ALLSTATE CORP quarterly report, Q1 FY2024

Allstate Corporation: Q1 2024 Form 10-Q Summary

Business Context and Reporting Period

The filing covers the three months ended March 31, 2024. Allstate operates primarily through Property-Liability, Protection Services, Allstate Health and Benefits, and Corporate and Other. Management continues its strategy of growing personal property-liability market share and expanding protection offerings. The company is pursuing the sale of its Health and Benefits business, but the sale had not been completed as of the filing date.

Financial Performance and Key Metrics

Metric	Q1 2024	Q1 2023	Change
Total revenue	$15.259 billion	$13.786 billion	+10.7%
Net income attributable to Allstate	$1.218 billion	$(320) million	Improved
Net income applicable to common shareholders	$1.189 billion	$(346) million	Improved
Diluted EPS	$4.46	$(1.31)	Improved
Net investment income	$764 million	$575 million	+$189 million
Operating income before tax	$1.464 billion	$(406) million	Improved
Operating cash flow	$1.666 billion	$601 million	+$1.065 billion
Property-Liability combined ratio	93.0%	108.6%	Improved 15.6 points

Allstate Protection underwriting income was $903 million versus a $998 million loss in the prior-year quarter. Property-Liability premiums earned increased to $12.900 billion from $11.635 billion, while premiums written increased 11.9% to $13.183 billion. The improved underwriting result primarily reflected lower catastrophe losses and higher earned premiums.

Catastrophe losses declined to $731 million from $1.691 billion, including favorable catastrophe reserve reestimates of $162 million.
Prior-year reserve reestimates were favorable by $151 million, compared with $15 million favorable in Q1 2023.
The Property-Liability loss ratio improved to 72.4% from 87.5%; the expense ratio improved to 20.6% from 21.1%.
Auto underwriting income was $351 million versus a $346 million loss; the auto combined ratio improved to 96.0% from 104.4%.
Homeowners underwriting income was $564 million versus a $534 million loss; the homeowners combined ratio improved to 82.1% from 119.0%.
Protection Services adjusted net income increased to $54 million from $34 million, primarily from improved margins at Allstate Protection Plans and lower roadside claim severity.
Allstate Health and Benefits adjusted net income was unchanged at $56 million. Its benefit ratio worsened to 60.0% from 55.5%.
Net investment income benefited from higher fixed-income yields, larger investment balances, and higher performance-based valuation gains.

Financial Position, Debt and Liquidity

Total assets were $105.241 billion at March 31, 2024, compared with $103.362 billion at December 31, 2023.
Total investments were $67.859 billion, including $50.777 billion of fixed-income securities and $8.562 billion of limited partnership interests.
Allstate shareholders’ equity increased to $18.639 billion from $17.770 billion. Book value per diluted common share was $62.27, up from $59.39 at year-end 2023.
Debt was $7.938 billion. Debt-to-Allstate-shareholders’ equity was 42.6%, and debt-to-capital resources was 29.9%.
$350 million of debt was scheduled to mature in May 2024. The filing does not state whether this maturity was subsequently refinanced or repaid.
Cash was $850 million at March 31, 2024, and operating cash flow exceeded investing and financing cash uses, producing a $128 million increase in cash during the quarter.
Parent-company deployable assets were $3.17 billion, and management reported $16.86 billion of cash and readily liquidated securities expected to be convertible to cash within one week.
The company had no borrowings under its $750 million revolving credit facility or commercial paper facility, leaving $750 million of stated borrowing capacity.

Material Changes Versus the Prior Comparable Period

Results shifted from a common-shareholder loss of $346 million to income of $1.189 billion, primarily because of substantially better Property-Liability underwriting.
Premium growth reflected rate increases and higher average premiums, although Allstate Protection auto policies in force declined 2.0% year over year to 25.207 million.
Homeowners and other underperforming lines remain subject to underwriting restrictions, non-renewals, and reduced new business in selected states, including California, Florida and New Jersey.
Advertising expense increased to $283 million from $158 million as profitability improved and the company increased customer acquisition efforts.
Net losses on investments and derivatives were $164 million versus a $14 million gain. The 2024 loss included a $123 million valuation allowance for surplus notes issued by the Adirondack and New Jersey Skylands reciprocal exchanges.
Accumulated other comprehensive loss increased to $883 million from $700 million, mainly because of higher unrealized losses on fixed-income securities.
The company paid $233 million of common dividends and $29 million of preferred dividends. No shares were repurchased under the prior $5 billion authorization, which expired March 31, 2024 with $472 million unused; no new authorization had been approved.

Guidance, Outlook, Commentary and Risks

The filing does not provide formal earnings guidance. Management expects to continue pursuing rate increases during 2024 to offset loss-cost inflation and improve auto and homeowners returns. As auto profitability improves, Allstate expects to increase advertising and remove selected underwriting restrictions to support growth.

Management cited inflation in vehicle repairs, labor, parts, medical care and home replacement costs; supply-chain disruption and labor shortages may continue to increase claim severity.
Catastrophe frequency and severity remain inherently unpredictable. The modeled one-in-100-year probable maximum loss for hurricane, wildfire and earthquake perils was approximately $2.5 billion net of reinsurance.
The 2024-2025 catastrophe reinsurance program was substantially placed, but certain Florida and National General programs were expected to be completed in Q2 2024, and additional coverage was still under evaluation.
Adirondack’s capital was below regulatory requirements. Ongoing operating losses and inadequate approved rate increases led to the $123 million valuation allowance on its surplus notes.
Legal and regulatory matters include claims-practice litigation, property and auto class-action allegations, California insurance-rate investigations, and life-insurance lapse-notice litigation. The estimated aggregate reasonably possible loss above accrued amounts for certain disclosed matters was zero to $87 million pre-tax; management stated that this estimate is not an expected loss or maximum exposure.
Reserves remain subject to material uncertainty, particularly for recent accident years, litigation-sensitive claims, catastrophes, inflation-sensitive losses, and run-off asbestos and environmental exposures.
Restructuring charges were $10 million in Q1 2024, primarily related to organizational streamlining, outsourcing, and vacated facilities. Additional charges may occur.

Investor Verification Priorities

Verify whether the improvement in the 93.0% combined ratio is sustained after catastrophe losses normalize and favorable reserve development declines.
Track auto claim severity, rate approvals, policy counts, renewal ratios, and the effect of underwriting restrictions on future growth.
Assess homeowners exposure in catastrophe-prone states, reinsurance costs and remaining 2024 program placements.
Monitor the sale process and any financial or regulatory consequences of separating Allstate Health and Benefits.
Review the financial condition of the reciprocal exchanges and potential additional losses related to the $123 million surplus-note valuation allowance.
Confirm the May 2024 debt maturity outcome and the status of any new share-repurchase authorization.
Evaluate investment portfolio unrealized losses, credit losses, private-equity valuation volatility and interest-rate sensitivity.
Follow the disclosed legal and regulatory proceedings, including the possible-loss range of up to $87 million above accrued amounts.