loans | 9 | 9 | 27 | 25 | ||||||||||||||||||||||
| Limited partnership interests | 138 | 190 | 440 | 446 | ||||||||||||||||||||||
| Short-term investments | 87 | 59 | 216 | 194 | ||||||||||||||||||||||
| Other investments | 25 | 41 | 71 | 121 | ||||||||||||||||||||||
| Investment income, before expense | 863 | 771 | 2,488 | 2,102 | ||||||||||||||||||||||
| Investment expense | ||||||||||||||||||||||||||
| Investee level expenses | (12) | (18) | (36) | (53) | ||||||||||||||||||||||
| Securities lending expense | (28) | (25) | (80) | (68) | ||||||||||||||||||||||
| Operating costs and expenses | (40) | (39) | (113) | (107) | ||||||||||||||||||||||
| Total investment expense | (80) | (82) | (229) | (228) | ||||||||||||||||||||||
| Net investment income | $ | 783 | $ | 689 | $ | 2,259 | $ | 1,874 | ||||||||||||||||||
| Property-Liability | $ | 708 | $ | 627 | $ | 2,053 | $ | 1,680 | ||||||||||||||||||
| Protection Services | 24 | 19 | 68 | 53 | ||||||||||||||||||||||
| Allstate Health and Benefits | 26 | 20 | 74 | 60 | ||||||||||||||||||||||
| Corporate and Other | 25 | 23 | 64 | 81 | ||||||||||||||||||||||
| Net investment income | $ | 783 | $ | 689 | $ | 2,259 | $ | 1,874 | ||||||||||||||||||
| Market-based | $ | 708 | $ | 569 | $ | 2,001 | $ | 1,615 | ||||||||||||||||||
| Performance-based | 155 | 202 | 487 | 487 | ||||||||||||||||||||||
| Investment income, before expense | $ | 863 | $ | 771 | $ | 2,488 | $ | 2,102 |
Net investment income increased $94 million in the third quarter of 2024, primarily due to higher market-based investment results, partially offset by lower performance-based investment results. Net investment income increased $385 million in the first nine months of 2024 compared to the same period of 2023, due to higher market-based investment results. Market-based results continue to benefit from portfolio repositioning into higher yielding fixed income securities and higher investment balances.
Investments
| Performance-based investment income | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Private equity | $ | 130 | $ | 131 | $ | 445 | $ | 348 | ||||||||||||||||||
| Real estate | 25 | 71 | 42 | 139 | ||||||||||||||||||||||
| Total performance-based income before investee level expenses | $ | 155 | $ | 202 | $ | 487 | $ | 487 | ||||||||||||||||||
| Investee level expenses (1) | (12) | (16) | (36) | (48) | ||||||||||||||||||||||
| Total performance-based income | $ | 143 | $ | 186 | $ | 451 | $ | 439 |
(1)Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense.
Performance-based investment income decreased $43 million in the third quarter of 2024 compared to the same period of 2023 primarily due to lower real estate investments results. Performance-based investment income increased $12 million in the first nine months of 2024 compared to the same period of 2023, primarily due to private equity valuation increases offset by lower real estate investment results, inclusive of investee level expenses.
Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The Company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements.
| Components of net gains (losses) on investments and derivatives and the related tax effect | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Sales | $ | 116 | $ | (63) | $ | (85) | $ | (313) | ||||||||||||||||||
| Credit losses (1) | (12) | (20) | (143) | (69) | ||||||||||||||||||||||
| Valuation change of equity investments - appreciation (decline): | ||||||||||||||||||||||||||
| Equity securities | 92 | (14) | 177 | 160 | ||||||||||||||||||||||
| Equity fund investments in fixed income securities | 27 | (21) | 18 | (7) | ||||||||||||||||||||||
| Limited partnerships (2) | — | 1 | 12 | 34 | ||||||||||||||||||||||
| Total valuation of equity investments | 119 | (34) | 207 | 187 | ||||||||||||||||||||||
| Valuation change and settlements of derivatives | 20 | 31 | (3) | (28) | ||||||||||||||||||||||
| Net gains (losses) on investments and derivatives, pre-tax | 243 | (86) | (24) | (223) | ||||||||||||||||||||||
| Income tax (expense) benefit | (54) | 19 | 4 | 48 | ||||||||||||||||||||||
| Net gains (losses) on investments and derivatives, after-tax | $ | 189 | $ | (67) | $ | (20) | $ | (175) | ||||||||||||||||||
| Property-Liability (1) | $ | 173 | $ | (48) | $ | (35) | $ | (146) | ||||||||||||||||||
| Protection Services | 7 | (6) | 3 | (10) | ||||||||||||||||||||||
| Allstate Health and Benefits | (5) | (2) | (3) | 1 | ||||||||||||||||||||||
| Corporate and Other | 14 | (11) | 15 | (20) | ||||||||||||||||||||||
| Net gains (losses) on investments and derivatives, after-tax | $ | 189 | $ | (67) | $ | (20) | $ | (175) | ||||||||||||||||||
| Market-based (1) | $ | 231 | $ | (166) | $ | (53) | $ | (293) | ||||||||||||||||||
| Performance-based | 12 | 80 | 29 | 70 | ||||||||||||||||||||||
| Net gains (losses) on investments and derivatives, pre-tax | $ | 243 | $ | (86) | $ | (24) | $ | (223) |
(1)Includes $123 million loss for the nine months ended 2024 related to the carrying value of the surplus notes issued by Adirondack Insurance Exchange and New Jersey Skylands Insurance Association (together “Reciprocal Exchanges”). See Note 8 for further details.
(2)Relates to limited partnerships where the underlying assets are predominately public equity securities.
Net gains on investments and derivatives in the third quarter of 2024 primarily related to valuation gains on equity investments and gains on sales of fixed income securities. Net losses in the first nine months of 2024 primarily related to a loss recognized related to surplus notes issued by the Reciprocal Exchanges and losses on sales of fixed income securities, partially offset by valuation gains on equity securities.
Net gains on sales in the third quarter and losses in the first nine months of 2024 related primarily to sales of fixed income securities in connection with ongoing portfolio management.
Net gains on valuation change and settlements of derivatives of $20 million in the third quarter of 2024 primarily related to net gains on interest rate futures used to manage duration, partially offset by losses on foreign currency contracts used to manage foreign
Third Quarter 2024 Form 10-Q 71
Investments
currency risk. Net losses of $3 million for the first nine months of 2024 primarily related to net losses on equity futures used to manage equity exposure and losses on foreign currency contracts used to manage
foreign currency risk, partially offset by net gains on rate futures used to manage duration.
| Net gains (losses) on performance-based investments and derivatives | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Sales | $ | 8 | $ | 65 | $ | 6 | $ | 68 | ||||||||||||||||||
| Credit losses | (7) | (10) | (28) | (37) | ||||||||||||||||||||||
| Valuation change of equity investments | 34 | 8 | 60 | 33 | ||||||||||||||||||||||
| Valuation change and settlements of derivatives | (23) | 17 | (9) | 6 | ||||||||||||||||||||||
| Total performance-based | $ | 12 | $ | 80 | $ | 29 | $ | 70 | ||||||||||||||||||
Net gains on performance-based investments and derivatives in the third quarter of 2024 primarily included increased valuation of equity investments, partially offset by losses on valuation change and settlements of derivatives. Net gains on performance-based investments and derivatives in the first nine months of 2024, primarily related to increased valuation of equity investments, partially offset by credit losses.
Capital Resources and Liquidity
Capital Resources and Liquidity
Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes.
| Capital resources | ||||||||||||||
| ($ in millions) | September 30, 2024 | December 31, 2023 | ||||||||||||
| Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items | $ | 20,626 | $ | 18,470 | ||||||||||
| Accumulated other comprehensive income (loss) | 251 | (700) | ||||||||||||
| Total Allstate shareholders’ equity | 20,877 | 17,770 | ||||||||||||
| Debt | 8,083 | 7,942 | ||||||||||||
| Total capital resources | $ | 28,960 | $ | 25,712 | ||||||||||
| Ratio of debt to Allstate shareholders’ equity | 38.7 | % | 44.7 | % | ||||||||||
| Ratio of debt to capital resources | 27.9 | 30.9 | ||||||||||||
Allstate shareholders’ equity increased in the first nine months of 2024, primarily due to net income and unrealized net capital gains, partially offset by dividends to shareholders. In the nine months ended September 30, 2024, we paid dividends of $719 million and $88 million related to our common and preferred shares, respectively.
Repayment of debt On May 15, 2024, the Company repaid, at maturity, $350 million of 6.75% Senior Notes.
Issuance of debt On June 24, 2024, the Company issued $500 million of 5.05% Senior Notes due 2029. Interest on the Senior Notes is payable semi-annually in arrears on June 24 and December 24 of each year, beginning on December 24, 2024. The Senior Notes are redeemable at any time at the applicable redemption price prior to the maturity date. The net proceeds of this issuance were used for general corporate purposes.
Debt maturities
| Debt maturities for each of the next five years and thereafter (excluding issuance costs) | ||||||||
| ($ in millions) | ||||||||
| 2025 | $ | 600 | ||||||
| 2026 | 550 | |||||||
| 2027 | — | |||||||
| 2028 | — | |||||||
| 2029 | 500 | |||||||
| Thereafter | 6,491 | |||||||
| Total long-term debt principal | $ | 8,141 |
Common share repurchases On March 31, 2024, our $5.00 billion share repurchase authorization expired. A new common share repurchase program has not been authorized as of September 30, 2024.
Common shareholder dividends On January 2, 2024, April 1, 2024, and July 1, 2024, we paid a common shareholder dividend of $0.89, $0.92 and $0.92, respectively. On July 17, 2024, we declared a common shareholder dividend of $0.92 payable on October 1, 2024.
Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of
operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock.
In May 2024, S&P affirmed The Allstate Corporation’s (the “Corporation”) senior debt and short-term issuer ratings of BBB+ and A-2, respectively, and Allstate Insurance Company’s (“AIC”) insurance financial strength rating of A+. The outlook for the ratings is stable.
In August 2024, A.M. Best affirmed the Corporation’s senior debt and short-term issuer ratings of a- and AMB-1, respectively, and AIC’s insurance financial strength rating of A+. The outlook for the ratings is stable.
In October 2024, Moody’s affirmed the Corporation’s senior debt and short-term issuer ratings of A3 and P-2, respectively, and AIC’s insurance financial strength rating of Aa3. The outlook for the ratings is negative.
Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility.
The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which includes, but is not limited to Allstate Insurance Company (“AIC”). The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries
Third Quarter 2024 Form 10-Q 73
Capital Resources and Liquidity
serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion.
In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to, AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings.
Parent company capital capacity At the parent holding company level, we have deployable assets totaling $2.95 billion as of September 30, 2024, primarily comprised of cash and short-term, fixed income and equity securities that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.
As of September 30, 2024, we held $10.60 billion of cash, U.S. government and agencies fixed income securities, public equity securities, and short-term investments, which we would expect to be able to liquidate within one week.
Intercompany dividends were paid in the first nine months of 2024 between the following companies: American Heritage Life (“AHL”), Allstate Financial Insurance Holdings Corporation (“AFIHC”), the Corporation, North Light Specialty Insurance Company (“NLSIC”) and AIC.
| Intercompany dividends | ||||||||
| ($ in millions) | ||||||||
| AHL to AFIHC | $ | 130 | ||||||
| AFIHC to the Corporation | 130 | |||||||
| NLSIC to AIC | 18 | |||||||
Based on the greater of 2023 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time through February 2025, is estimated at $1.20 billion, less dividends paid during the preceding twelve months measured at that point in time. In the first nine months of 2024, no dividends have been paid.
Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for.
The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first nine months of
2024, we did not defer interest payments on the subordinated debentures.
Additional resources to support liquidity are as follows:
-
The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2027. The facility is fully subscribed among 11 lenders with the largest commitment being $95 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 22.0% as of September 30, 2024. 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 2024.
-
To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million.
-
As of September 30, 2024, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million.
-
The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that was filed on April 30, 2024 and expires in 2027. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 635 million shares of treasury stock as of September 30, 2024), preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.
Forward-Looking Statements
This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to:
Insurance and Financial Services (1) actual claim costs exceeding current reserves; (2) unexpected increases in claim frequency or severity; (3) catastrophes and severe weather events; (4) limitations in analytical models used for loss cost estimates; (5) price competition and changes in regulation and underwriting standards; (6) market risk, inflation, and declines in credit quality of our investment portfolios; (7) our subjective determination of fair value and amount of credit losses for investments; (8) our participation in indemnification programs, including state industry pools and facilities; (9) inability to mitigate the impact associated with changes in capital requirements; (10) a downgrade in financial strength ratings;
Business, Strategy and Operations (11) operations in markets that are highly competitive; (12) changing consumer preferences; (13) new or changing technologies; (14) implementation of our Transformative Growth strategy; (15) our catastrophe management strategy; (16) restrictions on our subsidiaries’ ability to pay dividends; (17) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (18) the availability of reinsurance at current levels and prices; (19) counterparty risk related to reinsurance; (20) acquisitions and divestitures of businesses; (21) intellectual property infringement, misappropriation and third-party claims; (22) vendor-related business disruptions or failure of a vendor to provide and protect data, confidential and proprietary information, or personal information of our customers, claimants or employees; (23) our ability to attract, develop and retain talent;
Macro, Regulatory and Risk Environment (24) conditions in the global economy and capital markets; (25) a large-scale pandemic, the occurrence of terrorism, military actions or social unrest; (26) the failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (27) changing climate and weather conditions; (28) evolving environmental, social and governance standards and expectations; (29) restrictive regulations and regulatory reforms and uncertainty around the interpretation and implementation of regulations in the U.S. and internationally; (30) regulatory limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (31) losses from legal and regulatory actions; (32) changes in or the application of accounting standards and changes in tax laws; and (33) misconduct or fraudulent acts by employees, agents and third parties.
Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K.
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