The Allstate Corporation Investor Supplement First Quarter 2019 The consolidated financial statements and financial exhibits included herein are unaudited. These consolidated financial statements and exhibits should be read in conjunction with the consolidated financial statements and notes thereto included in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The results of operations for interim periods should not be considered indicative of results to be expected for the full year. Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*). These measures are defined on the page "Definitions of Non-GAAP Measures" and are reconciled to the most directly comparable generally accepted accounting principles ("GAAP") measure herein.
The Allstate Corporation We changed our accounting principle for recognizing actuarial gains and losses and expected return on plan assets for our pension and other postretirement plans to a more preferable policy under U.S. Generally Accepted Accounting Principles. Under the new principle, remeasurement of projected benefit obligation and plan assets are immediately recognized through earnings and are referred to as pension and other postretirement remeasurement gains and losses on the Condensed Consolidated Statements of Operations. This change has been applied on a retrospective basis. The following table provides a summary of the impacts of this change on previously reported periods. See Note 1 of the condensed consolidated financial statements in the March 31, 2019 Form 10-Q for further information regarding the impact of the change in accounting principle on our condensed consolidated financial statements. ($ in millions, except per share data and ratios) Three months ended Dec. 31, Sept. 30, June 30, March 31, 2018 2018 2018 2018 As adjusted Net (loss) income applicable to common shareholders $ (585) $ 942 $ 678 $ 977 Adjusted net income * 552 759 710 1,108 Net (loss) income applicable to common shareholders per common share - Basic (1.71) 2.72 1.94 2.76 Net (loss) income applicable to common shareholders per common share - Diluted (1.71) 2.68 1.91 2.71 Return on common shareholders' equity (rolling 12 months) 10.0 % 18.6 % 18.5 % 17.9 % Adjusted net income return on common shareholders' equity * (rolling 12 months) 16.2 % 16.9 % 17.0 % 16.2 % Property-Liability combined ratio 96.6 93.9 94.4 87.5 Property-Liability underlying combined ratio * 86.3 86.2 85.0 83.6 Impact of change Net (loss) income applicable to common shareholders $ (273) $ 109 $ 41 $ 31 Adjusted net income * 122 79 35 42 Net (loss) income applicable to common shareholders per common share - Basic (0.80) 0.31 0.12 0.09 Net (loss) income applicable to common shareholders per common share - Diluted (0.80) 0.31 0.11 0.08 Return on common shareholders' equity (rolling 12 months) (0.5) % 1.2 % 1.5 % 1.3 % Adjusted net income return on common shareholders' equity * (rolling 12 months) 1.4 % 1.0 % 1.2 % 1.2 % Property-Liability combined ratio (0.4) (0.4) (0.5) (0.5) Property-Liability underlying combined ratio * (0.5) (0.4) (0.5) (0.6) As previously reported Net (loss) income applicable to common shareholders $ (312) $ 833 $ 637 $ 946 Adjusted net income * 430 680 675 1,066 Net (loss) income applicable to common shareholders per common share - Basic (0.91) 2.41 1.82 2.67 Net (loss) income applicable to common shareholders per common share - Diluted (0.91) 2.37 1.80 2.63 Return on common shareholders' equity (rolling 12 months) 10.5 % 17.4 % 17.0 % 16.6 % Adjusted net income return on common shareholders' equity * (rolling 12 months) 14.8 % 15.9 % 15.8 % 15.0 % Property-Liability combined ratio 97.0 94.3 94.9 88.0 Property-Liability underlying combined ratio * 86.8 86.6 85.5 84.2 The Allstate Corporation 1Q19 Supplement Executive Summary - 1
The Allstate Corporation Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to the Company’s reportable segments. The pension and other postretirement remeasurement gains and losses are reported in the Corporate and Other segment. Net income (loss) applicable to common shareholders Adjusted net income (loss) * ($ in millions) Three months ended Three months ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2018 2018 2018 2018 2018 2018 2018 2018 As adjusted Property-Liability (1) $ 13 $ 832 $ 630 $ 990 $ 532 $ 736 $ 643 $ 1,066 Service Businesses (2) (22) (20) (15) (22) 8 1 2 (3) Allstate Life (2) 63 55 75 67 69 75 80 71 Allstate Benefits (2) 20 35 36 27 26 33 36 29 Allstate Annuities (2) (122) 131 50 17 32 20 44 35 Corporate and Other (2) (537) (91) (98) (102) (115) (106) (95) (90) Consolidated $ (585) $ 942 $ 678 $ 977 $ 552 $ 759 $ 710 $ 1,108 Impact of change Property-Liability $ 30 $ 27 $ 30 $ 37 $ 30 $ 27 $ 30 $ 37 Service Businesses 2 1 1 2 2 1 1 2 Allstate Life 1 1 2 2 1 1 2 2 Allstate Benefits 1 1 2 1 1 1 2 1 Allstate Annuities 1 - - - 1 - - - Corporate and Other (308) 79 6 (11) 87 49 - - Consolidated $ (273) $ 109 $ 41 $ 31 $ 122 $ 79 $ 35 $ 42 As previously reported Property-Liability $ (17) $ 805 $ 600 $ 953 $ 502 $ 709 $ 613 $ 1,029 Service Businesses (24) (21) (16) (24) 6 - 1 (5) Allstate Life 62 54 73 65 68 74 78 69 Allstate Benefits 19 34 34 26 25 32 34 28 Allstate Annuities (123) 131 50 17 31 20 44 35 Corporate and Other (229) (170) (104) (91) (202) (155) (95) (90) Consolidated $ (312) $ 833 $ 637 $ 946 $ 430 $ 680 $ 675 $ 1,066 (1) Allstate Protection and Discontinued Lines and Coverages segments comprise Property-Liability. (2) Adjusted net income is the segment measure used for each business. The Allstate Corporation 1Q19 Supplement Executive Summary - 2
The Allstate Corporation Investor Supplement - First Quarter 2019 Table of Contents Consolidated Operations Allstate Life Condensed Statements of Operations 1 Segment Results and Other Statistics 32 Contribution to Income 2 Analysis of Net Income 33 Revenues 3 Return on Equity 34 Segment Results 4 Reserves and Contractholder Funds 35 Condensed Statements of Financial Position 5 Book Value per Common Share 6 Allstate Benefits Return on Common Shareholders' Equity 7 Segment Results and Other Statistics 36 Debt to Capital 8 Segment Premium and Other Statistics 37 Statements of Cash Flows 9 Return on Equity 38 Analysis of Deferred Policy Acquisition Costs 10 Policies in Force 11 Allstate Annuities Premiums Written for Allstate Protection and Service Businesses 12 Segment Results and Other Statistics 39 Catastrophe Losses 13 Analysis of Net Income 40 Return on Equity 41 Property-Liability Reserves and Contractholder Funds 42 Results 14 Underwriting Results by Area of Business 15 Corporate and Other Segment Results 43 Catastrophe Experience 16 Property-Liability Prior Year Reserve Reestimates 17 Investments Catastrophe Losses included in Prior Year Reserve Reestimates 18 Consolidated Investments 44 Allstate Protection Investments by Segment 45 Impact of Net Rate Changes Approved on Premiums Written 19 Unrealized Net Capital Gains and Losses by Type 46 Allstate Brand Profitability Measures 20 Net Investment Income, Yields and Realized Capital Gains (Losses) (Pre-tax) 47 Allstate Brand Statistics 21 Net Investment Income, Yields and Realized Capital Gains (Losses) (Pre-tax) by Segment 48 Esurance Brand Profitability Measures and Statistics 22 Investment Position and Results by Strategy 49 Encompass Brand Profitability Measures and Statistics 23 Investment Position and Results by Strategy by Segment 50 Auto Profitability Measures by Brand 24 Performance-Based Investments 51 Homeowners Profitability Measures by Brand 25 Limited Partnership Interests 52 Other Personal Lines Profitability Measures by Brand 26 Commercial Lines Profitability Measures 27 Definitions of Non-GAAP Measures 53,54 Discontinued Lines and Coverages Reserves 28 Service Businesses Segment Results 29 SquareTrade Results 30 Other Service Businesses Segment Results 31
The Allstate Corporation Condensed Consolidated Statements of Operations ($ in millions, except per share data) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Revenues Property and casualty insurance premiums (1) $ 8,802 $ 8,707 $ 8,595 $ 8,460 $ 8,286 Life premiums and contract charges (2) 628 625 612 612 616 Other revenue (3) 250 257 238 228 216 Net investment income 648 786 844 824 786 Realized capital gains and losses: Total other-than-temporary impairment ("OTTI") losses (16) (5) (4) (4) - OTTI losses reclassified to (from) other comprehensive income 2 1 (1) - (1) Net OTTI losses recognized in earnings (14) (4) (5) (4) (1) Sales and valuation changes on equity investments and derivatives 676 (890) 181 (21) (133) Total realized capital gains and losses 662 (894) 176 (25) (134) Total revenues 10,990 9,481 10,465 10,099 9,770 Costs and expenses Property and casualty insurance claims and claims expense 5,820 6,067 5,805 5,777 5,129 Life contract benefits 497 488 498 483 504 Interest credited to contractholder funds 162 165 163 165 161 Amortization of deferred policy acquisition costs 1,364 1,336 1,317 1,296 1,273 Operating costs and expenses 1,380 1,508 1,425 1,358 1,303 Pension and other postretirement remeasurement gains and losses 15 500 (39) (7) 14 Amortization of purchased intangible assets 32 36 24 23 22 Restructuring and related charges 18 12 13 23 19 Interest expense 83 81 82 86 83 Total costs and expenses 9,371 10,193 9,288 9,204 8,508 Gain on disposition of operations 1 2 1 2 1 Income (Loss) from operations before income tax expense 1,620 (710) 1,178 897 1,263 Income tax expense (benefit) 328 (168) (4) 199 (4) 180 257 Net income (loss) 1,292 (542) 979 717 1,006 Preferred stock dividends 31 43 37 39 29 Net income (loss) applicable to common shareholders $ 1,261 $ (585) $ 942 $ 678 $ 977 Earnings per common share Net income (loss) applicable to common shareholders per common share - Basic $ 3.79 $ (1.71) $ 2.72 $ 1.94 $ 2.76 Weighted average common shares - Basic 332.6 341.9 346.0 349.2 354.1 Net income (loss) applicable to common shareholders per common share - Diluted $ 3.74 $ (1.71) (5) $ 2.68 $ 1.91 $ 2.71 Weighted average common shares - Diluted 337.5 347.1 351.7 354.6 359.9 Cash dividends declared per common share $ 0.50 $ 0.46 $ 0.46 $ 0.46 $ 0.46 (1) Property and casualty insurance premiums are reported in the Property-Liability and Service Businesses results and include auto, homeowners and other personal lines insurance products, as well as consumer product protection plans, roadside assistance, and finance and insurance products. (2) Life premiums and contract charges are reported in the Allstate Life, Allstate Benefits and Allstate Annuities results and include life insurance, voluntary accident and health insurance, and annuity products. (3) Other revenue primarily represents fees collected from policyholders relating to premium installment payments, commissions on sales of non-proprietary products, fee-based services and other revenue transactions. (4) Includes a $2 million Tax Legislation expense for the quarter ended December 31, 2018 and a $31 million benefit for the quarter ended September 30, 2018. (5) Calculation uses weighted average shares of 341.9 million, which excludes weighted average diluted shares of 5.2 million due to a net loss reported for the three months ended December 31, 2018. The Allstate Corporation 1Q19 Supplement 1
The Allstate Corporation Contribution to Income ($ in millions, except per share data) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Contribution to income Net income (loss) applicable to common shareholders $ 1,261 $ (585) $ 942 $ 678 $ 977 Realized capital gains and losses, after-tax (524) 704 (141) 19 106 Pension and other postretirement remeasurement gains and losses, after-tax 11 395 (30) (6) 11 Valuation changes on embedded derivatives not hedged, after-tax 3 2 (1) - (4) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives not hedged, after-tax 2 1 1 3 2 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax (1) (1) - (1) - Business combination expenses and the amortization of purchased intangible assets, after-tax 25 35 20 18 17 Gain on disposition of operations, after-tax (1) (1) (1) (1) (1) Tax Legislation expense (benefit) - 2 (31) - - Adjusted net income * $ 776 $ 552 $ 759 $ 710 $ 1,108 Income per common share - Diluted (1) Net income (loss) applicable to common shareholders $ 3.74 $ (1.71) $ 2.68 $ 1.91 $ 2.71 Realized capital gains and losses, after-tax (1.55) 2.03 (0.40) 0.05 0.29 Pension and other postretirement remeasurement gains and losses, after-tax 0.03 1.15 (0.08) (0.01) 0.03 Valuation changes on embedded derivatives not hedged, after-tax 0.01 0.01 - - (0.01) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives not hedged, after-tax - - - - 0.01 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - - - - Business combination expenses and the amortization of purchased intangible assets, after-tax 0.07 0.10 0.05 0.05 0.05 Gain on disposition of operations, after-tax - - - - - Tax Legislation expense (benefit) - 0.01 (0.09) - - Adjusted net income * $ 2.30 $ 1.59 $ 2.16 $ 2.00 $ 3.08 Weighted average common shares - Diluted 337.5 347.1 351.7 354.6 359.9 (1) Calculation uses weighted average shares of 341.9 million, which excludes weighted average diluted shares of 5.2 million due to a net loss reported for the three months ended December 31, 2018. The Allstate Corporation 1Q19 Supplement 2
The Allstate Corporation Revenues ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Property-Liability (1) Insurance premiums $ 8,507 $ 8,422 $ 8,320 $ 8,189 $ 8,019 Other revenue (2) 176 188 192 184 174 Net investment income 291 364 410 353 337 Realized capital gains and losses 497 (655) 126 (15) (95) Total Property-Liability revenues 9,471 8,319 9,048 8,711 8,435 Service Businesses Insurance premiums 295 285 275 271 267 Intersegment insurance premiums and service fees (3) 33 33 31 29 29 Other revenue (2) 47 34 16 16 16 Net investment income 9 9 7 6 5 Realized capital gains and losses 8 (5) - (2) (4) Total Service Businesses revenues 392 356 329 320 313 Allstate Life Premiums and contract charges 337 340 322 326 327 Other revenue (2) 27 35 30 28 26 Net investment income 127 125 128 130 122 Realized capital gains and losses (5) (5) (3) (3) (3) Total Allstate Life revenues 486 495 477 481 472 Allstate Benefits Premiums and contract charges 288 281 285 283 286 Net investment income 19 20 19 19 19 Realized capital gains and losses 4 (9) 2 - (2) Total Allstate Benefits revenues 311 292 306 302 303 Allstate Annuities Contract charges 3 4 5 3 3 Net investment income 190 253 260 293 290 Realized capital gains and losses 156 (194) 51 6 (29) Total Allstate Annuities revenues 349 63 316 302 264 Corporate and Other Net investment income 12 15 20 23 13 Realized capital gains and losses 2 (26) - (11) (1) Total Corporate and Other revenues 14 (11) 20 12 12 Intersegment eliminations (3) (33) (33) (31) (29) (29) Consolidated revenues $ 10,990 $ 9,481 $ 10,465 $ 10,099 $ 9,770 (1) Allstate Protection and Discontinued Lines and Coverages segments comprise Property-Liability. (2) Other revenue primarily represents fees collected from policyholders relating to premium installment payments, commissions on sales of non-proprietary products, fee- based services and other revenue transactions. (3) Intersegment insurance premiums and service fees are primarily related to Arity and Allstate Roadside Services and are eliminated in the consolidated financial statements. The Allstate Corporation 1Q19 Supplement 3
The Allstate Corporation Consolidating Segment Results Allstate Discontinued Property- Service Allstate Allstate Allstate Corporate Intersegment ($ in millions) Protection Lines Liability Businesses Life Benefits Annuities and Other Eliminations Consolidated Three months ended March 31, 2019 Premiums and contract charges $ 8,507 $ - $ 8,507 $ 295 $ 337 $ 288 $ 3 $ - $ - $ 9,430 Intersegment insurance premiums and service fees - - - 33 - - - - (33) - Other revenue 176 - 176 47 27 - - - - 250 Claims and claims expense (5,728) (2) (5,730) (92) - - - - 2 (5,820) Contract benefits and interest credited to contractholder funds - - - - (286) (154) (219) - - (659) Amortization of deferred policy acquisition costs (1,164) - (1,164) (127) (28) (43) (2) - - (1,364) Operating costs and expenses (1,069) (1) (1,070) (151) (91) (71) (7) (21) 31 (1,380) Pension and other postretirement remeasurement gains and losses - - - - - - - (15) - (15) Amortization of purchased intangible assets (1) - (1) (31) - - - - - (32) Restructuring and related charges (18) - (18) - - - - - - (18) Interest expense - - - - - - - (83) - (83) Underwriting income (loss) $ 703 $ (3) 700 Net investment income 291 9 127 19 190 12 - 648 Realized capital gains and losses 497 8 (5) 4 156 2 - 662 Gain on disposition of operations - - - - 1 - - 1 Income tax (expense) benefit (306) 3 (14) (9) (25) 23 - (328) Preferred stock dividends - - - - - (31) - (31) Net income (loss) applicable to common shareholders $ 1,182 $ (6) $ 67 $ 34 $ 97 $ (113) $ - $ 1,261 Realized capital gains and losses, after-tax (393) (7) 4 (3) (124) (1) - (524) Pension and other postretirement remeasurement gains and losses, after-tax - - - - - 11 11 Valuation changes on embedded derivatives not hedged, after-tax - - - - 3 - - 3 DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives not hedged, after-tax - - 2 - - - - 2 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax (1) - - - - - - (1) Business combination expenses and the amortization of purchased intangible assets, after-tax 1 24 - - - - - 25 Gain on disposition of operations, after-tax - - - - (1) - - (1) Adjusted net income (loss) * $ 789 $ 11 (1) $ 73 (1) $ 31 (1) $ (25) (1) $ (103) (1) $ - $ 776 Three months ended March 31, 2018 Premiums and contract charges $ 8,019 $ - $ 8,019 $ 267 $ 327 $ 286 $ 3 $ - $ - $ 8,902 Intersegment insurance premiums and service fees - - - 29 - - - - (29) - Other revenue 174 - 174 16 26 - - - - 216 Claims and claims expense (5,035) (3) (5,038) (93) - - - - 2 (5,129) Contract benefits and interest credited to contractholder funds - - - - (275) (157) (233) - - (665) Amortization of deferred policy acquisition costs (1,088) - (1,088) (110) (33) (41) (1) - - (1,273) Operating costs and expenses (1,043) - (1,043) (117) (83) (70) (9) (8) 27 (1,303) Pension and other postretirement remeasurement gains and losses - - - - - - - (14) - (14) Amortization of purchased intangible assets (1) - (1) (21) - - - - - (22) Restructuring and related charges (18) - (18) (1) - - - - - (19) Interest expense - - - - - - - (83) - (83) Underwriting income (loss) $ 1,008 $ (3) 1,005 Net investment income 337 5 122 19 290 13 - 786 Realized capital gains and losses (95) (4) (3) (2) (29) (1) - (134) Gain on disposition of operations - - - - 1 - - 1 Income tax (expense) benefit (257) 7 (14) (8) (5) 20 - (257) Preferred stock dividends - - - - - (29) - (29) Net income (loss) applicable to common shareholders $ 990 $ (22) $ 67 $ 27 $ 17 $ (102) $ - $ 977 Realized capital gains and losses, after-tax 75 3 2 2 23 1 - 106 Pension and other postretirement remeasurement gains and losses, after-tax - - - - - 11 - 11 Valuation changes on embedded derivatives not hedged, after-tax - - - - (4) - - (4) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives not hedged, after-tax - - 2 - - - - 2 Business combination expenses and the amortization of purchased intangible assets, after-tax 1 16 - - - - - 17 Gain on disposition of operations, after-tax - - - - (1) - - (1) Adjusted net income (loss) * $ 1,066 $ (3) (1) $ 71 (1) $ 29 (1) $ 35 (1) $ (90) (1) $ - $ 1,108 (1) Adjusted net income is the segment measure used for each business. The Allstate Corporation 1Q19 Supplement 4
The Allstate Corporation Condensed Consolidated Statements of Financial Position ($ in millions) March 31, 2019 Dec. 31, 2018 Sept. 30, 2018 June 30, 2018 March 31, 2018 Assets Investments Fixed income securities, at fair value (1) $ 58,202 $ 57,170 $ 57,663 $ 56,891 $ 56,674 Equity securities, at fair value (2) 5,802 5,036 6,965 6,888 6,986 Mortgage loans 4,681 4,670 4,592 4,535 4,679 Limited partnership interests 7,493 7,505 7,602 7,679 7,434 Short-term, at fair value 4,157 3,027 3,071 3,123 3,424 Other 3,786 3,852 4,075 4,125 4,092 Total investments 84,121 81,260 83,968 83,241 83,289 Cash 551 499 460 489 450 Premium installment receivables, net 6,201 6,154 6,196 5,953 5,856 Deferred policy acquisition costs 4,670 4,784 4,667 4,533 4,409 Reinsurance and indemnification recoverables, net 9,374 9,565 8,994 8,910 8,916 Accrued investment income 614 600 616 589 576 Property and equipment, net 1,047 1,045 1,032 1,040 1,060 Goodwill 2,547 2,530 2,189 2,189 2,189 Other assets 3,659 3,007 3,060 3,150 3,230 Separate Accounts 3,050 2,805 3,307 3,271 3,314 Total assets $ 115,834 $ 112,249 $ 114,489 $ 113,365 $ 113,289 Liabilities Reserve for property and casualty insurance claims and claims expense $ 27,544 $ 27,423 $ 26,939 $ 26,623 $ 26,115 Reserve for life-contingent contract benefits 12,200 12,208 12,214 12,213 12,333 Contractholder funds 18,161 18,371 18,650 18,888 19,139 Unearned premiums 14,323 14,510 14,408 13,824 13,448 Claim payments outstanding 891 1,007 904 894 865 Deferred income taxes 817 425 667 723 723 Other liabilities and accrued expenses 8,977 7,737 7,291 7,359 7,232 Long-term debt 6,453 6,451 6,450 6,448 6,847 Separate Accounts 3,050 2,805 3,307 3,271 3,314 Total liabilities 92,416 90,937 90,830 90,243 90,016 Equity Preferred stock and additional capital paid-in (3) 1,930 1,930 2,303 2,303 2,303 Common stock (4) 9 9 9 9 9 Additional capital paid-in 3,291 3,310 3,441 3,391 3,367 Retained income 45,148 44,033 44,776 43,997 43,479 Deferred ESOP expense (3) (3) (3) (3) (3) Treasury stock, at cost (5) (28,042) (28,085) (27,011) (26,818) (26,280) Accumulated other comprehensive income: Unrealized net capital gains and losses 972 (2) (16) 54 187 Unrealized foreign currency translation adjustments (44) (49) (23) (9) (3) Unamortized pension and other postretirement prior service credit 157 169 183 198 214 Total accumulated other comprehensive income 1,085 118 144 243 398 Total shareholders' equity 23,418 21,312 23,659 23,122 23,273 Total liabilities and shareholders' equity $ 115,834 $ 112,249 $ 114,489 $ 113,365 $ 113,289 (1) Amortized cost was $56,831, $57,134, $57,618, $56,750 and $56,209 as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. (2) Cost was $4,767, $4,489, $5,741, $5,846 and $5,928 as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. (3) Preferred shares outstanding were 79.8 thousand at March 31, 2019 and December 31, 2018 and 95.2 thousand at September 30, 2018, June 30, 2018 and March 31, 2018. (4) Common shares outstanding were 333,056,875; 331,908,805; 344,950,779; 346,600,485 and 352,133,515 as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. (5) Treasury shares outstanding were 567 million, 568 million, 555 million, 553 million and 548 million as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. The Allstate Corporation 1Q19 Supplement 5
The Allstate Corporation Book Value per Common Share ($ in millions, except per share data) March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Book value per common share Numerator: Common shareholders' equity (1) $ 21,488 $ 19,382 $ 21,356 $ 20,819 $ 20,970 Denominator: Common shares outstanding and dilutive potential common shares outstanding 337.9 336.7 350.9 351.9 357.7 Book value per common share $ 63.59 $ 57.56 $ 60.86 $ 59.16 $ 58.62 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities Numerator: Common shareholders' equity $ 21,488 $ 19,382 $ 21,356 $ 20,819 $ 20,970 Less: Unrealized net capital gains and losses on fixed income securities 975 - (15) 55 187 Adjusted common shareholders' equity $ 20,513 $ 19,382 $ 21,371 $ 20,764 $ 20,783 Denominator: Common shares outstanding and dilutive potential common shares outstanding 337.9 336.7 350.9 351.9 357.7 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities * $ 60.71 $ 57.56 $ 60.90 $ 59.01 $ 58.10 (1) Excludes equity related to preferred stock of $1,930 million at March 31, 2019 and December 31, 2018 and $2,303 million for all other periods presented. The Allstate Corporation 1Q19 Supplement 6
The Allstate Corporation Return on Common Shareholders' Equity ($ in millions) Twelve months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Return on Common Shareholders' Equity Numerator: Net income applicable to common shareholders (1) $ 2,296 (4) $ 2,012 (4) $ 3,891 (4) $ 3,759 (4) $ 3,630 (4) Denominator: Beginning common shareholders' equity $ 20,970 $ 20,805 $ 20,508 $ 19,806 $ 19,495 Ending common shareholders' equity (2) 21,488 19,382 21,356 20,819 20,970 Average common shareholders' equity (3) $ 21,229 $ 20,094 $ 20,932 $ 20,313 $ 20,233 Return on common shareholders' equity 10.8 % 10.0 % 18.6 % 18.5 % 17.9 % Adjusted Net Income Return on Common Shareholders' Equity Numerator: Adjusted net income * (1) $ 2,797 $ 3,129 $ 3,400 $ 3,322 $ 3,157 Denominator: Beginning common shareholders' equity $ 20,970 $ 20,805 $ 20,508 $ 19,806 $ 19,495 Less: Unrealized net capital gains and losses 187 1,662 1,651 1,526 1,256 Adjusted beginning common shareholders' equity 20,783 19,143 18,857 18,280 18,239 Ending common shareholders' equity 21,488 19,382 21,356 20,819 20,970 Less: Unrealized net capital gains and losses 972 (2) (16) 54 187 Adjusted ending common shareholders' equity 20,516 19,384 21,372 20,765 20,783 Average adjusted common shareholders' equity (3) $ 20,650 $ 19,264 $ 20,115 $ 19,523 $ 19,511 Adjusted net income return on common shareholders' equity * 13.5 % 16.2 % 16.9 % 17.0 % 16.2 % (1) Net income applicable to common shareholders and adjusted net income reflect a trailing twelve-month period. (2) Excludes equity related to preferred stock of $1,930 million at March 31, 2019 and December 31, 2018 and $2,303 million for all other periods presented. (3) Average common shareholders' equity and average adjusted common shareholders' equity are determined using a two-point average, with the beginning and ending common shareholders' equity and adjusted common shareholders' equity, respectively, for the twelve-month period as data points. (4) Includes a $29 million Tax Legislation benefit for the periods ended March 31, 2019 and December 31, 2018, $540 million benefit for the period ended September 30, 2018, and a $509 million benefit for all other periods presented. The Allstate Corporation 1Q19 Supplement 7
The Allstate Corporation Debt to Capital March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2019 2018 2018 2018 2018 Debt Short-term debt $ - $ - $ - $ - $ - Long-term debt 6,453 6,451 6,450 6,448 6,847 Total debt $ 6,453 $ 6,451 $ 6,450 $ 6,448 $ 6,847 Capital resources Debt $ 6,453 $ 6,451 $ 6,450 $ 6,448 $ 6,847 Shareholders' equity Preferred stock and additional capital paid-in 1,930 1,930 2,303 2,303 2,303 Common stock 9 9 9 9 9 Additional capital paid-in 3,291 3,310 3,441 3,391 3,367 Retained income 45,148 44,033 44,776 43,997 43,479 Deferred ESOP expense (3) (3) (3) (3) (3) Treasury stock (28,042) (28,085) (27,011) (26,818) (26,280) Unrealized net capital gains and losses 972 (2) (16) 54 187 Unrealized foreign currency translation adjustments (44) (49) (23) (9) (3) Unamortized pension and other postretirement prior service credit 157 169 183 198 214 Total shareholders' equity 23,418 21,312 23,659 23,122 23,273 Total capital resources $ 29,871 $ 27,763 $ 30,109 $ 29,570 $ 30,120 Ratio of debt to shareholders' equity 27.6% 30.3% 27.3% 27.9% 29.4% Ratio of debt to capital resources 21.6% 23.2% 21.4% 21.8% 22.7% The Allstate Corporation 1Q19 Supplement 8
The Allstate Corporation Consolidated Statements of Cash Flows ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Cash flows from operating activities Net income $ 1,292 $ (542) $ 979 $ 717 $ 1,006 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 157 135 128 126 122 Realized capital gains and losses (662) 894 (176) 25 134 Pension and other postretirement remeasurement gains and losses 15 500 (39) (7) 14 Gain on disposition of operations (1) (2) (1) (2) (1) Interest credited to contractholder funds 162 165 163 165 161 Changes in: Policy benefits and other insurance reserves (114) 379 112 342 (364) Unearned premiums (201) 130 574 415 (204) Deferred policy acquisition costs 33 (93) (123) (90) 10 Premium installment receivables, net (39) 26 (237) (127) (58) Reinsurance recoverables, net 179 (553) (94) 3 (12) Income taxes 303 (202) 60 (427) 189 Other operating assets and liabilities (410) 520 382 324 (371) Net cash provided by operating activities 714 1,357 1,728 1,464 626 Cash flows from investing activities Proceeds from sales Fixed income securities 9,034 6,960 6,708 8,896 10,619 Equity securities 633 2,222 1,061 2,438 1,138 Limited partnership interests 241 274 308 129 53 Other investments 44 299 99 59 76 Investment collections Fixed income securities 628 1,078 946 859 583 Mortgage loans 104 151 63 269 46 Other investments 68 118 135 113 122 Investment purchases Fixed income securities (9,056) (7,911) (8,648) (10,612) (9,789) Equity securities (871) (1,145) (890) (2,366) (1,535) Limited partnership interests (282) (362) (444) (458) (415) Mortgage loans (114) (229) (119) (124) (192) Other investments (89) (178) (151) (205) (330) Change in short-term investments, net (552) 160 (153) 1,021 (1,533) Change in other investments, net 47 (70) 7 (8) (27) Purchases of property and equipment, net (80) (82) (67) (66) (62) Acquisition of operations (18) (548) - (5) (5) Net cash (used in) provided by investing activities (263) 737 (1,145) (60) (1,251) Cash flows from financing activities Proceeds from issuance of long-term debt - - - - 498 Redemption and repayment of long-term debt - 1 - (401) - Redemption of preferred stock - (385) - - - Proceeds from issuance of preferred stock - - - (1) (1) 558 Contractholder fund deposits 254 254 250 253 253 Contractholder fund withdrawals (458) (493) (477) (505) (492) Dividends paid on common stock (158) (159) (160) (163) (132) Dividends paid on preferred stock (31) (37) (39) (29) (29) Treasury stock purchases - (1,241) (224) (568) (270) Shares reissued under equity incentive plans, net (5) 7 38 18 10 Other (1) (2) - 31 62 Net cash (used in) provided by financing activities (399) (2,055) (612) (1,365) 458 Net increase (decrease) in cash 52 39 (29) 39 (167) Cash at beginning of period 499 460 489 450 617 Cash at end of period $ 551 $ 499 $ 460 $ 489 $ 450 (1) Represents payment of issuance costs for March 29, 2018 preferred stock issuance. The Allstate Corporation 1Q19 Supplement 9
The Allstate Corporation Analysis of Deferred Policy Acquisition Costs Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy ($ in millions) For the three months ended March 31, 2019 Acquisition Costs as of March 31, 2019 Amortization relating to realized capital gains and losses and Amortization valuation changes (acceleration) DAC before DAC after impact Beginning on embedded deceleration for Effect of impact of Impact of of unrealized balance Acquisition costs Amortization before derivatives not changes in unrealized capital Ending balance unrealized capital unrealized capital capital gains and Dec. 31, 2018 deferred adjustments (1)(2) hedged (2) assumptions (2) gains and losses March 31, 2019 gains and losses gains and losses losses Allstate Protection $ 1,618 $ 1,128 $ (1,164) $ - $ - $ - $ 1,582 $ 1,582 $ - $ 1,582 Service Businesses 1,290 139 (127) - - - 1,302 1,302 - 1,302 Allstate Life Traditional life and accident and health 489 15 (12) - - - 492 492 - 492 Interest-sensitive life 811 15 (14) (2) - (81) 729 845 (116) 729 Subtotal 1,300 30 (26) (2) - (81) 1,221 1,337 (116) 1,221 Allstate Benefits Traditional life and accident and health 408 31 (37) - - - 402 402 - 402 Interest-sensitive life 141 5 (6) - - (2) 138 139 (1) 138 Subtotal 549 36 (43) - - (2) 540 541 (1) 540 Allstate Annuities Fixed annuity 27 - (2) - - - 25 25 - 25 Consolidated $ 4,784 $ 1,333 $ (1,362) $ (2) $ - $ (83) $ 4,670 $ 4,787 $ (117) $ 4,670 Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy For the three months ended March 31, 2018 Acquisition Costs as of March 31, 2018 Amortization relating to realized capital gains and losses and Amortization valuation changes (acceleration) DAC before DAC after impact Beginning on embedded deceleration for Effect of Ending impact of Impact of of unrealized balance Acquisition costs Amortization before derivatives not changes in unrealized capital balance unrealized capital unrealized capital capital gains and Dec. 31, 2017 deferred adjustments (1)(2) hedged (2) assumptions (2) gains and losses March 31, 2018 gains and losses gains and losses losses Allstate Protection $ 1,510 $ 1,062 $ (1,088) $ - $ - $ - $ 1,484 $ 1,484 $ - $ 1,484 Service Businesses 954 279 (110) - - - 1,123 1,123 - 1,123 Allstate Life Traditional life and accident and health 465 14 (11) - - - 468 468 - 468 Interest-sensitive life 687 16 (20) (2) - 79 760 866 (106) 760 Subtotal 1,152 30 (31) (2) - 79 1,228 1,334 (106) 1,228 Allstate Benefits Traditional life and accident and health 403 35 (35) - - - 403 403 - 403 Interest-sensitive life 139 5 (6) - - 1 139 139 - 139 Subtotal 542 40 (41) - - 1 542 542 - 542 Allstate Annuities Fixed annuity 33 - (1) - - - 32 32 - 32 Consolidated $ 4,191 $ 1,411 $ (1,271) $ (2) $ - $ 80 $ 4,409 $ 4,515 $ (106) $ 4,409 (1) Amortization before adjustments reflects total DAC amortization before amortization/accretion related to realized capital gains and losses and valuation changes on embedded derivatives not hedged and amortization acceleration/deceleration for changes in assumptions. (2) Included as a component of amortization of DAC on the Condensed Consolidated Statements of Operations. The Allstate Corporation 1Q19 Supplement 10
The Allstate Corporation Policies in Force and Other Statistics March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Policies in Force statistics (in thousands) (1) Allstate Protection Allstate brand Auto 20,145 20,104 19,912 19,810 19,617 Homeowners 6,198 6,186 6,145 6,121 6,093 Landlord 676 681 683 688 692 Renter 1,655 1,642 1,626 1,612 1,599 Condominium 668 668 665 664 663 Other 1,307 1,304 1,297 1,287 1,276 Other personal lines 4,306 4,295 4,271 4,251 4,230 Commercial lines 230 231 231 234 238 Total 30,879 30,816 30,559 30,416 30,178 Esurance brand Auto 1,548 1,488 1,463 1,432 1,399 Homeowners 98 95 92 88 84 Other personal lines 48 46 46 46 45 Total 1,694 1,629 1,601 1,566 1,528 Encompass brand Auto 499 502 504 507 517 Homeowners 237 239 240 243 248 Other personal lines 78 78 80 81 83 Total 814 819 824 831 848 Allstate Protection Policies in Force 33,387 33,264 32,984 32,813 32,554 Service Businesses SquareTrade 77,866 68,588 52,151 44,459 41,806 InfoArmor 1,211 1,040 - - - Allstate Roadside Services 649 663 671 681 692 Allstate Dealer Services 3,863 3,896 3,919 3,959 4,026 Total 83,589 74,187 56,741 49,099 46,524 Allstate Life 2,012 2,022 2,018 2,019 2,018 Allstate Benefits 4,322 4,208 4,241 4,283 4,260 Allstate Annuities 206 211 215 220 225 Total Policies in Force 123,516 113,892 96,199 88,434 85,581 Agency Data (2) Total Allstate agencies (3) 12,700 12,700 12,400 12,300 12,300 Licensed sales professionals (4) 26,800 26,900 25,600 25,200 24,700 Allstate independent agencies (5)(6) 3,000 2,700 2,600 2,600 2,500 (1) 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 for the agreement with a transportation network company reflects corporate contracts as opposed to individual driver counts. • Non-proprietary products offered by Ivantage (insurance agency) and Answer Financial (independent insurance agency) are not included. • Allstate Roadside Services reflects memberships in force and do not include their wholesale partners as the customer relationship is managed by the wholesale partner. • Allstate Dealer Services reflects service contracts and other products sold in conjunction with auto lending and vehicle sales transactions and do not include their third party administrators ("TPAs") as the customer relationship is managed by the TPAs. • SquareTrade represents active consumer product protection plans. • InfoArmor reflects individual customer counts for identity protection products. • Allstate Life insurance policies and Allstate Annuities in force reflect the number of contracts in force excluding sold blocks of business that remain on the balance sheet due to the dispositions of the business being effected through reinsurance arrangements. • Allstate Benefits reflects certificate counts as opposed to group counts. (2) Rounded to the nearest hundred. (3) Total Allstate agencies represents exclusive Allstate agencies and financial representatives in the United States and employee producers in Canada. (4) Represents employees of Allstate agencies who are licensed to sell Allstate products. (5) Includes 816 and 919 engaged Allstate independent agencies (“AIAs”) as of March 31, 2019 and December 31, 2018, respectively. Engaged AIAs, as currently determined, include those that achieve a minimum number of new policies written. (6) Beginning March 31, 2019, includes separate agency counts for agencies operating out of multiple locations, which increased the total agencies by approximately 200. The Allstate Corporation 1Q19 Supplement 11
The Allstate Corporation Premiums Written for Allstate Protection and Service Businesses ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate Protection Allstate brand (1) Auto $ 5,395 $ 5,272 $ 5,357 $ 5,211 $ 5,151 Homeowners 1,565 1,777 2,008 1,949 1,465 Landlord 124 133 139 131 121 Renter 69 70 86 77 69 Condominium 62 68 73 72 59 Other 144 149 174 195 126 Other personal lines 399 420 472 475 375 Commercial lines 185 177 173 172 137 Total 7,544 7,646 8,010 7,807 7,128 Esurance brand Auto 532 452 487 430 470 Homeowners 25 23 30 27 21 Other personal lines 2 2 2 2 2 Total 559 477 519 459 493 Encompass brand Auto 120 130 143 146 118 Homeowners 86 98 106 108 86 Other personal lines 18 19 22 21 19 Total 224 247 271 275 223 Total Allstate Protection Auto 6,047 5,854 5,987 5,787 5,739 Homeowners 1,676 1,898 2,144 2,084 1,572 Other personal lines 419 441 496 498 396 Commercial lines 185 177 173 172 137 Total 8,327 8,370 8,800 8,541 7,844 Discontinued Lines and Coverages - - - - - Total Property-Liability $ 8,327 $ 8,370 $ 8,800 $ 8,541 $ 7,844 Service Businesses (2) SquareTrade $ 206 $ 323 $ 194 $ 126 $ 130 Allstate Roadside Services 63 61 65 68 65 Allstate Dealer Services 99 105 99 103 92 Total $ 368 $ 489 $ 358 $ 297 $ 287 Total premiums written $ 8,695 $ 8,859 $ 9,158 $ 8,838 $ 8,131 Non-Proprietary Premiums Ivantage (3) $ 1,806 $ 1,780 $ 1,758 $ 1,719 $ 1,679 Answer Financial (4) 145 140 156 156 148 (1) Canada premiums included in Allstate brand Auto $ 205 $ 220 $ 244 $ 245 $ 186 Homeowners 58 68 77 77 50 Other personal lines 20 23 25 29 14 Total $ 283 $ 311 $ 346 $ 351 $ 250 (2) There are no premiums written for Arity or InfoArmor, which are part of the Service Businesses segment. Revenues for Arity and InfoArmor are reported as intersegment service fees and other revenue, respectively. (3) Represents non-proprietary premiums under management as of the end of the period related to personal and commercial line products offered by Ivantage when an Allstate product is not available. Fees for the three months ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018 were $37.3 million, $39.3 million, $45.2 million, $43.5 million and $37.2 million, respectively. (4) Represents non-proprietary premiums written for the period. Commissions earned for the three months ended March 31, 2019 were $20.2 million. The Allstate Corporation 1Q19 Supplement 12
The Allstate Corporation Catastrophe Losses ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate Protection Allstate brand Auto $ 68 $ 53 $ 113 $ 160 $ (1) Homeowners 511 (1) 798 (1) 418 627 300 Other personal lines 64 87 51 46 27 Commercial lines 1 9 6 4 3 Total 644 947 588 837 329 Esurance brand Auto 3 2 8 15 2 Homeowners 3 4 6 14 1 Total 6 6 14 29 3 Encompass brand Auto 3 (1) 2 4 1 Homeowners 25 9 20 34 26 Other personal lines 2 2 1 2 2 Total 30 10 23 40 29 Total Allstate Protection Auto 74 54 123 179 2 Homeowners 539 811 444 675 327 Other personal lines 66 89 52 48 29 Commercial lines 1 9 6 4 3 Total 680 963 625 906 361 Discontinued Lines and Coverages - - - - - Total Property-Liability $ 680 $ 963 $ 625 $ 906 $ 361 Service Businesses $ - $ - $ - $ - $ - Total catastrophe losses $ 680 $ 963 $ 625 $ 906 $ 361 (1) Includes $15 million and $60 million of reinstatement reinsurance premiums for the periods ended March 31, 2019 and December 31, 2018, respectively, related to the 2018 Camp Fire. The Allstate Corporation 1Q19 Supplement 13
The Allstate Corporation Property-Liability Results ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Premiums written $ 8,327 $ 8,370 $ 8,800 $ 8,541 $ 7,844 Decrease (increase) in unearned premiums 179 99 (505) (347) 209 Other 1 (47) 25 (5) (34) Premiums earned 8,507 8,422 8,320 8,189 8,019 Other revenue 176 188 192 184 174 Claims and claims expense (5,730) (5,991) (5,717) (5,689) (5,038) Amortization of deferred policy acquisition costs (1,164) (1,144) (1,133) (1,110) (1,088) Operating costs and expenses (1,071) (1,180) (1,143) (1,098) (1,044) Restructuring and related charges (18) (9) (12) (21) (18) Underwriting income 700 286 507 455 1,005 Net investment income 291 364 410 353 337 Income tax expense on operations (202) (119) (185) (166) (277) Realized capital gains and losses, after-tax 393 (516) 103 (12) (75) Tax Legislation expense - (2) (3) - - Net income applicable to common shareholders $ 1,182 $ 13 $ 832 $ 630 $ 990 Catastrophe losses $ 680 $ 963 $ 625 $ 906 $ 361 Amortization of purchased intangible assets $ 1 $ 3 $ 4 $ 3 $ 1 Operating ratios Claims and claims expense ("loss") ratio 67.4 71.1 68.7 69.4 62.9 Expense ratio (1) 24.4 25.5 25.2 25.0 24.6 Combined ratio 91.8 96.6 93.9 94.4 87.5 Loss ratio 67.4 71.1 68.7 69.4 62.9 Less: effect of catastrophe losses 8.0 11.4 7.5 11.1 4.5 effect of prior year non-catastrophe reserve reestimates (0.4) (1.1) 0.2 (1.7) (0.6) Underlying loss ratio * 59.8 60.8 61.0 60.0 59.0 Reconciliation of combined ratio to underlying combined ratio Combined ratio 91.8 96.6 93.9 94.4 87.5 Effect of catastrophe losses (8.0) (11.4) (7.5) (11.1) (4.5) Effect of prior year non-catastrophe reserve reestimates 0.4 1.1 (0.2) 1.7 0.6 Underlying combined ratio * 84.2 86.3 86.2 85.0 83.6 Effect of restructuring and related charges on combined ratio 0.2 0.1 0.1 0.3 0.2 Effect of Discontinued Lines and Coverages on combined ratio 0.1 - 1.0 - 0.1 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. 14 The Allstate Corporation 1Q19 Supplement
The Allstate Corporation Property-Liability Underwriting Results by Area of Business ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Property-Liability Underwriting Summary Allstate Protection $ 703 $ 290 $ 587 $ 458 $ 1,008 Discontinued Lines and Coverages (3) (4) (80) (3) (3) Underwriting income $ 700 $ 286 $ 507 $ 455 $ 1,005 Allstate Protection Underwriting Summary Premiums written $ 8,327 $ 8,370 $ 8,800 $ 8,541 $ 7,844 Premiums earned $ 8,507 $ 8,422 $ 8,320 $ 8,189 $ 8,019 Other revenue 176 188 192 184 174 Claims and claims expense (5,728) (5,989) (5,637) (5,687) (5,035) Amortization of deferred policy acquisition costs (1,164) (1,144) (1,133) (1,110) (1,088) Operating costs and expenses (1,070) (1,178) (1,143) (1,097) (1,044) Restructuring and related charges (18) (9) (12) (21) (18) Underwriting income $ 703 $ 290 $ 587 $ 458 $ 1,008 Catastrophe losses $ 680 $ 963 $ 625 $ 906 $ 361 Operating ratios Loss ratio 67.3 71.1 67.7 69.4 62.8 Expense ratio (1) 24.4 25.5 25.2 25.0 24.6 Combined ratio 91.7 96.6 92.9 94.4 87.4 Effect of catastrophe losses on combined ratio 8.0 11.4 7.5 11.1 4.5 Effect of restructuring and related charges on combined ratio 0.2 0.1 0.1 0.3 0.2 Discontinued Lines and Coverages Underwriting Summary Premiums written $ - $ - $ - $ - $ - Premiums earned $ - $ - $ - $ - $ - Claims and claims expense (2) (2) (80) (2) (3) Operating costs and expenses (1) (2) - (1) - Underwriting loss $ (3) $ (4) $ (80) $ (3) $ (3) Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio 0.1 - 1.0 - 0.1 Allstate Protection Underwriting Income (Loss) by Brand Allstate brand $ 702 $ 306 $ 587 $ 463 $ 1,001 Esurance brand 3 (9) (10) (9) 3 Encompass brand (2) (4) 11 5 6 Answer Financial - (3) (1) (1) (2) Underwriting income $ 703 $ 290 $ 587 $ 458 $ 1,008 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. 15 The Allstate Corporation 1Q19 Supplement
The Allstate Corporation Property-Liability Catastrophe Experience Catastrophe by Size of Event ($ in millions) Three months ended March 31, 2019 Average Number of Claims and Combined ratio catastrophe loss Size of catastrophe events claims expense impact per event Greater than $250 million - - % $ - - % - $ - $101 million to $250 million 1 4.6 225 33.1 2.7 225 $50 million to $100 million 3 13.6 225 33.1 2.7 75 Less than $50 million 18 81.8 177 26.0 2.0 10 Total 22 100.0 % 627 92.2 7.4 29 Prior year reserve reestimates 53 7.8 0.6 Total catastrophe losses $ 680 100.0 % 8.0 Effect of Catastrophe Losses on the Combined Ratio (1) Excludes the effect of catastrophe losses relating to earthquakes and hurricanes Effect on the property and Effect of all catastrophe losses on the combined ratio Premiums earned Total catastrophe Total catastrophe casualty Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year year-to-date losses by year losses by year combined ratio 2010 10.0 9.8 5.9 8.3 8.5 $ 25,957 $ 2,207 $ 2,272 8.8 2011 5.2 36.2 16.7 1.0 14.7 25,942 3,815 3,298 12.7 2012 3.9 12.3 3.1 15.7 8.8 26,737 2,345 1,324 5.0 2013 5.3 9.4 1.8 1.7 4.5 27,618 1,251 1,352 4.9 2014 6.3 13.0 7.1 1.3 6.9 28,929 1,993 2,000 6.9 2015 4.0 10.6 3.5 4.7 5.7 30,309 1,719 1,749 5.8 2016 10.9 12.5 6.2 3.9 8.4 30,727 2,571 2,419 7.9 2017 10.1 12.7 10.9 7.5 10.3 31,433 3,228 2,611 8.3 2018 4.5 11.1 7.5 11.4 8.7 32,950 2,855 2,653 8.1 2019 8.0 8,507 680 683 8.0 Average 6.8 14.2 7.0 6.2 8.5 7.6 (1) Catastrophe losses and the effect on the combined ratio for 2016 - 2019 do not include Service Businesses. The periods 2010 through 2015 include historical Property-Liability results, which include Allstate Protection, Discontinued Lines and Coverages and Service Businesses. The effect on the combined ratio is calculated using the total premiums earned. 16 The Allstate Corporation 1Q19 Supplement
The Allstate Corporation Property-Liability Prior Year Reserve Reestimates ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Prior Year Reserve Reestimates (1) Allstate Protection Allstate brand Auto $ (58) $ (94) $ (97) $ (155) $ (101) Homeowners 46 (35) (17) 24 27 Other personal lines 10 12 8 (6) (6) Commercial lines 4 1 42 45 20 Total 2 (116) (64) (92) (60) Esurance brand Auto 4 2 - (1) 1 Homeowners (1) 1 1 1 (1) Other personal lines - - (1) - - Total 3 3 - - - Encompass brand Auto - (7) (2) (1) - Homeowners 8 2 3 2 6 Other personal lines (3) (4) (4) (6) - Total 5 (9) (3) (5) 6 Discontinued Lines and Coverages 2 2 80 2 3 Total Property-Liability $ 12 $ (120) $ 13 $ (95) $ (51) Effect of Prior Year Reserve Reestimates on Combined Ratio (1)(2) Allstate Protection Auto (0.6) (1.1) (1.2) (1.9) (1.2) Homeowners 0.6 (0.4) (0.1) 0.3 0.4 Other personal lines 0.1 0.1 - (0.1) (0.1) Commercial lines - - 0.5 0.5 0.2 Total 0.1 (1.4) (0.8) (1.2) (0.7) Discontinued Lines and Coverages 0.1 - 1.0 - 0.1 Total Property-Liability 0.2 (1.4) 0.2 (1.2) (0.6) Allstate Protection by brand Allstate brand - (1.3) (0.8) (1.1) (0.8) Esurance brand - - - - - Encompass brand 0.1 (0.1) - (0.1) 0.1 Total 0.1 (1.4) (0.8) (1.2) (0.7) (1) Favorable reserve reestimates are shown in parentheses. (2) Calculated using the total premiums earned for Property-Liability for the respective period. Discontinued Lines and Coverages does not have premiums earned. The Allstate Corporation 1Q19 Supplement 17
The Allstate Corporation Property-Liability Catastrophe Losses included in Prior Year Reserve Reestimates ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate Protection (1) Allstate brand Auto $ (1) $ (2) $ (4) $ (5) $ (27) Homeowners 42 (3) (19) 2 41 (4) 27 Other personal lines 9 1 - - (3) Commercial lines (1) - - 1 (1) Total 49 (20) (2) 37 (4) Esurance brand Homeowners - - 1 1 - Total - - 1 1 - Encompass brand Auto - - (1) - - Homeowners 4 - 3 2 7 Other personal lines - - - - 1 Total 4 - 2 2 8 Total Allstate Protection Auto (1) (2) (5) (5) (27) Homeowners 46 (19) 6 44 34 Other personal lines 9 1 - - (2) Commercial lines (1) - - 1 (1) Total 53 (20) 1 40 4 Discontinued Lines and Coverages - - - - - Total Property-Liability $ 53 $ (20) $ 1 $ 40 $ 4 Effect of Catastrophe Losses included in Prior Year Reserve Reestimates on Combined Ratio (1)(2) Allstate Protection Auto - - (0.1) (0.1) (0.4) Homeowners 0.5 (0.3) 0.1 0.6 0.4 Other personal lines 0.1 - - - - Commercial lines - - - - - Total 0.6 (0.3) - 0.5 - Allstate Protection by brand Allstate brand 0.6 (0.3) - 0.5 (0.1) Esurance brand - - - - - Encompass brand - - - - 0.1 Total 0.6 (0.3) - 0.5 - (1) Favorable reserve reestimates are shown in parentheses. (2) Calculated using the total premiums earned for Property-Liability for the respective period. Discontinued Lines and Coverages does not have premiums earned or incur claims and claims expense related to catastrophes. (3) Includes $15 million of reinstatement reinsurance premiums incurred during the period related to the 2018 Camp Fire. (4) Includes $37 million for Texas Windstorm Insurance Association assessments related to Hurricane Harvey which occurred in third quarter 2017. The Allstate Corporation 1Q19 Supplement 18
The Allstate Corporation Allstate Protection Impact of Net Rate Changes Approved on Premiums Written Three months ended Three months ended Three months ended March 31, 2019 (1) December 31, 2018 September 30, 2018 Number of Location Number of Location Number of Location locations (5) Total brand (%) (6) specific (%) (7) locations Total brand (%) specific (%) locations Total brand (%) specific (%) Allstate brand Auto (2)(3) 19 0.6 3.4 25 0.3 3.2 20 - 1.0 Homeowners (4) 20 2.1 5.5 18 1.1 4.6 10 0.4 3.6 Esurance brand Auto 9 0.6 4.1 8 0.3 1.3 14 0.9 3.4 Homeowners 2 2.0 18.2 1 0.4 9.9 - - - Encompass brand Auto 3 0.5 4.5 4 0.5 2.6 7 0.6 4.6 Homeowners 4 1.4 10.8 3 1.2 8.2 11 2.7 7.8 Three months ended Three months ended Three months ended June 30, 2018 March 31, 2018 December 31, 2017 Number of Location Number of Location Number of Location locations Total brand (%) specific (%) locations Total brand (%) specific (%) locations Total brand (%) specific (%) Allstate brand Auto (2)(3) 21 0.5 2.5 24 0.3 2.4 25 1.2 (8) 5.4 (8) Homeowners (4) 5 0.1 1.8 14 1.1 4.9 11 0.2 1.5 Esurance brand Auto 8 0.5 2.9 2 0.1 4.5 7 0.8 4.2 Homeowners - - - 5 1.7 6.4 3 4.5 18.5 Encompass brand Auto 5 1.0 7.9 4 0.3 3.0 8 1.7 5.7 Homeowners 7 0.7 6.1 3 0.1 2.0 7 0.9 4.5 (1) Rate changes include changes approved based on our net cost of reinsurance. These rate changes do not reflect initial rates filed for insurance subsidiaries initially writing business. Based on historical premiums written in those 50 states, the District of Columbia and Canadian provinces, rate changes approved for Allstate brand, Esurance brand and Encompass brand for the three month period ending March 31, 2019 are estimated to total $297 million. Rate changes do not include rating plan enhancements, including the introduction of discounts and surcharges that result in no change in the overall rate level in a location. (2) Impacts of Allstate brand auto effective rate changes as a percentage of total brand prior year-end premiums written were 0.6%, 0.2%, 0.4%, 0.1%, 1.2% and 0.5% for the three months ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, respectively. Rate changes are included in the effective calculations in the period the rate change is effective for renewal contracts. (3) Allstate brand auto rate changes were 1.4%, 1.1%, 2.0%, 2.4%, 2.6% and 4.0% for the trailing twelve months ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, respectively. (4) Impacts of Allstate brand homeowners effective rate changes as a percentage of total brand prior year-end premiums written were 2.3%, 0.2%, 0.4%, 0.3%, 1.0% and 0.1% for the three months ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, respectively. (5) Allstate brand operates in 50 states, the District of Columbia, and 5 Canadian provinces. Esurance brand operates in 43 states. In the second quarter of 2018, Esurance brand discontinued its operations in Canada. Encompass operates in 40 states and the District of Columbia. (6) Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written. (7) Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations. (8) Includes a rate increase in California in fourth quarter 2017. Excluding California, Allstate brand auto total brand and location specific rate changes were 0.5% and 4.2%, respectively, in fourth quarter 2017. The Allstate Corporation 1Q19 Supplement 19
The Allstate Corporation Allstate Brand Profitability Measures ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net premiums written $ 7,544 $ 7,646 $ 8,010 $ 7,807 $ 7,128 Net premiums earned Auto $ 5,321 $ 5,275 $ 5,210 $ 5,131 $ 5,046 Homeowners 1,811 1,787 1,769 1,742 1,727 Other personal lines 437 432 432 432 420 Commercial lines 183 178 176 165 136 Total $ 7,752 $ 7,672 $ 7,587 $ 7,470 $ 7,329 Other revenue Auto $ 57 $ 65 $ 56 $ 56 $ 54 Homeowners 11 12 11 11 11 Other personal lines 28 34 36 34 28 Commercial lines 1 1 2 1 2 Other business lines (1) 38 39 47 41 41 Total $ 135 $ 151 $ 152 $ 143 $ 136 Incurred losses Auto $ 3,485 $ 3,520 $ 3,495 $ 3,424 $ 3,189 Homeowners 1,254 1,445 1,125 1,308 995 Other personal lines 292 316 305 260 257 Commercial lines 139 141 184 166 107 Total $ 5,170 $ 5,422 $ 5,109 $ 5,158 $ 4,548 Expenses Auto $ 1,381 $ 1,419 $ 1,380 $ 1,378 $ 1,300 Homeowners 426 449 438 408 406 Other personal lines 143 161 157 145 140 Commercial lines 38 37 36 36 37 Other business lines (1) 27 29 32 25 33 Total $ 2,015 $ 2,095 $ 2,043 $ 1,992 $ 1,916 Underwriting income (loss) Auto $ 512 $ 401 $ 391 $ 385 $ 611 Homeowners 142 (95) 217 37 337 Other personal lines 30 (11) 6 61 51 Commercial lines 7 1 (42) (36) (6) Other business lines (1) 11 10 15 16 8 Total $ 702 $ 306 $ 587 $ 463 $ 1,001 Loss ratio 66.7 70.7 67.4 69.0 62.0 Expense ratio (2) 24.2 25.3 24.9 24.8 24.3 Combined ratio 90.9 96.0 92.3 93.8 86.3 Loss ratio 66.7 70.7 67.4 69.0 62.0 Less: effect of catastrophe losses 8.3 12.3 7.8 11.2 4.5 effect of prior year non-catastrophe reserve reestimates (0.6) (1.2) (0.8) (1.7) (0.8) Underlying loss ratio * 59.0 59.6 60.4 59.5 58.3 Reconciliation of combined ratio to underlying combined ratio Combined ratio 90.9 96.0 92.3 93.8 86.3 Effect of catastrophe losses (8.3) (12.3) (7.8) (11.2) (4.5) Effect of prior year non-catastrophe reserve reestimates 0.6 1.2 0.8 1.7 0.8 Underlying combined ratio * 83.2 84.9 85.3 84.3 82.6 Effect of prior year reserve reestimates on combined ratio - (1.5) (0.8) (1.2) (0.8) Effect of advertising expenses on combined ratio 1.9 2.5 2.5 2.0 1.6 (1) Other business lines represent commissions earned and other costs and expenses for Ivantage. (2) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 20
The Allstate Corporation Allstate Brand Statistics (1) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 New Issued Applications (in thousands) (2) Auto 740 710 755 754 714 Homeowners 197 197 219 223 187 Average Premium - Gross Written ($) (3) Auto 578 578 572 566 564 Homeowners 1,267 1,243 1,238 1,226 1,212 Average Premium - Net Earned ($) (4) Auto 530 528 525 522 516 Homeowners 1,166 1,156 1,148 1,135 1,131 Annualized Average Premium ($) (5) Auto 1,057 1,050 1,047 1,036 1,029 Homeowners 1,169 1,156 1,152 1,138 1,134 Average Underlying Loss (Incurred Pure Premium) and Expense * ($) (6) Auto 953 978 963 956 920 Homeowners 745 712 751 716 716 Renewal Ratio (%) (7) Auto 88.8 88.5 88.7 88.5 88.3 Homeowners 88.4 88.5 88.3 87.7 87.5 Auto Property Damage (% change year-over-year) Gross claim frequency (8) (1.6) (2.5) (2.7) (2.9) (2.5) Paid claim frequency (8) (3.6) (0.6) 0.2 (3.0) (3.0) Paid claim severity (9) 6.1 7.4 7.7 3.7 4.7 Bodily Injury (% change year-over-year) Gross claim frequency (8) (1.2) (2.5) (0.7) (2.7) (2.0) Homeowners Excluding Catastrophe Losses (% change year-over-year) Gross claim frequency (8) (0.2) 8.7 7.0 7.1 (1.1) Paid claim frequency (8) 1.1 9.0 8.5 5.9 (4.0) Paid claim severity (9) 0.5 (0.1) 3.4 5.0 14.4 (1) Statistics presented for Allstate brand exclude excess and surplus lines. (2) New Issued Applications: Item counts of automobiles or homeowners insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the number allowed (currently 10) on a policy. (3) Average Premium - Gross Written: 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, which is 6 months for auto and 12 months for homeowners. (4) Average Premium - Net Earned: Earned premium divided by average policies in force for the period. Earned premium includes the impacts from mid-term premium adjustments and ceded reinsurance, but does not include impacts of premium refund accruals. Average premiums represent the appropriate policy term for each line, which is 6 months for auto and 12 months for homeowners. (5) Annualized Average Premium is calculated by annualizing net earned premium reported in the quarter and year-to-date divided by policies in force at quarter end. (6) Average underlying loss (incurred pure premium) and expense is calculated as the underlying combined ratio multiplied by the annualized average premium. (7) Renewal ratio: Renewal policies issued during the period, based on contract effective dates, divided by the total policies issued 6 months prior for auto or 12 months prior for homeowners. (8) Paid claim frequency is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. Gross claim frequency is calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). Frequency statistics exclude counts associated with catastrophe events. The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the prior year paid or gross claim frequency. (9) Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. The percent change in paid claim severity is calculated as the amount of increase or decrease in paid claim severity in the current period compared to the same period in the prior year; divided by the prior year paid claims severity. The Allstate Corporation 1Q19 Supplement 21
The Allstate Corporation Esurance Brand Profitability Measures and Statistics ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net premiums written $ 559 $ 477 $ 519 $ 459 $ 493 Net premiums earned Auto $ 475 $ 466 $ 455 $ 439 $ 411 Homeowners 25 26 22 22 20 Other personal lines 2 2 2 2 2 Total $ 502 $ 494 $ 479 $ 463 $ 433 Other revenue Auto $ 20 $ 19 $ 21 $ 20 $ 20 Total $ 20 $ 19 $ 21 $ 20 $ 20 Incurred losses Auto $ 367 $ 374 $ 346 $ 334 $ 309 Homeowners 15 16 20 28 11 Other personal lines 2 2 - 2 1 Total $ 384 $ 392 $ 366 $ 364 $ 321 Expenses Auto $ 129 $ 123 $ 135 $ 120 $ 121 Homeowners 6 6 8 8 7 Other personal lines - 1 1 - 1 Total $ 135 $ 130 $ 144 $ 128 $ 129 Underwriting income (loss) Auto $ (1) $ (12) $ (5) $ 5 $ 1 Homeowners 4 4 (6) (14) 2 Other personal lines - (1) 1 - - Total $ 3 $ (9) $ (10) $ (9) $ 3 Loss ratio 76.5 79.3 76.4 78.6 74.1 Expense ratio (1) 22.9 22.5 25.7 23.3 25.2 Combined ratio 99.4 101.8 102.1 101.9 99.3 Loss ratio 76.5 79.3 76.4 78.6 74.1 Less: effect of catastrophe losses 1.2 1.2 2.9 6.2 0.7 effect of prior year non-catastrophe reserve reestimates 0.6 0.6 (0.2) (0.2) - Underlying loss ratio * 74.7 77.5 73.7 72.6 73.4 Reconciliation of combined ratio to underlying combined ratio Combined ratio 99.4 101.8 102.1 101.9 99.3 Effect of catastrophe losses (1.2) (1.2) (2.9) (6.2) (0.7) Effect of prior year non-catastrophe reserve reestimates (0.6) (0.6) 0.2 0.2 - Effect of amortization of purchased intangible assets (0.2) (0.2) (0.2) - (0.2) Underlying combined ratio * 97.4 99.8 99.2 95.9 98.4 Effect of prior year reserve reestimates on combined ratio 0.6 0.6 - - - Effect of advertising expenses on combined ratio 8.2 7.5 10.6 8.6 8.1 Policies in Force (in thousands) Auto 1,548 1,488 1,463 1,432 1,399 Homeowners 98 95 92 88 84 Other personal lines 48 46 46 46 45 1,694 1,629 1,601 1,566 1,528 New Issued Applications (in thousands) Auto 180 153 166 156 158 Homeowners 7 6 9 9 8 Average Premium - Gross Written ($) Auto (6-month policy) 625 608 603 602 605 Homeowners (12-month policy) 1,016 974 984 977 970 Renewal Ratio (%) Auto 83.9 82.8 82.9 84.3 83.5 Homeowners 84.8 84.4 85.9 86.2 84.4 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 22
The Allstate Corporation Encompass Brand Profitability Measures and Statistics ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net premiums written $ 224 $ 247 $ 271 $ 275 $ 223 Net premiums earned Auto $ 134 $ 135 $ 133 $ 135 $ 134 Homeowners 99 101 100 100 101 Other personal lines 20 20 21 21 22 Total $ 253 $ 256 $ 254 $ 256 $ 257 Other revenue Auto $ 1 $ 1 $ - $ 1 $ 1 Homeowners - - 1 1 - Total $ 1 $ 1 $ 1 $ 2 $ 1 Incurred losses Auto $ 91 $ 99 $ 83 $ 82 $ 85 Homeowners 72 58 70 75 65 Other personal lines 11 18 9 8 16 Total $ 174 $ 175 $ 162 $ 165 $ 166 Expenses Auto $ 45 $ 45 $ 42 $ 45 $ 45 Homeowners 31 33 34 34 34 Other personal lines 6 8 6 9 7 Total $ 82 $ 86 $ 82 $ 88 $ 86 Underwriting income (loss) Auto $ (1) $ (8) $ 8 $ 9 $ 5 Homeowners (4) 10 (3) (8) 2 Other personal lines 3 (6) 6 4 (1) Total $ (2) $ (4) $ 11 $ 5 $ 6 Loss ratio 68.8 68.4 63.8 64.4 64.6 Expense ratio (1) 32.0 33.2 31.9 33.6 33.1 Combined ratio 100.8 101.6 95.7 98.0 97.7 Loss ratio 68.8 68.4 63.8 64.4 64.6 Less: effect of catastrophe losses 11.9 3.9 9.1 15.6 11.3 effect of prior year non-catastrophe reserve reestimates 0.4 (3.5) (2.0) (2.8) (0.8) Underlying loss ratio * 56.5 68.0 56.7 51.6 54.1 Reconciliation of combined ratio to underlying combined ratio Combined ratio 100.8 101.6 95.7 98.0 97.7 Effect of catastrophe losses (11.9) (3.9) (9.1) (15.6) (11.3) Effect of prior year non-catastrophe reserve reestimates (0.4) 3.5 2.0 2.8 0.8 Underlying combined ratio * 88.5 101.2 88.6 85.2 87.2 Effect of prior year reserve reestimates on combined ratio 2.0 (3.5) (1.2) (2.0) 2.3 Effect of advertising expenses on combined ratio - 0.4 - 0.4 - Policies in Force (in thousands) Auto 499 502 504 507 517 Homeowners 237 239 240 243 248 Other personal lines 78 78 80 81 83 814 819 824 831 848 New Issued Applications (in thousands) Auto 20 19 21 19 17 Homeowners 9 9 10 10 8 Average Premium - Gross Written ($) Auto (12-month policy) 1,134 1,136 1,115 1,104 1,116 Homeowners (12-month policy) 1,768 1,766 1,730 1,701 1,698 Renewal Ratio (%) Auto 77.7 77.5 76.4 73.3 72.5 Homeowners 82.1 81.8 80.9 78.9 78.3 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 23
The Allstate Corporation Auto Profitability Measures by Brand ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate brand auto Net premiums written $ 5,395 $ 5,272 $ 5,357 $ 5,211 $ 5,151 Net premiums earned $ 5,321 $ 5,275 $ 5,210 $ 5,131 $ 5,046 Other revenue 57 65 56 56 54 Incurred losses (3,485) (3,520) (3,495) (3,424) (3,189) Expenses (1,381) (1,419) (1,380) (1,378) (1,300) Underwriting income $ 512 $ 401 $ 391 $ 385 $ 611 Loss ratio 65.5 66.7 67.1 66.7 63.2 Less: effect of catastrophe losses 1.3 1.0 2.2 3.1 - effect of prior year non-catastrophe reserve reestimates (1.1) (1.7) (1.8) (2.9) (1.5) Underlying loss ratio * 65.3 67.4 66.7 66.5 64.7 Expense ratio (1) 24.9 25.7 25.4 25.8 24.7 Combined ratio 90.4 92.4 92.5 92.5 87.9 Effect of catastrophe losses (1.3) (1.0) (2.2) (3.1) - Effect of prior year non-catastrophe reserve reestimates 1.1 1.7 1.7 2.9 1.5 Underlying combined ratio * 90.2 93.1 92.0 92.3 89.4 Esurance brand auto Net premiums written $ 532 $ 452 $ 487 $ 430 $ 470 Net premiums earned $ 475 $ 466 $ 455 $ 439 $ 411 Other revenue 20 19 21 20 20 Incurred losses (367) (374) (346) (334) (309) Expenses (129) (123) (135) (120) (121) Underwriting (loss) income $ (1) $ (12) $ (5) $ 5 $ 1 Loss ratio 77.3 80.3 76.0 76.1 75.2 Less: effect of catastrophe losses 0.6 0.4 1.8 3.4 0.5 effect of prior year non-catastrophe reserve reestimates 0.9 0.4 - (0.2) 0.3 Underlying loss ratio * 75.8 79.5 74.2 72.9 74.4 Expense ratio (1) 22.9 22.3 25.1 22.8 24.6 Combined ratio 100.2 102.6 101.1 98.9 99.8 Effect of catastrophe losses (0.6) (0.4) (1.8) (3.4) (0.5) Effect of prior year non-catastrophe reserve reestimates (0.9) (0.4) - 0.2 (0.3) Effect of amortization of purchased intangible assets (0.2) (0.3) (0.2) - (0.2) Underlying combined ratio * 98.5 101.5 99.1 95.7 98.8 Encompass brand auto Net premiums written $ 120 $ 130 $ 143 $ 146 $ 118 Net premiums earned $ 134 $ 135 $ 133 $ 135 $ 134 Other revenue 1 1 - 1 1 Incurred losses (91) (99) (83) (82) (85) Expenses (45) (45) (42) (45) (45) Underwriting (loss) income $ (1) $ (8) $ 8 $ 9 $ 5 Loss ratio 67.9 73.3 62.4 60.7 63.4 Less: effect of catastrophe losses 2.2 (0.7) 1.5 3.0 0.8 effect of prior year non-catastrophe reserve reestimates - (5.3) (0.7) (0.8) - Underlying loss ratio * 65.7 79.3 61.6 58.5 62.6 Expense ratio (1) 32.8 32.6 31.6 32.6 32.9 Combined ratio 100.7 105.9 94.0 93.3 96.3 Effect of catastrophe losses (2.2) 0.7 (1.5) (3.0) (0.8) Effect of prior year non-catastrophe reserve reestimates - 5.3 0.7 0.8 - Underlying combined ratio * 98.5 111.9 93.2 91.1 95.5 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 24
The Allstate Corporation Homeowners Profitability Measures by Brand ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate brand homeowners Net premiums written $ 1,565 $ 1,777 $ 2,008 $ 1,949 $ 1,465 Net premiums earned $ 1,811 $ 1,787 $ 1,769 $ 1,742 $ 1,727 Other revenue 11 12 11 11 11 Incurred losses (1,254) (1,445) (1,125) (1,308) (995) Expenses (426) (449) (438) (408) (406) Underwriting income (loss) $ 142 $ (95) $ 217 $ 37 $ 337 Loss ratio 69.3 80.9 63.6 75.1 57.6 Less: effect of catastrophe losses 28.2 44.6 23.6 36.0 17.4 effect of prior year non-catastrophe reserve reestimates 0.3 (0.9) (1.1) (1.0) - Underlying loss ratio * 40.8 37.2 41.1 40.1 40.2 Expense ratio (1) 22.9 24.4 24.1 22.8 22.9 Combined ratio 92.2 105.3 87.7 97.9 80.5 Effect of catastrophe losses (28.2) (44.6) (23.6) (36.0) (17.4) Effect of prior year non-catastrophe reserve reestimates (0.3) 0.9 1.1 1.0 - Underlying combined ratio * 63.7 61.6 65.2 62.9 63.1 Esurance brand homeowners Net premiums written $ 25 $ 23 $ 30 $ 27 $ 21 Net premiums earned $ 25 $ 26 $ 22 $ 22 $ 20 Incurred losses (15) (16) (20) (28) (11) Expenses (6) (6) (8) (8) (7) Underwriting income (loss) $ 4 $ 4 $ (6) $ (14) $ 2 Loss ratio 60.0 61.5 90.9 127.3 55.0 Less: effect of catastrophe losses 12.0 15.4 27.3 63.6 5.0 effect of prior year non-catastrophe reserve reestimates (4.0) 3.8 - - (5.0) Underlying loss ratio * 52.0 42.3 63.6 63.7 55.0 Expense ratio (1) 24.0 23.1 36.4 36.3 35.0 Combined ratio 84.0 84.6 127.3 163.6 90.0 Effect of catastrophe losses (12.0) (15.4) (27.3) (63.6) (5.0) Effect of prior year non-catastrophe reserve reestimates 4.0 (3.8) - - 5.0 Underlying combined ratio * 76.0 65.4 100.0 100.0 90.0 Encompass brand homeowners Net premiums written $ 86 $ 98 $ 106 $ 108 $ 86 Net premiums earned $ 99 $ 101 $ 100 $ 100 $ 101 Other revenue - - 1 1 - Incurred losses (72) (58) (70) (75) (65) Expenses (31) (33) (34) (34) (34) Underwriting (loss) income $ (4) $ 10 $ (3) $ (8) $ 2 Loss ratio 72.7 57.4 70.0 75.0 64.3 Less: effect of catastrophe losses 25.3 8.9 20.0 34.0 25.7 effect of prior year non-catastrophe reserve reestimates 4.0 2.0 - - (1.0) Underlying loss ratio * 43.4 46.5 50.0 41.0 39.6 Expense ratio (1) 31.3 32.7 33.0 33.0 33.7 Combined ratio 104.0 90.1 103.0 108.0 98.0 Effect of catastrophe losses (25.3) (8.9) (20.0) (34.0) (25.7) Effect of prior year non-catastrophe reserve reestimates (4.0) (2.0) - - 1.0 Underlying combined ratio * 74.7 79.2 83.0 74.0 73.3 (1) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 25
The Allstate Corporation Other Personal Lines Profitability Measures by Brand (1) ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Allstate brand other personal lines Net premiums written $ 399 $ 420 $ 472 $ 475 $ 375 Net premiums earned $ 437 $ 432 $ 432 $ 432 $ 420 Other revenue 28 34 36 34 28 Incurred losses (292) (316) (305) (260) (257) Expenses (143) (161) (157) (145) (140) Underwriting income (loss) $ 30 $ (11) $ 6 $ 61 $ 51 Loss ratio 66.8 73.1 70.6 60.2 61.2 Less: effect of catastrophe losses 14.6 20.1 11.8 10.7 6.5 effect of prior year non-catastrophe reserve reestimates 0.2 2.5 1.8 (1.4) (0.7) Underlying loss ratio * 52.0 50.5 57.0 50.9 55.4 Expense ratio (2) 26.3 29.4 28.0 25.7 26.7 Combined ratio 93.1 102.5 98.6 85.9 87.9 Effect of catastrophe losses (14.6) (20.1) (11.8) (10.7) (6.5) Effect of prior year non-catastrophe reserve reestimates (0.2) (2.5) (1.8) 1.4 0.7 Underlying combined ratio * 78.3 79.9 85.0 76.6 82.1 Esurance brand other personal lines Net premiums written $ 2 $ 2 $ 2 $ 2 $ 2 Net premiums earned $ 2 $ 2 $ 2 $ 2 $ 2 Incurred losses (2) (2) - (2) (1) Expenses - (1) (1) - (1) Underwriting (loss) income $ - $ (1) $ 1 $ - $ - Encompass brand other personal lines Net premiums written $ 18 $ 19 $ 22 $ 21 $ 19 Net premiums earned $ 20 $ 20 $ 21 $ 21 $ 22 Incurred losses (11) (18) (9) (8) (16) Expenses (6) (8) (6) (9) (7) Underwriting income (loss) $ 3 $ (6) $ 6 $ 4 $ (1) Loss ratio 55.0 90.0 42.8 38.1 72.7 Less: effect of catastrophe losses 10.0 10.0 4.8 9.5 9.1 effect of prior year non-catastrophe reserve reestimates (15.0) (20.0) (19.1) (28.5) (4.6) Underlying loss ratio * 60.0 100.0 57.1 57.1 68.2 Expense ratio (2) 30.0 40.0 28.6 42.9 31.8 Combined ratio 85.0 130.0 71.4 81.0 104.5 Effect of catastrophe losses (10.0) (10.0) (4.8) (9.5) (9.1) Effect of prior year non-catastrophe reserve reestimates 15.0 20.0 19.1 28.5 4.6 Underlying combined ratio * 90.0 140.0 85.7 100.0 100.0 (1) Other personal lines include renters, condominium, landlord and other personal lines products in Allstate Protection. (2) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 26
The Allstate Corporation Commercial Lines Profitability Measures (1)(2) ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net premiums written $ 185 $ 177 $ 173 $ 172 $ 137 Net premiums earned $ 183 $ 178 $ 176 $ 165 $ 136 Other revenue 1 1 2 1 2 Incurred losses (139) (141) (184) (166) (107) Expenses (38) (37) (36) (36) (37) Underwriting income (loss) $ 7 $ 1 $ (42) $ (36) $ (6) Loss ratio 76.0 79.2 104.6 100.6 78.7 Expense ratio (3) 20.2 20.2 19.3 21.2 25.7 Combined ratio 96.2 99.4 123.9 121.8 104.4 Reconciliation of combined ratio to underlying combined ratio Combined ratio 96.2 99.4 123.9 121.8 104.4 Effect of catastrophe losses on combined ratio (0.5) (5.1) (3.4) (2.4) (2.2) Effect of prior year non-catastrophe reserve reestimates (2.8) (0.5) (23.9) (26.7) (15.4) Underlying combined ratio * 92.9 93.8 96.6 92.7 86.8 Effect of prior year reserve reestimates on combined ratio 2.2 0.5 23.9 27.3 14.7 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio (0.6) - - 0.6 (0.7) (1) Commercial lines are all Allstate brand products. (2) Includes an agreement with a transportation network company to provide commercial auto insurance coverage in select states that became effective March 1, 2018. Effective March 1, 2019, this coverage was expanded to 15 states from 4 states in 2018. Incurred losses are based on original pricing expectations given limited loss experience. (3) Other revenue is deducted from other costs and expenses in the expense ratio calculation. The Allstate Corporation 1Q19 Supplement 27
The Allstate Corporation Discontinued Lines and Coverages Reserves Three months ($ in millions) ended Twelve months ended December 31, March 31, (net of reinsurance) 2019 2018 2017 2016 2015 2014 Asbestos Beginning reserves $ 866 $ 884 $ 912 $ 960 $ 1,014 $ 1,017 Incurred claims and claims expense - 44 61 67 39 87 Claims and claims expense paid (19) (62) (89) (115) (93) (90) Ending reserves $ 847 $ 866 $ 884 $ 912 $ 960 $ 1,014 Claims and claims expense paid as a percent of ending reserves 2.2 % 7.2 % 10.1 % 12.6 % 9.7 % 8.9 % Environmental Beginning reserves $ 170 $ 166 $ 179 $ 179 $ 203 $ 208 Incurred claims and claims expense - 20 10 23 1 15 Claims and claims expense paid (3) (16) (23) (23) (25) (20) Ending reserves $ 167 $ 170 $ 166 $ 179 $ 179 $ 203 Claims and claims expense paid as a percent of ending reserves 1.8 % 9.4 % 13.9 % 12.8 % 14.0 % 9.9 % Other (1) Beginning reserves $ 355 $ 357 $ 354 $ 377 $ 395 $ 421 Incurred claims and claims expense 2 23 25 15 13 11 Claims and claims expense paid (7) (25) (22) (38) (31) (37) Ending reserves $ 350 $ 355 $ 357 $ 354 $ 377 $ 395 Claims and claims expense paid as a percent of ending reserves 2.0 % 7.0 % 6.2 % 10.7 % 8.2 % 9.4 % Total (2) Beginning reserves $ 1,391 $ 1,407 $ 1,445 $ 1,516 $ 1,612 $ 1,646 Incurred claims and claims expense 2 87 96 105 53 113 Claims and claims expense paid (29) (103) (134) (176) (149) (147) Ending reserves $ 1,364 $ 1,391 $ 1,407 $ 1,445 $ 1,516 $ 1,612 Claims and claims expense paid as a percent of ending reserves 2.1 % 7.4 % 9.5 % 12.2 % 9.8 % 9.1 % (1) Other includes other mass torts, workers' compensation, commercial and other. (2) The 3-year survival ratio for the combined asbestos, environmental and other claims was 11.6, 10.1, 9.2, 9.2, 10.6 and 12.0 for the annualized three months of 2019 and twelve months ended 2018, 2017, 2016, 2015 and 2014, respectively, and is calculated by taking the ending reserves divided by net payments made during the year. The Allstate Corporation 1Q19 Supplement 28
The Allstate Corporation Service Businesses Segment Results (1) ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Service Businesses Net premiums written $ 368 $ 489 $ 358 $ 297 $ 287 Net premiums earned $ 295 $ 285 $ 275 $ 271 $ 267 Intersegment insurance premiums and service fees 33 33 31 29 29 Other revenue 47 34 16 16 16 Net investment income 9 9 7 6 5 Realized capital gains and losses 8 (5) - (2) (4) Claims and claims expense (92) (78) (90) (89) (93) Amortization of deferred policy acquisition costs (127) (122) (118) (113) (110) Operating costs and expenses (151) (148) (124) (116) (117) Amortization of purchased intangible assets (31) (33) (20) (20) (21) Restructuring and related charges - (3) - - (1) Income tax benefit 3 6 3 3 7 Net loss applicable to common shareholders $ (6) $ (22) $ (20) $ (15) $ (22) Realized capital gains and losses, after-tax (7) 4 1 1 3 Amortization of purchased intangible assets, after-tax 24 26 16 16 16 Tax Legislation expense - - 4 - - Adjusted net income (loss) $ 11 $ 8 $ 1 $ 2 $ (3) (1) Service Businesses results include SquareTrade, Arity, InfoArmor, Allstate Roadside Services and Allstate Dealer Services. SquareTrade results are on page 30 and other service businesses segment results are on page 31. The Allstate Corporation 1Q19 Supplement 29
The Allstate Corporation SquareTrade Results ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net premiums written $ 206 $ 323 $ 194 $ 126 $ 130 Net premiums earned $ 145 $ 134 $ 125 $ 121 $ 123 Other revenue (1) 8 3 - - - Net investment income 4 4 2 2 1 Realized capital gains and losses 7 (4) 1 (1) (2) Claims and claims expense (43) (32) (37) (39) (41) Amortization of deferred policy acquisition costs (53) (50) (47) (45) (45) Other costs and expenses (42) (47) (38) (32) (35) Amortization of purchased intangible assets (18) (20) (20) (20) (21) Income tax (expense) benefit (2) 2 1 3 4 Net income (loss) applicable to common shareholders $ 6 $ (10) $ (13) $ (11) $ (16) Realized capital gains and losses, after-tax (6) 3 - - 2 Amortization of purchased intangible assets, after-tax 14 16 16 16 16 Tax Legislation expense - - 4 - - Adjusted net income $ 14 $ 9 $ 7 $ 5 $ 2 Fair value adjustments, after-tax (2) 1 2 2 2 2 Adjusted net income, excluding purchase accounting adjustments * $ 15 $ 11 $ 9 $ 7 $ 4 Protection Plans in Force (in thousands) (3) 77,866 68,588 52,151 44,459 41,806 New Issued Protection Plans (in thousands) 13,500 22,110 11,120 5,319 5,564 (1) Other revenue relates to the acquisition of PlumChoice and iCracked Inc. (2) Purchase accounting adjustments made to record the acquired assets and liabilities at their fair value for unearned premiums, contractual liability insurance policy premium expenses, and commissions paid to retailers recorded as of the acquisition date are recognized over the life of the in force contracts or approximately three years. (3) Protection plan terms generally range between one and five years with an average term of three years. The Allstate Corporation 1Q19 Supplement 30
The Allstate Corporation Other Service Businesses Segment Results ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Arity (1) Intersegment service fees $ 24 $ 24 $ 22 $ 21 $ 21 Operating costs and other expenses (27) (26) (26) (25) (25) Income tax benefit 1 1 - 1 1 Net loss applicable to common shareholders $ (2) $ (1) $ (4) $ (3) $ (3) Adjusted net loss $ (2) $ (1) $ (4) $ (3) $ (3) InfoArmor (1) Other revenue $ 24 $ 16 $ - $ - $ - Operating costs and other expenses (2) (25) (14) - - - Amortization of purchased intangible assets (13) (13) - - - Income tax benefit 3 2 - - - Net loss applicable to common shareholders $ (11) $ (9) $ - $ - $ - Amortization of purchased intangible assets, after-tax 10 10 - - - Adjusted net (loss) income $ (1) $ 1 $ - $ - $ - Allstate Roadside Services Net premiums written $ 63 $ 61 $ 65 $ 68 $ 65 Net premiums earned $ 63 $ 65 $ 66 $ 68 $ 64 Intersegment insurance premiums and service fees 9 9 9 8 8 Other revenue 1 1 1 1 2 Net investment income - - 1 - - Realized capital gains and losses - (1) - - - Claims and claims expense (38) (36) (38) (36) (35) Amortization of deferred policy acquisition costs (1) (1) (1) (2) (1) Operating costs and other expenses (42) (43) (45) (44) (43) Restructuring and related charges - (3) - - (1) Income tax benefit 2 2 2 1 1 Net loss applicable to common shareholders $ (6) $ (7) $ (5) $ (4) $ (5) Realized capital gains and losses, after-tax - 1 - - - Adjusted net loss $ (6) $ (6) $ (5) $ (4) $ (5) Allstate Dealer Services Net premiums written $ 99 $ 105 $ 99 $ 103 $ 92 Net premiums earned $ 87 $ 86 $ 84 $ 82 $ 80 Other revenue 14 14 15 15 14 Net investment income 5 5 4 4 4 Realized capital gains and losses 1 - (1) (1) (2) Claims and claims expense (11) (10) (15) (14) (17) Amortization of deferred policy acquisition costs (73) (71) (70) (66) (64) Operating costs and other expenses (15) (18) (15) (15) (14) Income tax (expense) benefit (1) (1) - (2) 1 Net income applicable to common shareholders $ 7 $ 5 $ 2 $ 3 $ 2 Realized capital gains and losses, after-tax (1) - 1 1 1 Adjusted net income $ 6 $ 5 $ 3 $ 4 $ 3 (1) There are no premiums written or earned for Arity or InfoArmor. (2) Costs include investments in growing the business and integration into Allstate. The Allstate Corporation 1Q19 Supplement 31
The Allstate Corporation Allstate Life Segment Results and Other Statistics ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Premiums $ 154 $ 158 $ 149 $ 149 $ 146 Contract charges 183 182 173 177 181 Other revenue (1) 27 35 30 28 26 Net investment income 127 125 128 130 122 Contract benefits (214) (216) (193) (195) (205) Interest credited to contractholder funds (72) (72) (72) (71) (70) Amortization of deferred policy acquisition costs (26) (24) (36) (31) (31) Operating costs and expenses (91) (104) (88) (86) (83) Restructuring and related charges - - (1) (2) - Income tax expense on operations (15) (15) (15) (19) (15) Adjusted net income 73 69 75 80 71 Realized capital gains and losses, after-tax (4) (4) (3) (2) (2) DAC and DSI amortization relating to realized capital gains and losses, after-tax (2) (2) (1) (3) (2) Tax Legislation expense - - (16) - - Net income applicable to common shareholders $ 67 $ 63 $ 55 $ 75 $ 67 Premiums and Contract Charges by Product Traditional life insurance premiums $ 154 $ 157 $ 149 $ 148 $ 146 Accident and health insurance premiums - 1 - 1 - Interest-sensitive life insurance contract charges 183 182 173 177 181 Total $ 337 $ 340 $ 322 $ 326 $ 327 Proprietary Life Issued Policies (2) 28,425 46,421 35,454 37,021 30,479 Policies in Force (in thousands) (3) Life insurance Allstate agencies 1,823 1,831 1,820 1,819 1,816 Closed channels 187 189 196 198 200 Accident and health insurance 2 2 2 2 2 Total 2,012 2,022 2,018 2,019 2,018 (1) Includes gross dealer concessions received in connection with Allstate exclusive agencies and exclusive financial specialist's sales of non-proprietary products, including mutual funds, fixed and variable annuities, disability insurance and long-term care insurance. (2) Policies issued during the period. (3) Reflect the number of contracts in force. The Allstate Corporation 1Q19 Supplement 32
The Allstate Corporation Allstate Life Analysis of Net Income ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Benefit spread Premiums $ 154 $ 158 $ 149 $ 149 $ 146 Cost of insurance contract charges (1) 129 127 119 121 126 Contract benefits (214) (216) (193) (195) (205) Total benefit spread 69 69 75 75 67 Investment spread Net investment income 127 125 128 130 122 Interest credited to contractholder funds (72) (72) (72) (71) (70) Total investment spread 55 53 56 59 52 Surrender charges and contract maintenance expense fees (1) 54 55 54 56 55 Other revenue 27 35 30 28 26 Realized capital gains and losses (5) (5) (3) (3) (3) Amortization of deferred policy acquisition costs (28) (26) (38) (35) (33) Operating costs and expenses (91) (104) (88) (86) (83) Restructuring and related charges - - (1) (2) - Income tax expense (14) (14) (30) (17) (14) Net income applicable to common shareholders $ 67 $ 63 $ 55 $ 75 $ 67 (1) Reconciliation of contract charges Cost of insurance contract charges $ 129 $ 127 $ 119 $ 121 $ 126 Surrender charges and contract maintenance expense fees 54 55 54 56 55 Total contract charges $ 183 $ 182 $ 173 $ 177 $ 181 The Allstate Corporation 1Q19 Supplement 33
The Allstate Corporation Allstate Life Return on Equity ($ in millions) Twelve months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Return on Equity Numerator: Net income applicable to common shareholders (1)(2) $ 260 $ 260 $ 591 $ 611 $ 598 Denominator: Beginning equity $ 2,542 $ 2,618 Ending equity (3) 2,657 2,474 $ 2,528 $ 2,587 $ 2,542 Average equity (4) $ 2,600 $ 2,546 Return on equity 10.0 % 10.2 % 23.4 % 23.6 % 23.5 % Adjusted Net Income Return on Adjusted Equity * Numerator: Adjusted net income (1) $ 297 $ 295 $ 284 $ 285 $ 270 Denominator: Beginning equity $ 2,542 $ 2,618 Less: Unrealized net capital gains and losses 142 234 Goodwill 175 175 Adjusted beginning equity $ 2,225 $ 2,209 Ending equity (3) $ 2,657 $ 2,474 $ 2,528 $ 2,587 $ 2,542 Less: Unrealized net capital gains and losses 168 52 75 89 142 Goodwill 175 175 175 175 175 Adjusted ending equity $ 2,314 $ 2,247 $ 2,278 $ 2,323 $ 2,225 Average adjusted equity (4) $ 2,270 $ 2,228 Adjusted net income return on adjusted equity * 13.1 % 13.2 % 12.5 % 12.3 % 12.1 % (1) Net income applicable to common shareholders and adjusted net income reflect a trailing twelve-month period. (2) Includes a $16 million Tax Legislation expense for the periods ended March 31, 2019 and December 31, 2018, a $322 million benefit for the period ended September 30, 2018, and a $338 million benefit for all other periods presented. (3) For the periods ended September 30, 2018, June 30, 2018 and March 31, 2018, ending equity has been used due to the changes in reportable segments that were effective October 2017. (4) Average equity and average adjusted equity are determined using a two-point average, with the beginning and ending equity and adjusted equity, respectively, for the twelve-month period as data points. The Allstate Corporation 1Q19 Supplement 34
The Allstate Corporation Allstate Life Reserves and Contractholder Funds ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Reserve for life-contingent contract benefits Traditional life insurance $ 2,561 $ 2,539 $ 2,507 $ 2,482 $ 2,467 Accident and health insurance 137 138 165 169 170 Total $ 2,698 $ 2,677 $ 2,672 $ 2,651 $ 2,637 Contractholders funds, beginning balance $ 7,656 $ 7,650 $ 7,630 $ 7,603 $ 7,608 Deposits 234 250 237 238 240 Interest credited 72 72 71 71 70 Benefits, withdrawals and other adjustments Benefits (61) (58) (59) (56) (59) Surrenders and partial withdrawals (70) (63) (64) (65) (67) Contract charges (176) (177) (176) (175) (176) Net transfers from separate accounts 2 1 1 2 2 Other adjustments 29 (19) 10 12 (15) Total benefits, withdrawals and other adjustments (276) (316) (288) (282) (315) Contractholder funds, ending balance $ 7,686 $ 7,656 $ 7,650 $ 7,630 $ 7,603 The Allstate Corporation 1Q19 Supplement 35
The Allstate Corporation Allstate Benefits Segment Results and Other Statistics ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Premiums $ 259 $ 253 $ 259 $ 254 $ 258 Contract charges 29 28 26 29 28 Net investment income 19 20 19 19 19 Contract benefits (145) (144) (159) (143) (149) Interest credited to contractholder funds (9) (10) (8) (9) (8) Amortization of deferred policy acquisition costs (43) (43) (26) (36) (41) Operating costs and expenses (71) (71) (68) (69) (70) Income tax expense on operations (8) (7) (10) (9) (8) Adjusted net income 31 26 33 36 29 Realized capital gains and losses, after-tax 3 (7) 2 - (2) DAC and DSI amortization relating to realized capital gains and losses, after-tax - 1 - - - Net income applicable to common shareholders $ 34 $ 20 $ 35 $ 36 $ 27 Benefit ratio (1) 50.3 51.2 55.8 50.5 52.1 Operating expense ratio (2) 24.7 25.3 23.9 24.4 24.5 (1) Benefit ratio is contract benefits divided by premiums and contract charges. (2) Operating expense ratio is operating costs and expenses divided by premiums and contract charges. The Allstate Corporation 1Q19 Supplement 36
The Allstate Corporation Allstate Benefits Segment Premium and Other Statistics ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Premiums and Contract Charges by Product Life $ 38 $ 40 $ 39 $ 38 $ 38 Accident 76 73 75 75 74 Critical illness 122 117 119 119 121 Short-term disability 26 27 27 27 27 Other health 26 24 25 24 26 Total $ 288 $ 281 $ 285 $ 283 $ 286 New Annualized Premium Sales by Product (1) Life $ 8 $ 16 $ 10 $ 11 $ 8 Accident 21 49 22 20 21 Critical illness 24 63 22 23 25 Short-term disability 8 13 9 7 10 Other health 11 28 10 10 12 Total $ 72 $ 169 $ 73 $ 71 $ 76 Annualized Premium In Force (2) $ 1,251 $ 1,225 $ 1,234 $ 1,245 $ 1,237 Policies in Force (in thousands) (3) Life insurance 457 457 464 469 468 Accident and health insurance 3,865 3,751 3,777 3,814 3,792 Total 4,322 4,208 4,241 4,283 4,260 (1) New annualized premium sales reflects annualized premiums at initial customer enrollment (including new accounts and new employees or policies of existing accounts). A significant portion of Allstate Benefits business is seasonally written in the fourth quarter during many clients’ annual employee benefits enrollment. (2) Premium amount paid annually for all active policies, which have not been cancelled. (3) Individual life and accident and health insurance policies reflect the number of contracts in force. Group life and accident and health insurance reflect certificate counts as opposed to group counts. The Allstate Corporation 1Q19 Supplement 37
The Allstate Corporation Allstate Benefits Return on Equity ($ in millions) Twelve months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Return on Equity Numerator: Net income applicable to common shareholders (1)(2) $ 125 $ 118 $ 172 $ 167 $ 158 Denominator: Beginning equity $ 824 $ 821 Ending equity (3) 906 842 $ 883 $ 848 $ 824 Average equity (4) $ 865 $ 832 Return on equity 14.5 % 14.2 % 19.5 % 19.7 % 19.2 % Adjusted Net Income Return on Adjusted Equity * Numerator: Adjusted net income (1) $ 126 $ 124 $ 119 $ 115 $ 106 Denominator: Beginning equity $ 824 $ 821 Less: Unrealized net capital gains and losses 8 57 Goodwill 96 96 Adjusted beginning equity $ 720 $ 668 Ending equity (3) $ 906 $ 842 $ 883 $ 848 $ 824 Less: Unrealized net capital gains and losses 21 (10) (4) (4) 8 Goodwill 96 96 96 96 96 Adjusted ending equity $ 789 $ 756 $ 791 $ 756 $ 720 Average adjusted equity (4) $ 755 $ 712 Adjusted net income return on adjusted equity * 16.7% 17.4 % 15.0 % 15.2 % 14.7 % (1) Net income applicable to common shareholders and adjusted net income reflect a trailing twelve-month period. (2) Includes a $54 million Tax Legislation benefit for the periods ended September 30, 2018, June 30, 2018 and March 31, 2018. (3) For the periods ended September 30, 2018, June 30, 2018 and March 31, 2018, ending equity has been used due to the changes in reportable segments that were effective October 2017. (4) Average equity and average adjusted equity are determined using a two-point average, with the beginning and ending equity and adjusted equity, respectively, for the twelve-month period as data points. The Allstate Corporation 1Q19 Supplement 38
The Allstate Corporation Allstate Annuities Segment Results and Other Statistics ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Contract charges $ 3 $ 4 $ 5 $ 3 $ 3 Net investment income 190 253 260 293 290 Contract benefits (138) (128) (146) (145) (150) Interest credited to contractholder funds (78) (80) (83) (87) (87) Amortization of deferred policy acquisition costs (2) (2) (2) (2) (1) Operating costs and expenses (7) (6) (7) (9) (9) Income tax benefit (expense) on operations 7 (9) (7) (9) (11) Adjusted net (loss) income (25) 32 20 44 35 Realized capital gains and losses, after-tax 124 (153) 40 5 (23) Valuation changes on embedded derivatives not hedged, after-tax (3) (2) 1 - 4 Gain on disposition of operations, after-tax 1 1 1 1 1 Tax Legislation benefit - - 69 - - Net income (loss) applicable to common shareholders $ 97 $ (122) $ 131 $ 50 $ 17 Policies in Force (in thousands) (1) Deferred annuities 123 127 130 133 137 Immediate annuities 83 84 85 87 88 206 211 215 220 225 (1) Allstate Annuities in force reflect the number of contracts in force excluding sold blocks of business that remain on the balance sheet due to the dispositions of the business being effected through reinsurance arrangements. The Allstate Corporation 1Q19 Supplement 39
The Allstate Corporation Allstate Annuities Analysis of Net Income ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Benefit spread Cost of insurance contract charges (1) $ 2 $ 3 $ 3 $ 1 $ 2 Contract benefits excluding the implied interest on immediate annuities with life contingencies (2) (17) (6) (23) (22) (26) Total benefit spread (15) (3) (20) (21) (24) Investment spread Net investment income (3) 190 253 260 293 290 Implied interest on immediate annuities with life contingencies (2) (121) (122) (123) (123) (124) Interest credited to contractholder funds (81) (83) (83) (85) (83) Total investment spread (12) 48 54 85 83 Surrender charges and contract maintenance expense fees (1) 1 1 2 2 1 Realized capital gains and losses 156 (194) 51 6 (29) Amortization of deferred policy acquisition costs (2) (2) (2) (2) (1) Operating costs and expenses (7) (6) (7) (9) (9) Gain on disposition of operations 1 2 1 2 1 Income tax (expense) benefit (25) 32 52 (13) (5) Net income (loss) applicable to common shareholders $ 97 $ (122) $ 131 $ 50 $ 17 (1) Reconciliation of contract charges Cost of insurance contract charges $ 2 $ 3 $ 3 $ 1 $ 2 Surrender charges and contract maintenance expense fees 1 1 2 2 1 Total contract charges $ 3 $ 4 $ 5 $ 3 $ 3 (2) Reconciliation of contract benefits Contract benefits excluding the implied interest on immediate annuities with life contingencies $ (17) $ (6) $ (23) $ (22) $ (26) Implied interest on immediate annuities with life contingencies (121) (122) (123) (123) (124) Total contract benefits $ (138) $ (128) $ (146) $ (145) $ (150) (3) Performance-based net investment income, a component of net investment income $ 1 $ 64 $ 72 $ 92 $ 97 The Allstate Corporation 1Q19 Supplement 40
The Allstate Corporation Allstate Annuities Return on Equity ($ in millions) Twelve months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Return on Equity Numerator: Net income applicable to common shareholders (1)(2) $ 156 $ 76 $ 461 $ 396 $ 407 Denominator: Beginning equity $ 5,009 $ 4,950 Ending equity (3) 5,278 4,949 $ 5,119 $ 5,029 $ 5,009 Average equity (4) $ 5,144 $ 4,950 Return on equity 3.0% 1.5% 9.0% 7.9% 8.1% Adjusted Net Income Return on Adjusted Equity * Numerator: Adjusted net income (1) $ 71 $ 131 $ 155 $ 190 $ 211 Denominator: Beginning equity $ 5,009 $ 4,950 Less: Unrealized net capital gains and losses 279 607 Adjusted beginning equity $ 4,730 $ 4,343 Ending equity (3) $ 5,278 $ 4,949 $ 5,119 $ 5,029 $ 5,009 Less: Unrealized net capital gains and losses 428 193 241 272 279 Adjusted ending equity $ 4,850 $ 4,756 $ 4,878 $ 4,757 $ 4,730 Average adjusted equity (4) $ 4,790 $ 4,550 Adjusted net income return on adjusted equity * 1.5% 2.9% 3.2% 4.0% 4.5% Adjusted net income return on adjusted equity by product: Deferred annuities 11.7% 10.7% 10.4% 11.3% 10.6% Immediate annuities 0.4% 1.9% 2.4% 3.2% 3.7% (1) Net income applicable to common shareholders and adjusted net income reflect a trailing twelve-month period. (2) Includes a $69 million Tax Legislation benefit for the periods ended March 31, 2019 and December 31, 2018, a $251 million benefit for the period ended September 30, 2018, and a $182 million benefit for all other periods presented. (3) For the periods ended September 30, 2018, June 30, 2018 and March 31, 2018, ending equity has been used due to the changes in reportable segments that were effective October 2017. (4) Average equity and average adjusted equity are determined using a two-point average, with the beginning and ending equity and adjusted equity, respectively, for the twelve- month period as data points. The Allstate Corporation 1Q19 Supplement 41
The Allstate Corporation Allstate Annuities Reserves and Contractholder Funds ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Reserve for life-contingent contract benefits Immediate fixed annuities with life contingencies: Sub-standard structured settlements and group pension terminations (1) $ 4,987 $ 4,990 $ 5,010 $ 5,011 $ 5,135 Standard structured settlements and SPIA (2) 3,401 3,425 3,443 3,469 3,491 Subtotal (3) 8,388 8,415 8,453 8,480 8,626 Other 109 109 82 87 81 Total $ 8,497 $ 8,524 $ 8,535 $ 8,567 $ 8,707 Contractholder funds Deferred fixed annuities $ 6,962 $ 7,156 $ 7,423 $ 7,630 $ 7,883 Immediate fixed annuities without life contingencies (4) 2,478 2,525 2,568 2,620 2,656 Other 131 136 107 109 104 Total $ 9,571 $ 9,817 $ 10,098 $ 10,359 $ 10,643 Contractholders funds, beginning balance $ 9,817 $ 10,098 $ 10,359 $ 10,643 $ 10,936 Deposits 5 3 3 5 4 Interest credited 80 83 82 84 82 Benefits, withdrawals and other adjustments Benefits (141) (135) (148) (148) (156) Surrenders and partial withdrawals (181) (229) (197) (227) (201) Contract charges (2) (3) (3) (1) (2) Net transfers (to) from separate accounts (1) - - - - Other adjustments (6) - 2 3 (20) Total benefits, withdrawals and other adjustments (331) (367) (346) (373) (379) Contractholder funds, ending balance $ 9,571 $ 9,817 $ 10,098 $ 10,359 $ 10,643 (1) Includes structured settlement annuities for severe injuries or other health impairments which significantly reduced their life expectancy at the time the annuity was issued and group annuity contracts issued to sponsors of terminated pension plans. (2) Includes life-contingent structured settlement annuities for annuitants with standard life expectancy and single premium immediate annuities with life contingencies. (3) To the extent that unrealized gains on fixed income securities would result in a premium deficiency had those gains actually been realized, a premium deficiency reserve is recorded for certain immediate annuities with life contingencies. Liabilities of $8 million and $119 million are included in the reserve for life-contingent contract benefits with respect to this deficiency as of March 31, 2019 and March 31, 2018, respectively. The offset to this liability is recorded as a reduction of the unrealized net capital gains included in accumulated other comprehensive income. The liability was zero for all other periods presented. (4) Includes period certain structured settlements and single premium immediate annuities without life contingencies. The Allstate Corporation 1Q19 Supplement 42
The Allstate Corporation Corporate and Other Segment Results ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net investment income $ 12 $ 15 $ 20 $ 23 $ 13 Operating costs and expenses (21) (24) (28) (11) (8) Interest expense (83) (81) (82) (86) (83) Income tax benefit on operations 20 18 21 18 17 Preferred stock dividends (31) (43) (37) (39) (29) Adjusted net loss (103) (115) (106) (95) (90) Realized capital gains and losses, after-tax 1 (20) - (9) (1) Pension and other postretirement remeasurement gains and losses, after-tax (11) (395) 30 6 (11) Business combination expenses, after-tax - (7) - - - Tax Legislation expense - - (15) - - Net loss applicable to common shareholders $ (113) $ (537) $ (91) $ (98) $ (102) The Allstate Corporation 1Q19 Supplement 43
The Allstate Corporation Consolidated Investments March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2019 2018 2018 2018 2018 Consolidated Investments Fixed income securities, at fair value: Tax-exempt $ 7,132 $ 7,000 $ 7,252 $ 7,396 $ 6,310 Taxable 51,070 50,170 50,411 49,495 50,364 Equity securities (1) 5,802 5,036 6,965 6,888 6,986 Mortgage loans 4,681 4,670 4,592 4,535 4,679 Limited partnership interests (2) 7,493 7,505 7,602 7,679 7,434 Short-term, at fair value 4,157 3,027 3,071 3,123 3,424 Other 3,786 3,852 4,075 4,125 4,092 Total $ 84,121 $ 81,260 $ 83,968 $ 83,241 $ 83,289 Fixed income securities, at amortized cost: Tax-exempt $ 6,980 $ 6,994 $ 7,340 $ 7,438 $ 6,379 Taxable 49,851 50,140 50,278 49,312 49,830 Ratio of fair value to amortized cost 102.4 % 100.1 % 100.1 % 100.2 % 100.8 % Short-term, at amortized cost $ 4,157 $ 3,027 $ 3,071 $ 3,123 $ 3,424 (1) Equity securities may include investments in exchange traded and mutual funds whose underlying investments are fixed income securities. (2) As of March 31, 2019, we have commitments to invest in additional limited partnership interests totaling $2.89 billion. The Allstate Corporation 1Q19 Supplement 44
The Allstate Corporation Investments by Segment ($ in millions) As of March 31, 2019 Property- Service Allstate Allstate Allstate Corporate and Liability Businesses Life Benefits Annuities Other Total Investments by Segment Fixed income securities, at fair value: Tax-exempt $ 6,837 $ - $ - $ - $ 70 $ 225 $ 7,132 Taxable 25,297 1,048 7,571 1,253 14,173 1,728 51,070 Equity securities (1) 4,182 162 73 96 1,257 32 5,802 Mortgage loans 360 - 1,877 206 2,238 - 4,681 Limited partnership interests 4,288 - - - 3,205 - 7,493 Short-term, at fair value 2,325 108 401 41 913 369 4,157 Other 1,521 - 1,294 304 667 - 3,786 Total $ 44,810 $ 1,318 $ 11,216 $ 1,900 $ 22,523 $ 2,354 $ 84,121 Fixed income securities, at amortized cost: Tax-exempt $ 6,695 $ - $ - $ - $ 68 $ 217 $ 6,980 Taxable 25,017 1,033 7,237 1,226 13,623 1,715 49,851 Ratio of fair value to amortized cost 101.3 % 101.5 % 104.6 % 102.2 % 104.0 % 101.1 % 102.4 % Short-term, at amortized cost $ 2,325 $ 108 $ 401 $ 41 $ 913 $ 369 $ 4,157 Fixed income securities portfolio duration (in years) (2) 4.52 4.19 5.62 4.78 4.22 2.44 4.52 (1) Equity securities may include investments in exchange traded and mutual funds whose underlying investments are fixed income securities. (2) Duration measures the price sensitivity of assets and liabilities to changes in interest rates. The Allstate Corporation 1Q19 Supplement 45
The Allstate Corporation Unrealized Net Capital Gains and Losses by Type ($ in millions) March 31, 2019 December 31, 2018 September 30, 2018 Unrealized net Fair value as a Unrealized net Fair value as a Unrealized net Fair value as a capital gains percent of amortized capital gains percent of amortized capital gains percent of amortized and losses Fair value cost (1) and losses Fair value cost (1) and losses Fair value cost (1) Fixed income securities U.S. government and agencies $ 117 $ 3,892 103.1 % $ 131 $ 5,517 102.4 % $ 9 $ 3,151 100.3 % Municipal 385 9,264 104.3 206 9,169 102.3 99 9,415 101.1 Corporate 756 42,699 101.8 (400) 40,136 99.0 (166) 42,662 99.6 Foreign government 20 752 102.7 8 747 101.1 - 854 100.0 Asset-backed securities ("ABS") (2) 1,058 99.8 (4) 1,045 99.6 - 979 100.0 Residential mortgage-backed securities ("RMBS") 88 442 124.9 87 464 123.1 96 500 123.8 Commercial mortgage-backed securities ("CMBS") 6 73 109.0 7 70 111.1 6 80 108.1 Redeemable preferred stock 1 22 104.8 1 22 104.8 1 22 104.8 Total fixed income securities 1,371 58,202 102.4 36 57,170 100.1 45 57,663 100.0 Equity securities - 5,802 n/a - 5,036 n/a - 6,965 n/a Short-term investments - 4,157 100.0 - 3,027 100.0 - 3,071 100.0 Derivatives (3) 98 n/a (3) 117 n/a (3) 108 n/a EMA limited partnership interests (2) - n/a n/a - n/a n/a 2 n/a n/a Unrealized net capital gains and losses, pre-tax 1,368 33 44 Amounts recognized for: Insurance reserves (3) (8) - - DAC and DSI (4) (124) (33) (62) Amounts recognized (132) (33) (62) Deferred income taxes 264 2 2 Unrealized net capital gains and losses, after-tax $ 972 $ 2 $ (16) June 30, 2018 March 31, 2018 December 31, 2017 Unrealized net Fair value as a Unrealized net Fair value as a Unrealized net Fair value as a capital gains percent of amortized capital gains percent of capital gains percent of amortized (1) (1) (1) and losses Fair value cost and losses Fair value amortized cost and losses Fair value cost Fixed income securities U.S. government and agencies $ 24 $ 3,206 100.8 % $ 33 $ 3,406 101.0 % $ 36 $ 3,616 101.0 % Municipal 174 9,628 101.8 165 8,569 102.0 275 8,328 103.4 Corporate (169) 41,415 99.6 152 41,851 100.4 1,030 44,026 102.4 Foreign government 9 926 101.0 11 979 101.1 16 1,021 101.6 ABS 1 1,085 100.1 1 1,197 100.1 6 1,272 100.5 RMBS 96 520 122.6 97 550 121.4 98 578 120.4 CMBS 4 88 104.8 4 99 104.2 4 128 103.2 Redeemable preferred stock 2 23 109.5 2 23 109.5 2 23 109.5 Total fixed income securities 141 56,891 100.2 465 56,674 100.8 1,467 58,992 102.6 Equity securities - 6,888 n/a - 6,986 n/a 1,160 6,621 121.2 Short-term investments - 3,123 100.0 - 3,424 100.0 - 1,944 100.0 Derivatives (3) 104 n/a (1) 103 n/a (1) 127 n/a EMA limited partnership interests (2) 3 n/a n/a 1 n/a n/a 1 n/a n/a Unrealized net capital gains and losses, pre-tax 141 465 2,627 Amounts recognized for: Insurance reserves (3) - (119) (315) DAC and DSI (4) (72) (109) (196) Amounts recognized (72) (228) (511) Deferred income taxes (15) (50) (454) Unrealized net capital gains and losses, after-tax $ 54 $ 187 $ 1,662 (1) The comparison of percentages from period to period may be distorted by investment transactions such as sales, purchases and impairment write-downs. (2) Unrealized net capital gains and losses for limited partnership interests represent the Company's share of EMA limited partnerships' other comprehensive income. Fair value and amortized cost are not applicable. (3) The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuities). (4) The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized. The Allstate Corporation 1Q19 Supplement 46
The Allstate Corporation Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-Tax) ($ in millions) Three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Net Investment Income Fixed income securities $ 538 $ 533 $ 527 $ 509 $ 508 Equity securities 30 40 35 61 34 Mortgage loans 53 54 52 60 51 Limited partnership interests ("LP") (1) 9 142 210 173 180 Short-term 26 23 19 19 12 Other 63 67 71 68 66 Investment income, before expense 719 859 914 890 851 Less: Investment expense (2) (71) (73) (70) (66) (65) Net investment income $ 648 $ 786 $ 844 $ 824 $ 786 Interest-bearing investments (3) $ 664 $ 659 $ 650 $ 639 $ 622 Equity securities 30 40 35 61 34 LP and other alternative investments (4) 25 160 229 190 195 Investment income, before expense $ 719 $ 859 $ 914 $ 890 $ 851 Pre-Tax Yields (5) Fixed income securities 3.8 % 3.7 % 3.7 % 3.6 % 3.6 % Equity securities 2.6 3.2 2.3 4.1 2.5 Mortgage loans 4.6 4.6 4.6 5.2 4.4 Limited partnership interests 0.5 7.5 11.0 9.2 10.1 Total portfolio 3.4 4.1 4.4 4.3 4.1 Interest-bearing investments 3.9 3.9 3.8 3.8 3.7 Realized Capital Gains and Losses (Pre-tax) by Transaction Type Impairment write-downs $ (14) $ (4) $ (5) $ (4) $ (1) Change in intent write-downs - - - - - Net other-than-temporary impairment losses recognized in earnings (14) (4) (5) (4) (1) Sales 95 (76) (22) (75) (42) Valuation of equity investments 627 (840) 198 34 (83) Valuation and settlements of derivative instruments (46) 26 5 20 (8) Total $ 662 $ (894) $ 176 $ (25) $ (134) Total Return on Investment Portfolio (6) Net investment income 0.8 % 0.9 % 1.0 % 1.0 % 0.9 % Valuation-interest bearing 1.7 (0.1) (0.1) (0.5) (1.3) Valuation-equity owned 0.8 (1.0) 0.2 - (0.1) Total 3.3 % (0.2) % 1.1 % 0.5 % (0.5) % Average Investment Balances (in billions) (7) $ 81.2 $ 81.7 $ 82.4 $ 81.9 $ 81.0 (1) Income from equity method of accounting LP is generally recognized on a three-month delay due to the availability of the related financial statements from investees. (2) Includes $20 million and $18 million of investee level expenses (depreciation and asset level operating expenses) for the three months ended March 31, 2019 and 2018, respectively, and $11 million and $4 million of securities lending expenses (portion of reinvestment income on securities lending collateral paid to counterparties) for the three months ended March 31, 2019 and 2018, respectively. (3) Comprised of fixed income securities, mortgage loans, short-term investments, and other investments, including bank and agent loans, and derivatives. (4) Comprised of limited partnership interests and other alternative investments, including real estate investments classified as other investments. (5) Quarterly pre-tax yield is calculated as annualized quarterly investment income, before investment expense divided by the average of the current and prior quarter investment balances. Year-to- date pre-tax yield is calculated as annualized year-to-date investment income, before investment expense divided by the average of investment balances at the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate and other consolidated investments is net of investee level expenses (depreciation and asset level operating expenses reported in investment expense). Fixed income securities investment balances exclude unrealized capital gains and losses. Equity securities investment balances use cost in the calculation. (6) Total return on investment portfolio is calculated from GAAP results, including the total of net investment income, realized capital gains and losses, the change in unrealized net capital gains and losses, and the change in the difference between fair value and carrying value of mortgage loans, bank loans and agent loans divided by the average fair value balances. (7) Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses on fixed income securities are excluded and equity securities investment balances are at cost. The Allstate Corporation 1Q19 Supplement 47
The Allstate Corporation Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-Tax) by Segment ($ in millions) Three months ended March 31, 2019 Property- Service Allstate Allstate Allstate Corporate and Liability Businesses Life Benefits Annuities Other Total Net Investment Income Fixed income securities $ 259 $ 7 $ 90 $ 13 $ 158 $ 11 $ 538 Equity securities 23 1 - - 6 - 30 Mortgage loans 4 - 22 2 25 - 53 Limited partnership interests ("LP") 6 - - - 3 - 9 Short-term 15 1 2 - 6 2 26 Other 26 - 19 5 12 1 63 Investment income, before expense 333 9 133 20 210 14 719 Less: Investment expense (42) - (6) (1) (20) (2) (71) Net investment income $ 291 $ 9 $ 127 $ 19 $ 190 $ 12 $ 648 Net investment income, after-tax $ 241 $ 7 $ 104 $ 15 $ 150 $ 10 $ 527 Interest-bearing investments (1) $ 293 $ 8 $ 133 $ 20 $ 196 $ 14 $ 664 Equity securities 23 1 - - 6 - 30 LP and other alternative investments (2) 17 - - - 8 - 25 Investment income, before expense $ 333 $ 9 $ 133 $ 20 $ 210 $ 14 $ 719 Pre-Tax Yields (3) Fixed income securities 3.2 % 2.9 % 4.9 % 4.1 % 4.6 % 2.8 % 3.8 % Equity securities 2.9 2.9 2.1 1.0 2.0 0.4 2.6 Mortgage loans 4.8 - 4.6 4.4 4.5 - 4.6 Limited partnership interests 0.5 - - - 0.4 - 0.5 Total portfolio 2.9 2.9 4.9 4.3 3.7 2.9 3.4 Interest-bearing investments 3.3 2.9 4.9 4.4 4.5 3.0 3.9 Realized Capital Gains and Losses (Pre-tax) by transaction type Impairment write-downs $ (7) $ - $ - $ - $ (7) $ - $ (14) Change in intent write-downs - - - - - - - Net other-than-temporary impairment losses recognized in earnings (7) - - - (7) - (14) Sales 101 - (8) (2) 4 - 95 Valuation of equity investments 453 8 3 6 155 2 627 Valuation and settlements of derivative instruments (50) - - - 4 - (46) Total $ 497 $ 8 $ (5) $ 4 $ 156 $ 2 $ 662 (1) Comprised of fixed income securities, mortgage loans, short-term investments, and other investments including bank and agent loans and derivatives. (2) Comprised of limited partnership interests and other alternative investments, including real estate investments classified as other investments. (3) Quarterly pre-tax yield is calculated as annualized quarterly investment income, before investment expense divided by the average of the current and prior quarter investment balances. For the purposes of the pre-tax yield calculation, income for directly held real estate and other consolidated investments is net of investee level expenses (depreciation and asset level operating expenses reported in investment expense). Fixed income securities investment balances exclude unrealized capital gains and losses. Equity securities investment balances use cost in the calculation. The Allstate Corporation 1Q19 Supplement 48
The Allstate Corporation Investment Position and Results by Strategy ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Market-Based (1) Investment Position Interest-bearing investments $ 69,863 $ 67,757 $ 68,441 $ 67,733 $ 67,934 Equity securities (2) 5,583 4,775 6,725 6,670 6,818 LP and other alternative investments (3) 766 691 764 930 828 Total $ 76,212 $ 73,223 $ 75,930 $ 75,333 $ 75,580 Investment income Interest-bearing investments $ 663 $ 656 $ 648 $ 638 $ 619 Equity securities 30 40 36 59 34 LP and other alternative investments 2 2 1 - 1 Investment income, before expense 695 698 685 697 654 Investee level expenses (4) (2) (2) (2) (1) (2) Income for yield calculation $ 693 $ 696 $ 683 $ 696 $ 652 Market-based pre-tax yield 3.8 % 3.8 % 3.7 % 3.8 % 3.5 % Realized capital gains and losses (pre-tax) by transaction type Impairment write-downs $ (13) $ (4) $ (3) $ (3) $ (1) Change in intent write-downs - - - - - Net other-than-temporary impairment losses recognized in earnings (13) (4) (3) (3) (1) Sales 66 (81) (25) (74) (42) Valuation of equity investments 602 (853) 194 15 (83) Valuation and settlements of derivative instruments (50) 16 (3) 1 - Total $ 605 $ (922) $ 163 $ (61) $ (126) Performance-Based (5) Investment Position Interest-bearing investments $ 127 $ 113 $ 124 $ 112 $ 115 Equity securities 219 261 240 218 168 LP and other alternative investments 7,563 7,663 7,674 7,578 7,426 Total $ 7,909 $ 8,037 $ 8,038 $ 7,908 $ 7,709 Investment income Interest-bearing investments $ 1 $ 3 $ 2 $ 1 $ 3 Equity securities - - (1) 2 - LP and other alternative investments 23 158 228 190 194 Investment income, before expense 24 161 229 193 197 Investee level expenses (18) (16) (15) (17) (16) Income for yield calculation $ 6 $ 145 $ 214 $ 176 $ 181 Performance-based pre-tax yield 0.3 % 7.2 % 10.8 % 9.0 % 9.9 % Realized capital gains and losses (pre-tax) by transaction type Impairment write-downs $ (1) $ - $ (2) $ (1) $ - Change in intent write-downs - - - - - Net other-than-temporary impairment losses recognized in earnings (1) - (2) (1) - Sales 29 5 3 (1) - Valuation of equity investments 25 13 4 19 - Valuation and settlements of derivative instruments 4 10 8 19 (8) Total $ 57 $ 28 $ 13 $ 36 $ (8) (1) Market-based strategy seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities. (2) Equity securities may include investments in exchange traded and mutual funds whose underlying investments are fixed income securities. (3) Market-based investments include publicly traded equity securities classified as limited partnerships. (4) When calculating the pre-tax yields, investee level expenses are netted against income for directly held real estate and other consolidated investments. (5) Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity and real estate. The Allstate Corporation 1Q19 Supplement 49
The Allstate Corporation Investment Position and Results by Strategy and Segment ($ in millions) As of or for the three months ended March 31, 2019 Property- Service Allstate Allstate Allstate Corporate and Liability Businesses Life Benefits Annuities Other Total Market-based (1) Investment Position Interest-bearing investments $ 35,672 $ 1,156 $ 11,143 $ 1,804 $ 17,766 $ 2,322 $ 69,863 Equity securities (2) 4,036 162 73 96 1,184 32 5,583 LP and other alternative investments (3) 635 - - - 131 - 766 Total $ 40,343 $ 1,318 $ 11,216 $ 1,900 $ 19,081 $ 2,354 $ 76,212 Investment income Interest-bearing investments $ 292 $ 8 $ 133 $ 20 $ 196 $ 14 $ 663 Equity securities 23 1 - - 6 - 30 LP and other alternative investments 2 - - - - - 2 Investment income, before expense 317 9 133 20 202 14 695 Investee level expenses (4) (2) - - - - - (2) Income for yield calculation $ 315 $ 9 $ 133 $ 20 $ 202 $ 14 $ 693 Market-based pre-tax yield 3.2 % 2.9 % 4.9 % 4.3 % 4.4 % 2.9 % 3.8 % Realized capital gains and losses (pre-tax) by transaction type Impairment write-downs $ (7) $ - $ - $ - $ (6) $ - $ (13) Change in intent write-down - - - - - - - Net other-than-temporary impairment losses recognized in earnings (7) - - - (6) - (13) Sales 72 - (8) (2) 4 - 66 Valuation of equity investments 441 8 3 6 142 2 602 Valuation and settlements of derivative instruments (53) - - - 3 - (50) Total $ 453 $ 8 $ (5) $ 4 $ 143 $ 2 $ 605 Performance-based (5) Investment Position Interest-bearing investments $ 96 $ - $ - $ - $ 31 $ - $ 127 Equity securities 146 - - - 73 - 219 LP and other alternative investments 4,225 - - - 3,338 - 7,563 Total $ 4,467 $ - $ - $ - $ 3,442 $ - $ 7,909 Investment income Interest-bearing investments $ 1 $ - $ - $ - $ - $ - $ 1 Equity securities - - - - - - - LP and other alternative investments 15 - - - 8 - 23 Investment income, before expense 16 - - - 8 - 24 Investee level expenses (11) - - - (7) - (18) Income for yield calculation $ 5 $ - $ - $ - $ 1 $ - $ 6 Performance-based pre-tax yield 0.4 % n/a n/a n/a 0.3 % n/a 0.3 % Realized capital gains and losses (pre-tax) by transaction type Impairment write-downs $ - $ - $ - $ - $ (1) $ - $ (1) Change in intent write-downs - - - - - - - Net other-than-temporary impairment losses recognized in earnings - - - - (1) - (1) Sales 29 - - - - - 29 Valuation of equity investments 12 - - - 13 - 25 Valuation and settlements of derivative instruments 3 - - - 1 - 4 Total $ 44 $ - $ - $ - $ 13 $ - $ 57 (1) Market-based strategy seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities. (2) Equity securities may include investments in exchange traded and mutual funds whose underlying investments are fixed income securities. (3) Market-based investments include publicly traded equity securities classified as limited partnerships. (4) When calculating the pre-tax yields, investee level expenses are netted against income for directly held real estate and other consolidated investments. (5) Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity and real estate. The Allstate Corporation 1Q19 Supplement 50
The Allstate Corporation Performance-Based ("PB") Investments ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Investment position Limited partnerships Private equity $ 5,786 $ 5,724 $ 5,712 $ 5,585 $ 5,437 Real estate 984 1,134 1,170 1,207 1,212 PB - limited partnerships 6,770 6,858 6,882 6,792 6,649 Non-LP Private equity 331 343 327 300 249 Real estate 808 836 829 816 811 PB - non-LP 1,139 1,179 1,156 1,116 1,060 Total Private equity 6,117 6,067 6,039 5,885 5,686 Real estate 1,792 1,970 1,999 2,023 2,023 Total PB $ 7,909 $ 8,037 $ 8,038 $ 7,908 $ 7,709 Investment income Limited partnerships Private equity $ (5) $ 130 $ 123 $ 152 $ 177 Real estate 12 12 87 21 3 PB - limited partnerships 7 142 210 173 180 Non-LP Private equity 3 2 1 4 2 Real estate 14 17 18 16 15 PB - non-LP 17 19 19 20 17 Total Private equity (2) 132 124 156 179 Real estate 26 29 105 37 18 Total PB $ 24 $ 161 $ 229 $ 193 $ 197 Investee level expenses $ (18) $ (16) $ (15) $ (17) $ (16) Realized capital gains and losses Limited partnerships Private equity $ (3) $ (3) $ 1 $ (1) $ - Real estate - - (2) - - PB - limited partnerships (3) (3) (1) (1) - Non-LP Private equity 28 18 13 34 (8) Real estate 32 13 1 3 - PB - non-LP 60 31 14 37 (8) Total Private equity 25 15 14 33 (8) Real estate 32 13 (1) 3 - Total PB $ 57 $ 28 $ 13 $ 36 $ (8) Pre-Tax Yield 0.3 % 7.2 % 10.8 % 9.0 % 9.9 % Internal Rate of Return (1) 10 Year 11.4 % 10.0 % 9.3 % 9.1 % 9.0 % 5 Year 11.2 % 12.3 % 13.0 % 13.1 % 13.0 % (1) The internal rate of return ("IRR") is one of the measures we use to evaluate the performance of these investments. The IRR represents the rate of return on the investments considering the cash flows paid and received and, until the investment is fully liquidated, the estimated value of investment holdings at the end of the measurement period. The calculated IRR for any measurement period is highly influenced by the values of the portfolio at the beginning and end of the period, which reflect the estimated fair values of the investments as of such dates. As a result, the IRR can vary significantly for different measurement periods based on macroeconomic or other events that impact the estimated beginning or ending portfolio value, such as the global financial crisis. Our IRR calculation method may differ from those used by other investors. The timing of the recognition of income in the financial statements may differ significantly from the cash distributions and changes in the value of these investments. The Allstate Corporation 1Q19 Supplement 51
The Allstate Corporation Limited Partnership Interests ($ in millions) As of or for the three months ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2019 2018 2018 2018 2018 Investment position Underlying investment Private equity $ 5,788 $ 5,724 $ 5,712 $ 5,585 $ 5,437 Real estate 984 1,134 1,170 1,207 1,212 Other (1) 721 647 720 887 785 Total $ 7,493 $ 7,505 $ 7,602 $ 7,679 $ 7,434 Accounting basis Equity method $ 5,755 $ 5,726 $ 5,893 $ 6,029 $ 5,771 Fair value 1,738 1,779 1,709 1,650 1,663 Total $ 7,493 $ 7,505 $ 7,602 $ 7,679 $ 7,434 Approximate cumulative pre-tax appreciation $ 1,231 $ 1,236 $ 1,308 $ 1,366 $ 1,347 Investment income (2) Underlying investment Private equity $ (3) $ 130 $ 123 $ 152 $ 177 Real estate 12 12 87 21 3 Total $ 9 $ 142 $ 210 $ 173 $ 180 Accounting basis Equity method $ 40 $ 70 $ 135 $ 143 $ 103 Fair value (31) 72 75 30 77 Total $ 9 $ 142 $ 210 $ 173 $ 180 (1) Comprised of certain limited partnerships where the underlying assets are predominately public equity securities with changes in fair value reported as realized capital gains and losses. (2) Income from equity method of accounting limited partnership interests is generally recognized on a three-month delay due to the availability of the related financial statements from investees. The Allstate Corporation 1Q19 Supplement 52
Definitions of Non-GAAP Measures We believe that investors’ understanding of Allstate’s performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited. Adjusted net 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 adjusted net income, • pension and other postretirement remeasurement gains and losses, after-tax, • valuation changes on embedded derivatives not hedged, after-tax, • amortization of deferred policy acquisition costs ("DAC") and deferred sales inducements (“DSI”), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives not hedged, after-tax, • business combination expenses and the 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. Net income applicable to common shareholders is the GAAP measure that is most directly comparable to adjusted net income. We use adjusted net income as an important measure to evaluate our results of operations. We believe that the measure provides investors with a valuable measure of the Company's ongoing performance because it reveals trends in our insurance and financial service business that may be obscured by the net effect of realized capital gains and losses, pension and other postretirement remeasurement gains and losses, valuation changes on embedded derivatives not hedged, business combination expenses and the amortization of purchased intangible assets, gain (loss) on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items. Realized capital gains and losses, pension and other postretirement remeasurement gains and losses, valuation changes on embedded derivatives not hedged and gain (loss) on disposition of operations may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to the insurance underwriting process. Consistent with our intent to protect results or earn additional income, adjusted net income includes periodic settlements and accruals on certain derivative instruments that are reported in realized capital gains and losses because they do not qualify for hedge accounting or are not designated as hedges for accounting purposes. These instruments are used for economic hedges and to replicate fixed income securities, and by including them in adjusted net income, we are appropriately reflecting their trends in our performance and in a manner consistent with the economically hedged investments, product attributes (e.g. net investment income and interest credited to contractholder funds) or replicated investments. Business combination expenses are excluded because they are non-recurring in nature and the amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, adjusted net income excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of our business. A byproduct of excluding these items to determine adjusted net income is the transparency and understanding of their significance to net income variability and profitability while recognizing these or similar items may recur in subsequent periods. Adjusted net income is used by management along with the other components of net income applicable to common shareholders to assess our performance. We use adjusted measures of adjusted net income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income applicable to common shareholders, adjusted net income and their components separately and in the aggregate when reviewing and evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income results in their evaluation of our and our industry's financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the Company and management's performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses adjusted net income as the denominator. Adjusted net income should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business. A reconciliation of adjusted net income to net income applicable to common shareholders is provided in the schedule, "Contribution to Income". Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets ("underlying combined ratio") is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of catastrophes on the combined ratio, the effect of prior year non-catastrophe reserve reestimates on the combined ratio, and the effect of amortization of purchased intangible assets on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our Property-Liability business that may be obscured by catastrophe losses, prior year reserve reestimates and amortization of purchased intangible assets. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves which could increase or decrease current year income. Amortization of purchased intangible assets relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide it to facilitate a comparison to our outlook on the underlying combined ratio. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business. A reconciliation of the underlying combined ratio to combined ratio is provided in the schedules "Property-Liability Results", "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics", "Encompass Brand Profitability Measures and Statistics", "Auto Profitability Measures by Brand", "Homeowners Profitability Measures by Brand", "Other Personal Lines Profitability Measures by Brand" and "Commercial Lines Profitability Measures". Average underlying loss (incurred pure premium) and expense is calculated as the underlying combined ratio (a non-GAAP measure) provided on the schedule "Auto Profitability Measures by Brand" and "Homeowners Profitability Measures by Brand" multiplied by average premium calculated using annualized GAAP quarterly earned premium, which is annualized (multiplied by 4), provided on the schedule "Auto Profitability Measures by Brand" and "Homeowners Profitability Measures by Brand", divided by the policies in force provided on the schedule "Policies in Force" (“average premium”). We believe that this measure is useful to investors and it is used by management for the same reasons noted above for the underlying combined ratio. The Allstate Corporation 1Q19 Supplement 53
Definitions of Non-GAAP Measures (continued) Underlying loss ratio is a non-GAAP ratio, which is computed as the difference between three GAAP operating ratios: the loss ratio, the effect of catastrophes on the combined ratio and the effect of prior year non-catastrophe reserve reestimates on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends that may be obscured by catastrophe losses and prior year reserve reestimates. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year reserve reestimates are caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. The most directly comparable GAAP measure is the loss ratio. The underlying loss ratio should not be considered a substitute for the loss ratio and does not reflect the overall loss ratio of our business. A reconciliation of underlying loss ratio is provided in the schedules "Property-Liability Results", "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics", "Encompass Brand Profitability Measures and Statistics", "Auto Profitability Measures by Brand", "Homeowners Profitability Measures by Brand" and "Other Personal Lines Profitability Measures by Brand". Adjusted net income return on common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month adjusted net income by the average of common shareholders’ equity at the beginning and at the end of the 12-months, after excluding the effect of unrealized net capital gains and losses. Return on common shareholders' equity is the most directly comparable GAAP measure. We use adjusted net income as the numerator for the same reasons we use adjusted net income, as discussed above. We use average common shareholders' equity excluding the effect of unrealized net capital gains and losses for the denominator as a representation of common shareholders’ equity primarily attributable to the Company’s earned and realized business operations because it eliminates the effect of items that are unrealized and vary significantly between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. We use it to supplement our evaluation of net income applicable to common shareholders and return on common shareholders' equity because it excludes the effect of items that tend to be highly variable from period to period. We believe that this measure is useful to investors and that it provides a valuable tool for investors when considered along with return on common shareholders' equity because it eliminates the after-tax effects of realized and unrealized net capital gains and losses that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by management. In addition, it eliminates non-recurring items that are not indicative of our ongoing business or economic trends. A byproduct of excluding the items noted above to determine adjusted net income return on common shareholders' equity from return on common shareholders' equity is the transparency and understanding of their significance to return on common shareholders' equity variability and profitability while recognizing these or similar items may recur in subsequent periods. We use adjusted measures of adjusted net income return on common shareholders' equity in incentive compensation. Therefore, we believe it is useful for investors to have adjusted net income return on common shareholders' equity and return on common shareholders' equity when evaluating our performance. We note that investors, financial analysts, financial and business media organizations and rating agencies utilize adjusted net income return on common shareholders' equity results in their evaluation of our and our industry’s financial performance and in their investment decisions, recommendations and communications as it represents a reliable, representative and consistent measurement of the industry and the company and management’s utilization of capital. Adjusted net income return on common shareholders' equity should not be considered a substitute for return on common shareholders' equity and does not reflect the overall profitability of our business. A reconciliation of return on common shareholders' equity and adjusted net income return on common shareholders' equity can be found in the schedule, "Return on Common Shareholders' Equity". Adjusted net income return on adjusted equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month adjusted net income by the average of equity at the beginning and at the end of the 12-months, after excluding the effect of unrealized net capital gains and losses and goodwill. Return on equity is the most directly comparable GAAP measure. We use average equity excluding the effect of unrealized net capital gains and losses and goodwill for the denominator as a representation of equity primarily attributable to the Company’s earned and realized business operations. Unrealized net capital gains and losses are excluded because they vary significantly between periods due to external economic developments such as capital market conditions like changes in equity prices and interest rates, the amount and timing of which are unrelated to the insurance underwriting process. Goodwill is excluded because it relates to the acquisition purchase price and is not indicative of our underlying business results. We believe it is useful for investors to have adjusted net income return on adjusted equity when evaluating our performance as it represents a reliable, representative and consistent measurement of the company and management’s utilization of capital. Adjusted net income return on adjusted equity should not be considered a substitute for return on equity and does not reflect the overall profitability of our business. A reconciliation of return on equity and adjusted net income return on adjusted equity can be found in the schedules, "Allstate Life Return on Equity", "Allstate Benefits Return on Equity" and "Allstate Annuities Return on Equity". Adjusted net income, excluding purchase accounting adjustments, is a non-GAAP measure, which is computed as net income (loss) applicable to common shareholders, excluding amortization of purchased intangible assets, after-tax, realized capital gains and losses, after-tax, pension and other postretirement remeasurement gains and losses, after-tax, and adjusted for the after-tax income statement effects of acquisition-related purchase accounting fair value adjustments to unearned premiums, contractual liability insurance policy premium expenses, and commissions paid to retailers. Net income (loss) applicable to shareholders is the GAAP measure that is most directly comparable to adjusted net income, excluding purchase accounting adjustments. We use adjusted net income, excluding purchase accounting adjustments, as an important measure to evaluate SquareTrade’s results of operations. We believe that the measure provides investors with a valuable measure of SquareTrade’s ongoing performance because it reveals trends that may be obscured by the amortization of purchased intangible assets, the acquisition-related purchase accounting fair value adjustments, and the net effects of realized capital gains and losses. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our business results or trends. We adjust for the effects of acquisition-related purchase accounting fair value adjustments because they relate to the acquisition and their effects are not indicative of the underlying business results and trends. Realized capital gains and losses may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions, the timing of which is unrelated to SquareTrade’s operations. Adjusted net income, excluding purchase accounting adjustments, highlights the results from ongoing operations and the underlying profitability of our business and is used by management along with the other components of net income applicable to common shareholders to assess our performance. We believe it is useful for investors to evaluate net income applicable to common shareholders, adjusted net income, excluding purchase accounting adjustments, and their components separately and in the aggregate when reviewing and evaluating SquareTrade’s performance. Adjusted net income, excluding purchase accounting adjustments, should not be considered a substitute for net income applicable to common shareholders and does not reflect the overall profitability of our business. A reconciliation of net income (loss) applicable to common shareholders to adjusted net income, excluding purchase accounting adjustments, is provided in the schedule, "SquareTrade Results". Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, is a ratio that uses a non-GAAP measure. It is calculated by dividing common shareholders’ equity after excluding the impact of unrealized net capital gains and losses on fixed income securities and related DAC, DSI and life insurance reserves by total common shares outstanding plus dilutive potential common shares outstanding. We use the trend in book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, in conjunction with book value per common share to identify and analyze the change in net worth attributable to management efforts between periods. We believe the non-GAAP ratio is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market conditions, the magnitude and timing of which are generally not influenced by management, and we believe it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. We note that book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, is a measure commonly used by insurance investors as a valuation technique. Book value per common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities, should not be considered a substitute for book value per common share, and does not reflect the recorded net worth of our business. A reconciliation of book value per common share, excluding the impact of unrealized net capital gains on fixed income securities, and book value per common share can be found in the schedule, "Book Value per Common Share". The Allstate Corporation 1Q19 Supplement 54
