Reporting Segments

Allstate management is organized around products and services, and this structure is considered in the identification of its four reportable segments. These segments and their respective operations are as follows:

Allstate Protection principally sells private passenger auto and homeowners insurance in the United States and Canada. Revenues from external customers generated outside the United States were $1.06 billion, $1.03 billion and $1.08 billion in 2016, 2015 and 2014, respectively. The Company evaluates the results of this segment based upon underwriting results.

Discontinued Lines and Coverages consists of property-liability business no longer written by Allstate, including results from asbestos, environmental and other discontinued lines claims, and certain commercial and other businesses in run-off. This segment also includes the historical results of the commercial and reinsurance businesses sold in 1996. The Company evaluates the results of this segment based upon underwriting results.

Allstate Financial sells traditional, interest-sensitive and variable life insurance and voluntary accident and health insurance products. Allstate Financial previously offered and continues to have in force fixed annuities such as deferred and immediate annuities. Allstate Financial also previously offered institutional products consisting of funding agreements sold to unaffiliated trusts that used them to back medium-term notes. There are no institutional products outstanding as of December 31, 2016. Revenues from external customers generated outside the United States relate to voluntary accident and health insurance sold in Canada and were $1 million in 2016. Allstate Financial had no revenues from external customers generated outside the United States in 2015 or 2014. The Company evaluates the results of this segment based upon operating income.

Corporate and Other comprises holding company activities and certain non-insurance operations.

Allstate Protection and Discontinued Lines and Coverages comprise Property-Liability. The Company does not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability, Allstate Financial, and Corporate and Other levels for decision-making purposes. Allstate Protection and Allstate Financial performance and resources are managed by committees of senior officers of the respective segments.

The accounting policies of the reportable segments are the same as those described in Note 2. The effects of certain inter-segment transactions are excluded from segment performance evaluation and therefore are eliminated in the segment results.

Measuring segment profit or loss

The measure of segment profit or loss used by Allstate’s management in evaluating performance is underwriting income for the Allstate Protection and Discontinued Lines and Coverages segments and operating income for the Allstate Financial and Corporate and Other segments. A reconciliation of these measures to net income applicable to common shareholders is provided below.

Underwriting income is calculated as premiums earned, less claims and claims expenses (“losses”), amortization of DAC, operating costs and expenses, and restructuring and related charges as determined using GAAP.

Operating income is net income applicable to common shareholders, excluding:


•	realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in operating income,


•	valuation changes on embedded derivatives that are not hedged, after-tax,


•	amortization of DAC and DSI, to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives that are not hedged, after-tax,


•	amortization of purchased intangible assets, after-tax,


•	gain (loss) on disposition of operations, after-tax, and


•	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.

Summarized revenue data for each of the Company’s reportable segments for the years ended December 31 are as follows:



($ in millions)	2016			2015			2014
Revenues
Property-Liability
Property-liability insurance premiums
Auto	$	21,264		$	20,410		$	19,344
Homeowners	7,257			7,136			6,904
Other personal lines	1,700			1,692			1,662
Commercial lines	506			510			476
Other business lines	580			561			542
Allstate Protection	31,307			30,309			28,928
Discontinued Lines and Coverages	—			—			1
Total property-liability insurance premiums	31,307			30,309			28,929
Net investment income	1,266			1,237			1,301
Realized capital gains and losses	(6		)	(237		)	549
Total Property-Liability	32,567			31,309			30,779
Allstate Financial
Life and annuity premiums and contract charges
Life and annuity premiums
Traditional life insurance	573			542			511
Immediate annuities with life contingencies	—			—			4
Accident and health insurance	859			780			744
Total life and annuity premiums	1,432			1,322			1,259
Contract charges
Interest-sensitive life insurance	829			822			879
Fixed annuities	14			14			19
Total contract charges	843			836			898
Total life and annuity premiums and contract charges	2,275			2,158			2,157
Net investment income	1,734			1,884			2,131
Realized capital gains and losses	(81		)	267			144
Total Allstate Financial	3,928			4,309			4,432
Corporate and Other
Service fees	4			3			5
Net investment income	42			35			27
Realized capital gains and losses	(3		)	—			1
Total Corporate and Other before reclassification of service fees	43			38			33
Reclassification of service fees ⁽¹⁾	(4		)	(3		)	(5		)
Total Corporate and Other	39			35			28
Consolidated revenues	$	36,534		$	35,653		$	35,239

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⁽¹⁾	For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to operating costs and expenses.

Summarized financial performance data for each of the Company’s reportable segments for the years ended December 31 are as follows:



($ in millions)	2016			2015			2014
Net income
Property-Liability
Underwriting income
Allstate Protection	$	1,317		$	1,614		$	1,887
Discontinued Lines and Coverages	(107		)	(55		)	(115		)
Total underwriting income	1,210			1,559			1,772
Net investment income	1,266			1,237			1,301
Income tax expense on operations ⁽¹⁾	(812		)	(952		)	(1,040		)
Realized capital gains and losses, after-tax	—			(154		)	357
Gain on disposition of operations, after-tax	—			—			37
Property-Liability net income applicable to common shareholders	1,664			1,690			2,427
Allstate Financial
Life and annuity premiums and contract charges	2,275			2,158			2,157
Net investment income	1,734			1,884			2,131
Periodic settlements and accruals on non-hedge derivative instruments	—			—			(1		)
Contract benefits and interest credited to contractholder funds	(2,580		)	(2,563		)	(2,663		)
Operating costs and expenses and amortization of deferred policy acquisition costs	(774		)	(729		)	(721		)
Restructuring and related charges	(1		)	—			(2		)
Income tax expense on operations	(206		)	(241		)	(294		)
Operating income	448			509			607
Realized capital gains and losses, after-tax	(54		)	173			94
Valuation changes on embedded derivatives that are not hedged, after-tax	(2		)	(1		)	(15		)
DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax	(4		)	(3		)	(3		)
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax	—			—			1
Gain (loss) on disposition of operations, after-tax	3			2			(53		)
Change in accounting for investments in qualified affordable housing projects, after-tax	—			(17		)	—
Allstate Financial net income applicable to common shareholders	391			663			631
Corporate and Other
Service fees ⁽²⁾	4			3			5
Net investment income	42			35			27
Operating costs and expenses ⁽²⁾	(328		)	(329		)	(364		)
Income tax benefit on operations	106			109			124
Preferred stock dividends	(116		)	(116		)	(104		)
Operating loss	(292		)	(298		)	(312		)
Realized capital gains and losses, after-tax	(2		)	—			—
Corporate and Other net loss applicable to common shareholders	(294		)	(298		)	(312		)
Consolidated net income applicable to common shareholders	$	1,761		$	2,055		$	2,746

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⁽¹⁾	Income tax on operations for Property-Liability segment includes $28 million of expense related to the change in accounting guidance for investments in qualified affordable housing projects adopted in 2015.


⁽²⁾	For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to operating costs and expenses.

Additional significant financial performance data for each of the Company’s reportable segments for the years ended December 31 are as follows:



($ in millions)	2016			2015			2014
Amortization of DAC
Property-Liability	$	4,267		$	4,102		$	3,875
Allstate Financial	283			262			260
Consolidated	$	4,550		$	4,364		$	4,135

Income tax expense
Property-Liability	$	806		$	869		$	1,211
Allstate Financial	178			351			299
Corporate and Other	(107		)	(109		)	(124		)
Consolidated	$	877		$	1,111		$	1,386

Interest expense is primarily incurred in the Corporate and Other segment. Capital expenditures for long-lived assets are generally made in the Property-Liability segment. A portion of these long-lived assets are used by entities included in the Allstate Financial and Corporate and Other segments and, accordingly, are charged expenses in proportion to their use.

Summarized data for total assets and investments for each of the Company’s reportable segments as of December 31 are as follows:



($ in millions)	2016		2015		2014
Assets
Property-Liability	$	60,394	$	55,671	$	55,767
Allstate Financial	45,945		46,342		49,248
Corporate and Other	2,271		2,643		3,464
Consolidated	$	108,610	$	104,656	$	108,479

Investments
Property-Liability	$	42,722	$	38,479	$	39,083
Allstate Financial	36,840		36,792		38,809
Corporate and Other	2,237		2,487		3,221
Consolidated	$	81,799	$	77,758	$	81,113

The balances above reflect the elimination of related party investments between segments.