Allstate 2012 Annual Report Download - page 4

Solid Financial Results
Allstate achieved solid financial results in a year when
the insurance industry faced continued high costs from
extreme weather. While income was down from 2010
we still managed to increase book value per share by
4.5 percent and return nearly $1.4 billion to shareholders.
• Net income was $788 million, a 15 percent decline
from the prior year reflecting a 73 percent increase
in catastrophe losses to $3.8 billion.
• The underlying combined ratio* was 89.3, which
excludes catastrophe losses and reserve changes,
an excellent result.
• Strong returns were achieved in auto insurance
which had a combined ratio of 96.1.
• Homeowners insurance operated at an underwriting
loss as catastrophe losses utilized approximately
50 percent of premiums reflecting high catastrophe
losses in the second and third quarters of the
year. Proactive efforts to generate an acceptable
return on capital from this business include raising
prices, increasing the use of third-party products
and introducing the new Allstate House and
HomeSM product.
• Allstate Financial made progress in its strategy
of focusing on underwritten products sold through
Allstate Agencies and the workplace. Operating
income* improved by 11 percent to $529 million
for the year.
• Investment results were also very strong in 2011.
Investment yields were maintained from the
prior year despite continued low interest rates
as a result of tactical moves in the fixed income
portfolio early in the year. The consolidated
investment portfolio declined by $4.9 billion to
$95.6 billion primarily reflecting the reduction in
Allstate Financial’s portfolio as it shifts away from
spread-based products.
• Shareholders received dividends of $435 million
($0.83 per share) and $946 million of common
stock was repurchased (6 percent of outstanding
shares at the beginning of the year). Book value
increased to almost $37 per share.
CLAIM SATISFACTION GUARANTEESM
Under our Claim Satisfaction Guarantee,
any eligible standard auto customer who
is dissatisfied with the auto claim experi-
ence will receive a credit to his or her auto
policy (after notifying Allstate, in writing,
of the dissatisfaction and meeting all
other program requirements).
* For a definition of this term, please see the
“Definitions of Non-GAAP Measures” on the
second page following the proxy statement.
ALLSTATE INNOVATIONS
Allstate innovations include Drive
Wise®, a voluntary program that
rewards safe and low-mileage drivers
in eligible states with discounts of up
to 30 percent. In 2011, Allstate opened
its Insight, Design & Innovation Center
to help employees collaborate, design
solutions and discover fresh insights
about consumers.