Allstate Corporation 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023, with fourth-quarter results included. The filing was signed February 21, 2024. Allstate is primarily a U.S. and Canadian personal property-and-casualty insurer, with additional protection-services and health-and-benefits businesses. Management announced on November 1, 2023 that it is pursuing the sale of Allstate Health and Benefits.
Business Context and Key Metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $57.09 billion | $51.41 billion | 11.1% increase |
| Net loss applicable to common shareholders | $316 million | $1.394 billion | Loss narrowed |
| Diluted loss per share | $1.20 | $5.14 | Improved |
| Operating cash flow | $4.23 billion | $5.12 billion | 17.4% decrease |
| Net investment income | $2.48 billion | $2.40 billion | 3.1% increase |
| Net gains/(losses) on investments and derivatives | $(300) million | $(1.072) billion | Improved |
| Property-Liability combined ratio | 104.5 | 106.6 | Improved 2.1 points |
| Allstate Protection underwriting result | $(2.09) billion | $(2.78) billion | Loss narrowed |
| Allstate shareholders’ equity | $17.77 billion | $17.49 billion | 1.6% increase |
| Debt | $7.94 billion | $7.96 billion | Broadly stable |
Property and casualty premiums earned were $50.67 billion, up from $45.90 billion. Allstate Protection premiums written increased 10.0% to $50.35 billion, driven principally by rate increases and growth at National General. Consolidated policies in force increased 2.8% to 194 million, but Property-Liability policies in force declined 2.0%, primarily because Allstate-brand auto renewals fell.
Catastrophe losses increased substantially to $5.64 billion from $3.11 billion, primarily due to more frequent and larger wind and hail events. The catastrophe impact was 11.6 points of the Property-Liability combined ratio. The expense ratio improved to 21.0 from 23.0, while the loss ratio was broadly stable at 83.5.
The investment portfolio totaled $66.68 billion at year-end, including $48.87 billion of fixed-income securities, $8.38 billion of limited partnership interests, and $5.14 billion of short-term investments. Approximately 91.5% of fixed-income securities were investment grade. Unrealized net capital losses improved to $791 million pretax from $2.89 billion, contributing to higher equity.
Fourth-Quarter Results
Fourth-quarter revenue was $14.83 billion, compared with $13.65 billion in the fourth quarter of 2022. Net income applicable to common shareholders was $1.46 billion, or $5.57 diluted earnings per share, compared with a $303 million loss, or $(1.15) per share, in the prior-year quarter. The filing attributes the improvement primarily to better underwriting results. Fourth-quarter Allstate auto underwriting income was $93 million, compared with a $974 million underwriting loss in the fourth quarter of 2022.
Material Changes Versus the Prior Comparable Period
- Premium growth accelerated through pricing actions: 2023 Allstate-brand auto rate increases had a 16.4% total premium impact, while National General auto rate increases had a 12.8% impact. Homeowners rate actions had an 11.3% impact for Allstate brand and 11.0% for National General.
- Auto policies in force decreased 2.9% to 25.28 million, and Allstate-brand auto renewal declined to 85.4% from 87.0%. Management expects additional rate increases and continued underwriting restrictions in 2024.
- Homeowners combined ratio increased to 106.8 from 93.6 because of catastrophe losses and higher severity. Allstate stopped writing new homeowners business in California and Florida and is non-renewing selected Florida policies.
- Commercial-lines premiums written decreased 35.9% as Allstate exited traditional commercial insurance in five states and restricted transportation-network-company coverage absent telematics-based pricing.
- Protection Services adjusted net income declined to $106 million from $169 million, reflecting higher appliance and furniture claim severity and lower Arity third-party lead sales. Policies in force increased 4.3%.
- Allstate Health and Benefits adjusted net income was $242 million, compared with $245 million. Policies in force declined to 4.14 million from 4.30 million, and management is pursuing a sale of the business.
- Net investment income increased because of higher fixed-income yields, but performance-based investment income fell to $499 million from $1.02 billion.
- Operating cash flow declined, while investments increased by $4.85 billion. The company paid $925 million of common dividends, $107 million of preferred dividends, and repurchased $330 million of common shares during 2023.
- Allstate issued $750 million of 5.25% senior notes due 2033, repaid $750 million of maturing debt, redeemed $575 million of Series G preferred stock, and issued $600 million of Series J preferred stock.
Liquidity, Capital and Debt
Allstate reported $16.20 billion of assets expected to be liquidated within one week and $23.52 billion of cash and estimated liquidity available within one quarter under normal market conditions. Parent-company deployable assets totaled $3.41 billion. The company had no borrowings under its $750 million revolving credit facility or commercial paper program at year-end; the facility matures in November 2027 and permits up to an additional $500 million subject to lender commitments.
Debt represented 44.7% of Allstate shareholders’ equity and 30.9% of total capital resources. Principal debt maturities include $350 million in 2024, $600 million in 2025, and $550 million in 2026. Allstate Insurance Company’s statutory surplus was $14.25 billion for property and casualty subsidiaries, and its adjusted statutory capital and surplus was $11.99 billion compared with an authorized control level RBC of $3.07 billion.
Guidance, Outlook, Commentary and Risks
- Management’s 2024 operating priorities remain generally consistent with 2023: improve customer value, grow the customer base, achieve target economic returns, manage investments proactively, execute Transformative Growth, and expand digital and technology capabilities.
- The company is executing a profitability plan involving rate increases, lower operating and advertising expenses, underwriting restrictions in underperforming markets, and claims-process improvements.
- Management expects to continue auto and homeowners rate increases in 2024, but acknowledged that pricing and underwriting actions may reduce retention, new business, premiums and future policies in force.
- The modeled one-in-100-year probable maximum loss for hurricane, wildfire and earthquake perils was approximately $2.5 billion net of reinsurance. Reinsurance costs increased to $1.02 billion in 2023 from $788 million.
- Major uncertainties include catastrophe frequency and severity, climate-related losses, inflation in repair and medical costs, reserve adequacy, reinsurance availability and counterparty collectability, investment-market volatility, regulatory restrictions on rates and underwriting, cybersecurity and privacy events, and execution of the Transformative Growth strategy.
- Net property-and-casualty reserves were $31.46 billion, including $29.97 billion for Allstate Protection. The 2023 unfavorable prior-year reserve reestimate was $550 million for Property-Liability, compared with $1.74 billion in 2022.
- Run-off Property-Liability net reserves totaled $1.44 billion, including asbestos, environmental and other legacy claims. Management states that ultimate costs may vary materially because of litigation, legal interpretations, claim development and reinsurance uncertainty.
- The aggregate reasonably possible legal loss above accrued amounts for disclosed matters was estimated at zero to $56 million before tax where an estimate was possible; this excludes matters for which no estimate could be made and is not the company’s maximum exposure.
Most Important Facts to Verify
- Whether continued rate increases and claims initiatives produce a sustained combined ratio below 100, particularly in auto and homeowners.
- Whether catastrophe losses, reinsurance pricing and exposures in California, Florida and other severe-weather markets remain within the company’s risk and capital targets.
- The ultimate sale terms, timing, regulatory approvals and financial effects of the proposed Health and Benefits divestiture.
- Development of auto, homeowners and run-off reserves, including the sensitivity of results to inflation, litigation and adverse reserve reestimates.
- Parent-company liquidity, subsidiary dividend capacity, debt maturities and the effect of financial-strength-rating changes on funding and competitiveness.
- The sustainability of investment income as fixed-income yields change and performance-based investment returns normalize.
- Detailed terms and potential liabilities associated with the MCCA, state insurance facilities, reinsurance recoverables, pending litigation and regulatory proceedings.