Allstate Advances Strategic Priorities

Simultaneously addressing loss cost inflation

NORTHBROOK, Ill.--(BUSINESS WIRE)--The Allstate Corporation (NYSE: ALL) today reported financial results for the fourth quarter of 2021.

“We made significant progress on strategic initiatives in 2021,” said Tom Wilson, Chair, President and CEO of The Allstate Corporation. “The life and annuities businesses were divested for $4.4 billion. The $4.0 billion acquisition of National General increased auto insurance market share, lowered costs and created a strong independent agent platform. It also provided growth platforms for the Health and Benefits business and expanded Arity’s marketing services. Allstate Protection Plans expanded relationships with retailers, and into appliance and furniture protection. The transformation of Allstate’s personal property-liability business model made significant progress which will create higher growth by reducing expenses, expanding customer access and using technology to provide affordable, simple and connected protection.”

"These strategic actions position Allstate for sustainable growth while addressing the inflationary impact on auto insurance prices and returns,” continued Wilson. “Fourth quarter revenues were 18.7% above the prior year, reflecting about a 1 percentage point increase in auto insurance market share, increased investment income and growth in protection plans. Revenues for the full year were $50.6 billion, 20.7% above the prior year, largely reflecting a 9.8% increase in policies in force and higher investment income. Net income was $790 million as excellent results from homeowners insurance and performance-based investments were partially offset by lower auto insurance underwriting income. We are adapting to higher auto claim costs by raising premiums with Allstate brand implemented rate increases in the quarter at 2.9% of countrywide premiums, reducing expenses and managing loss costs. Adjusted net income* was $796 million ($2.75 per diluted common share) for the fourth quarter and $4.0 billion ($13.48 per diluted common share) for the full year 2021. At the same time, the common stock dividend was increased by 50% last year, and there are 7.8% fewer common shares outstanding at the end of the year,” concluded Wilson.

Full Year 2021 Highlights

• Allstate delivered on the 2021 Operating Priorities, which focus on both near-term performance and long-term value creation.
  • Better Serve Customers: Allstate made substantial progress in advancing Transformative Growth initiatives in 2021, including improving the competitive price position in auto insurance through continued cost reductions and pricing sophistication. Distribution was expanded with increased sales through Allstate’s direct channel and National General’s independent agent relationships.

  • Grow Customer Base: Consolidated policies in force grew to 190.9 million in 2021, a 9.8% increase compared to prior year. Property-Liability policies in force increased by 13.7%, driven by expanded customer access from the acquisition of National General and Allstate brand growth. Protection Services policies in force grew to 148.4 million, an 8.9% increase to the prior year, driven by continued expansion in Allstate Protection Plans.

  • Achieve Target Returns on Capital: Adjusted net income return on shareholders’ equity* was 16.9% in 2021, reflecting increased net investment income from strong performance-based results. The Property-Liability combined ratio of 95.9 for the full year increased compared to the prior year, primarily due to higher auto losses. Allstate is responding to higher severity through auto insurance rate increases, ongoing cost reductions and claims loss cost management.

  • Proactively Manage Investments: Net investment income of $3.3 billion in 2021 exceeded prior year by $1.7 billion due to exceptional performance-based results. Total return on the $64.7 billion investment portfolio was 4.4% in 2021, reflecting higher performance-based income and equity returns, partially offset by fixed income valuation declines.

  • Build Long-Term Growth Platforms: Allstate completed the divestiture of the life and annuity businesses in the fourth quarter. National General is meeting or exceeding acquisition performance targets. Protection Services has increased revenues, particularly Protection Plans, Dealer Services and Identity Protection. Arity expanded its telematics and marketing services with LeadCloud, Transparent.ly and Arity IQ.

Fourth Quarter 2021 Results

• Total revenues of $13.0 billion in the fourth quarter of 2021 increased 18.7% compared to the prior year quarter, reflecting higher revenues from the National General acquisition and increased net investment income. Protection Services revenues also increased, reflecting growth at Allstate Protection Plans.
  
• Net income applicable to common shareholders of $790 million in the fourth quarter of 2021 decreased $1.8 billion compared to the prior year quarter, primarily driven by lower underwriting income, partially offset by higher net investment income.
  
• Adjusted net income* of $796 million, or $2.75 per diluted share, was below the $1.6 billion generated in the prior year quarter. The decrease reflects higher non-catastrophe losses, unfavorable non-catastrophe reserve reestimates and increased catastrophe losses, partially offset by higher earned premiums.

• Property-Liability written premium of $10.3 billion increased 19.7% in the fourth quarter of 2021 compared to the prior year quarter, driven by the addition of National General and Allstate brand growth. The recorded combined ratio of 98.9 generated underwriting income of $113 million compared to $1.4 billion in the fourth quarter of 2020. The 2020 results reflected low auto accident frequency related to the effects of the pandemic.
  • Decreased underwriting income was primarily driven by higher non-catastrophe losses in auto and homeowners insurance and increased non-catastrophe prior year reserve reestimates, partially offset by higher premiums earned. Prior year reserve strengthening of $187 million reflects unfavorable loss development in auto insurance casualty coverages and shared economy business within commercial lines, increasing the combined ratio by 1.8 points.

    The underlying combined ratio* of 91.3 in the fourth quarter of 2021 was 12.2 points above the prior year quarter, reflecting higher auto and homeowners claims severity due to increased inflationary impacts and increased auto accident frequency.

  • The expense ratio increased by 0.3 points in the fourth quarter of 2021 compared to the prior year quarter as lower advertising expenses were offset by increased amortization of purchased intangibles from the National General acquisition and higher expenses related to guaranty fund assessments and premium taxes.
    • Allstate continues to focus on improving operational flexibility and competitive position through cost reductions. The full year 2021 adjusted expense ratio*, which includes underwriting and claims expenses, improved to 26.0, representing a 0.6-point decline to the prior year and 3.2-point reduction since 2018. The long-term objective is a further reduction of 3 points⁽¹⁾ over the next 3 years.

  • Allstate Protection auto insurance net written premium increased 16.6% and policies in force increased 16.4% compared to the prior year quarter, driven by the acquisitions of National General and SafeAuto and Allstate brand growth. Allstate brand auto net written premiums increased by 3.0% compared to the prior year quarter.

    The recorded auto insurance combined ratio of 104.3 in the fourth quarter of 2021 was 18.8 points above the prior year quarter, and the underlying combined ratio* of 100.2 was 15.3 points above the prior year quarter, primarily due to an increase in the loss ratio. The auto loss ratio increase was driven by higher claim severity from rising inflationary impacts and increased accident frequency as miles driven rebound toward pre-pandemic levels. The fourth quarter was also impacted by 2.1 points of adverse non-catastrophe prior year reserve reestimates and an additional 1.6 points for reserve strengthening for the first three quarters of 2021.

    Rising loss costs reflect increased used car prices, higher parts and labor costs, medical inflation, and greater attorney representation. In response, Allstate is taking comprehensive action to improve profitability, including rate increases, reducing expenses and claims loss cost management actions.

  • Allstate Protection homeowners insurance net written premium grew 31.1%, and policies in force increased 7.8% compared to the fourth quarter of 2020, due to the addition of National General and Allstate brand growth. Allstate brand net written premium increased 13.8% compared to the prior year quarter, driven by policies in force growth of 1.5% and an increase in average premiums of 11.0% due to inflation in insured home valuations and implemented rate increases.

    The recorded homeowners insurance combined ratio of 87.1 in the fourth quarter of 2021 increased 8.6 points above the prior year quarter, and the underlying combined ratio* of 69.6 increased 8.1 points compared to the fourth quarter of 2020. The increases were primarily driven by higher severity due to inflation in labor and material costs and the inclusion of National General’s results, partially offset by higher average premium.

• Protection Services revenues increased to $606 million in the fourth quarter of 2021, 21.9% higher than the prior year quarter, and written premium of $716 million increased by 28.1%, primarily driven by Allstate Protection Plans growth. Adjusted net income of $29 million decreased by $9 million compared to the prior year quarter, due to growth investments at Allstate Protection Plans and increased severity at Allstate Roadside.
  • Allstate Protection Plans revenue of $314 million increased $51 million, or 19.4%, compared to the prior year quarter, reflecting increased policies in force. Written premium of $519 million increased 34.8% compared to the prior year quarter, driven by the launch with the Home Depot in the first quarter. Full year written premium of $1.8 billion was 49.1% higher than the prior year and will be earned over the policy period of one to five years, generating future revenue growth. Adjusted net income of $23 million in the fourth quarter of 2021 was $9 million lower than the prior year quarter, driven by strategic investments in partner incentives and advertising, technology and international growth.

  • Allstate Dealer Services revenue of $135 million was 11.6% higher than the fourth quarter of 2020, driven by increased sales and the impact of lower volumes in the fourth quarter of 2020 from impacts of the pandemic. Adjusted net income of $9 million in the fourth quarter was $2 million higher than the prior year quarter.

  • Allstate Roadside revenue of $61 million in the fourth quarter of 2021 increased 5.2% compared to the prior year quarter, as rescue volumes increased compared to the fourth quarter of 2020, which was impacted by the pandemic. Adjusted net income in the fourth quarter of 2021 declined by $4 million compared to the prior year quarter from increased severity due to higher out-of-network costs.

  • Arity revenue of 62 million increased $36 million compared to the prior year quarter, primarily driven by the inclusion of Transparent.ly and LeadCloud as a result of the National General acquisition, and increased device revenue driven by growth in the Allstate brand Milewise^® product. Adjusted net loss of $1 million in the fourth quarter of 2021 was comparable to the prior year quarter. Arity continues to expand its data acquisition platform with over 700 billion miles of traffic data being used to serve an increasing number of insurance and third-party application customers.

  • Allstate Identity Protection revenue of $34 million in the fourth quarter of 2021 increased 17.2% compared to the prior year quarter, and policies in force increased by 3.8% to 2.8 million. Adjusted net loss of $2 million in the fourth quarter of 2021 was comparable to the prior year quarter as higher revenue was largely offset by higher expenses.

• Allstate Health and Benefits premiums and contract charges increased 75.2% compared to the prior year quarter, primarily due to the addition of group and individual health businesses acquired with National General. The acquisition also generated other revenue of $111 million in the fourth quarter and $359 million in 2021, primarily from administrative fees and commissions on sales of non-proprietary health products. Adjusted net income of $48 million in the fourth quarter of 2021 was $14 million greater than the fourth quarter of 2020 as income from the addition of National General was offset by an increased benefit ratio due to higher life mortality and lower benefit utilization in the prior year quarter.

• Allstate Investments $64.7 billion portfolio generated net investment income of $847 million in the fourth quarter of 2021, an increase of $187 million from the prior year quarter, driven by higher performance-based income.
  • Market-based investment income was $363 million in the fourth quarter of 2021, a decrease of $7 million, or 1.9%, compared to the prior year quarter as the impact of lower reinvestment rates was largely mitigated by higher average assets under management and prepayment fee income.

  • Performance-based investment income totaled $516 million in the fourth quarter of 2021, an increase of $202 million compared to the fourth quarter of 2020, primarily due to higher private equity investment valuations and gains from sales. Approximately 50% of performance-based income was generated by 10 individual investments in the quarter, and over a 3-, 5- and 10-year time horizon performance-based annual returns have ranged between 12.9% and 14.0%.

  • Net gains on investments and derivatives were $266 million in the fourth quarter of 2021, compared to $490 million in the prior year quarter, primarily due to lower net gains on the valuation of equity investments and the sale of fixed income securities.

  • Unrealized net capital gains decreased $419 million in the fourth quarter of 2021 as higher interest rates resulted in lower fixed income valuations.

  • Total return on the investment portfolio was 1.1% for the quarter and 4.4% in 2021.

  • Ongoing proactive management of the investment portfolio risk and return profile included shortening the fixed income duration from 5.0 to 4.2 years in 2021, primarily during the fourth quarter to reduce exposure to an inflation-driven increase in interest rates.

• Discontinued Operations generated a loss of $321 million in the fourth quarter of 2021, primarily driven by an increase in the loss on disposition associated with the sales of Allstate Life Insurance Company and Allstate Life Insurance Company of New York in the quarter. The total loss on disposition was $4.1 billion in comparison to the original estimate of $4.0 billion.

Proactive Capital Management

“Allstate’s earnings power and proactive capital management support reinvestment in growth and provided excellent cash returns to shareholders,” said Mario Rizzo, Chief Financial Officer. “We closed on the acquisitions of National General for $4 billion and SafeAuto for $262 million in 2021, enhancing our competitive position in personal lines insurance and further increasing market share. We also returned $4.1 billion to common shareholders in 2021 through a combination of $3.3 billion in share repurchases and $885 million of shareholder dividends. This was $1.7 billion greater than the prior year and driven, in part, by the deployable capital generated through the divestiture of our life and annuity businesses,” concluded Rizzo.

Visit www.allstateinvestors.com for additional information about Allstate’s results, including a webcast of its quarterly conference call and the call presentation. The conference call will be at 9 a.m. ET on Thursday, February 3. Financial information, including material announcements about The Allstate Corporation, is routinely posted on www.allstateinvestors.com.

Forward-Looking Statements

This news release 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. These 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. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could 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 may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward-looking statements are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.

Contacts

Al Scott

Media Relations

(847) 402-5600

Mark Nogal

Investor Relations

(847) 402-2800

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