Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*) the first time they appear. 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 Investor Supplement Second Quarter 2016 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.
PAGE Consolidated Statements of Operations 1 Contribution to Income 2 Revenues 3 Statements of Financial Position 4 Book Value Per Common Share 5 Return on Common Shareholders' Equity 6 Debt to Capital 7 Statements of Cash Flows 8 Analysis of Deferred Policy Acquisition Costs 9,10 Property-Liability Operations Property-Liability Results 11 Underwriting Results by Area of Business 12 Property-Liability Premiums Written by Brand 13 Impact of Net Rate Changes Approved on Premiums Written 14 Policies in Force and Other Statistics 15 Allstate Brand Profitability Measures 16 Allstate Brand Statistics 17 Allstate Brand Auto Claim Frequency Analysis 18-20 Esurance Brand Profitability Measures and Statistics 21 Encompass Brand Profitability Measures and Statistics 22 Auto Profitability Measures 23 Homeowners Profitability Measures 24 Other Personal Lines Profitability Measures 25 Commercial Lines Profitability Measures 26 Other Business Lines Profitability Measures 27 Auto, Homeowners and Other Personal Lines Underlying Combined Ratios 28 Allstate Brand Auto and Homeowners Underlying Loss and Expense 29 Homeowners Supplemental Information 30 Catastrophe Losses by Brand 31 Effect of Catastrophe Losses on the Combined Ratio 32 Catastrophe by Size of Event 33 Prior Year Reserve Reestimates 34 Asbestos and Environmental Reserves 35 Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures 36 Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures 37 Allstate Financial Operations Allstate Financial Results 38 Return on Attributed Equity 39 Allstate Financial Premiums and Contract Charges 40 Allstate Financial Change in Contractholder Funds 41 Allstate Financial Analysis of Net Income 42 Allstate Financial Weighted Average Investment Spreads 43 Allstate Financial Supplemental Product Information 44 Allstate Financial Insurance Policies and Annuities in Force 45 Allstate Life, Allstate Annuities and Allstate Benefits Results and Product Information 46,47 Corporate and Other Results 48 Investments Investments 49 Limited Partnership Investments 50 Unrealized Net Capital Gains and Losses on Security Portfolio by Type 51 Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 52 Property-Liability Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 53 Allstate Financial Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 54 Investment Results 55 Investment Position by Strategy 56 Investment Results by Strategy 57 Investment Income and Realized Capital Gains and Losses By Investment Type and Strategy 58 Performance-Based Long-Term Investments 59 Definitions of Non-GAAP Measures 60 THE ALLSTATE CORPORATION Investor Supplement - Second Quarter 2016 Table of Contents
1 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Revenues Property-liability insurance premiums $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975 Life and annuity premiums and contract charges 564 566 547 538 536 537 1,130 1,073 Net investment income 762 731 710 807 789 850 1,493 1,639 Realized capital gains and losses: Total other-than-temporary impairment ("OTTI") losses (77) (91) (166) (186) (47) (53) (168) (100) OTTI losses reclassified to (from) other comprehensive income (2) 10 16 12 4 4 8 8 Net OTTI losses recognized in earnings (79) (81) (150) (174) (43) (49) (160) (92) Sales and other realized capital gains and losses 103 (68) (100) 207 151 188 35 339 Total realized capital gains and losses 24 (149) (250) 33 108 139 (125) 247 Total revenues 9,164 8,871 8,691 9,028 8,982 8,952 18,035 17,934 Costs and expenses Property-liability insurance claims and claims expense 5,901 5,684 5,199 5,255 5,587 4,993 11,585 10,580 Life and annuity contract benefits 454 455 456 460 446 441 909 887 Interest credited to contractholder funds 185 190 183 194 185 199 375 384 Amortization of deferred policy acquisition costs 1,126 1,129 1,116 1,092 1,086 1,070 2,255 2,156 Operating costs and expenses 1,040 982 938 992 1,061 1,090 2,022 2,151 Restructuring and related charges 11 5 7 9 19 4 16 23 Interest expense 72 73 73 73 73 73 145 146 Total costs and expenses 8,789 8,518 7,972 8,075 8,457 7,870 17,307 16,327 Gain (loss) on disposition of operations 1 2 1 2 1 (1) 3 - Income from operations before income tax expense 376 355 720 955 526 1,081 731 1,607 Income tax expense 105 109 231 305 171 404 214 575 Net income $ 271 $ 246 $ 489 $ 650 $ 355 $ 677 $ 517 $ 1,032 Preferred stock dividends 29 29 29 29 29 29 58 58 Net income applicable to common shareholders $ 242 $ 217 $ 460 $ 621 $ 326 $ 648 $ 459 $ 974 Earnings per common share: Net income applicable to common shareholders per common share - Basic $ 0.65 $ 0.57 $ 1.19 $ 1.56 $ 0.80 $ 1.56 $ 1.22 $ 2.37 Weighted average common shares - Basic 373.6 378.1 385.0 397.0 407.0 415.8 375.8 411.4 Net income applicable to common shareholders per common share - Diluted $ 0.64 $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 $ 1.21 $ 2.33 Weighted average common shares - Diluted 378.1 382.9 390.2 402.1 412.6 422.6 380.5 417.6 Cash dividends declared per common share $ 0.33 $ 0.33 $ 0.30 $ 0.30 $ 0.30 $ 0.30 $ 0.66 $ 0.60 THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS ($ in millions, except per share data) Six months endedThree months ended
2 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Contribution to income Operating income before the impact of restructuring and related charges $ 242 $ 325 $ 629 $ 616 $ 274 $ 619 $ 567 $ 893 Restructuring and related charges, after-tax (7) (3) (4) (6) (12) (3) (10) (15) Operating income * 235 322 625 610 262 616 557 878 Realized capital gains and losses, after-tax 17 (96) (161) 21 69 90 (79) 159 Valuation changes on embedded derivatives that are not hedged, after-tax (4) (4) 2 (2) 4 (5) (8) (1) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (1) (1) - (1) (2) - (2) (2) Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - 1 1 - - 1 1 1 Amortization of purchased intangible assets, after-tax (6) (6) (8) (8) (8) (8) (12) (16) Gain (loss) on disposition of operations, after-tax 1 1 1 1 1 (1) 2 - Change in accounting for investments in qualified affordable housing projects, after-tax - - - - - (45) - (45) Net income applicable to common shareholders $ 242 $ 217 $ 460 $ 621 $ 326 $ 648 $ 459 $ 974 Income per common share - Diluted Operating income before the impact of restructuring and related charges $ 0.64 $ 0.85 $ 1.61 $ 1.53 $ 0.66 $ 1.46 $ 1.49 $ 2.14 Restructuring and related charges, after-tax (0.02) (0.01) (0.01) (0.01) (0.03) - (0.03) (0.04) Operating income 0.62 0.84 1.60 1.52 0.63 1.46 1.46 2.10 Realized capital gains and losses, after-tax 0.04 (0.25) (0.41) 0.05 0.17 0.21 (0.21) 0.38 Valuation changes on embedded derivatives that are not hedged, after-tax (0.01) (0.01) 0.01 (0.01) 0.01 (0.01) (0.02) - DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax - - - - - - - - Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - - - - - - - - Amortization of purchased intangible assets, after-tax (0.01) (0.01) (0.02) (0.02) (0.02) (0.02) (0.03) (0.04) Gain (loss) on disposition of operations, after-tax - - - - - - 0.01 - Change in accounting for investments in qualified affordable housing projects, after-tax - - - - - (0.11) - (0.11) Net income applicable to common shareholders $ 0.64 $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 $ 1.21 $ 2.33 Weighted average common shares - Diluted 378.1 382.9 390.2 402.1 412.6 422.6 380.5 417.6 THE ALLSTATE CORPORATION CONTRIBUTION TO INCOME ($ in millions, except per share data) Six months endedThree months ended
3 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Property-Liability Property-Liability insurance premiums $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975 Net investment income 316 302 280 307 292 358 618 650 Realized capital gains and losses 26 (99) (153) (161) 49 28 (73) 77 Total Property-Liability revenues 8,156 7,926 7,811 7,796 7,890 7,812 16,082 15,702 Allstate Financial Life and annuity premiums and contract charges 564 566 547 538 536 537 1,130 1,073 Net investment income 435 419 420 491 489 484 854 973 Realized capital gains and losses - (49) (97) 194 59 111 (49) 170 Total Allstate Financial revenues 999 936 870 1,223 1,084 1,132 1,935 2,216 Corporate and Other Service fees (1) 1 1 1 - 1 1 2 2 Net investment income 11 10 10 9 8 8 21 16 Realized capital gains and losses (2) (1) - - - - (3) - Total Corporate and Other revenues before reclassification of services fees 10 10 11 9 9 9 20 18 Reclassification of service fees (1) (1) (1) (1) - (1) (1) (2) (2) Total Corporate and Other revenues 9 9 10 9 8 8 18 16 Consolidated revenues $ 9,164 $ 8,871 $ 8,691 $ 9,028 $ 8,982 $ 8,952 $ 18,035 $ 17,934 (1) For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to Operating costs and expenses. THE ALLSTATE CORPORATION REVENUES ($ in millions) Six months endedThree months ended
4 June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30, 2016 2016 2015 2015 2015 2016 2016 2015 2015 2015 Assets Liabilities Investments Reserve for property-liability insurance claims and claims expense $ 24,904 $ 24,605 $ 23,869 $ 23,757 $ 23,702 Fixed income securities, at fair value Reserve for life-contingent contract benefits 12,215 12,224 12,247 12,229 12,227 (amortized cost $55,770, $55,627, Contractholder funds 20,845 21,092 21,295 21,559 21,968 $57,201, $56,918 and $57,971) $ 58,129 $ 57,291 $ 57,948 $ 58,257 $ 59,930 Unearned premiums 12,300 12,036 12,202 12,343 11,858 Equity securities, at fair value Claim payments outstanding 946 852 842 804 820 (cost $4,924, $4,792, $4,806, Deferred income taxes 782 479 90 243 475 $4,123 and $3,649) 5,265 5,117 5,082 4,236 4,000 Other liabilities and accrued expenses 6,192 5,704 5,304 5,558 5,462 Mortgage loans 4,453 4,302 4,338 4,402 4,343 Long-term debt 5,109 5,108 5,124 5,123 5,133 Limited partnership interests 5,407 5,091 4,874 4,823 4,536 Separate Accounts 3,438 3,507 3,658 3,677 4,121 Short-term, at fair value Total liabilities 86,731 85,607 84,631 85,293 85,766 (amortized cost $2,850,$3,526, $2,122, $3,036 and $2,821) 2,850 3,526 2,122 3,036 2,821 Other 3,590 3,550 3,394 3,588 3,511 Total investments 79,694 78,877 77,758 78,342 79,141 Equity Preferred stock and additional capital paid-in, 72.2 thousand shares outstanding 1,746 1,746 1,746 1,746 1,746 Common stock, 371 million, 375 million, 381 million, 390 million and 402 million shares outstanding 9 9 9 9 9 Additional capital paid-in 3,203 3,237 3,245 3,224 3,205 Retained income 39,623 39,505 39,413 39,068 38,567 Deferred ESOP expense (13) (13) (13) (23) (23) Treasury stock, at cost (529 million, 525 million, 519 million, 510 million and 498 million shares) (24,310) (23,994) (23,620) (23,058) (22,273) Accumulated other comprehensive income: Unrealized net capital gains and losses: Unrealized net capital gains and losses on fixed income securities with other-than-temporary impairments 49 31 56 57 62 Cash 446 531 495 905 805 Other unrealized net capital gains and losses 1,702 1,259 608 886 1,435 Premium installment receivables, net 5,593 5,558 5,544 5,711 5,599 Unrealized adjustment to DAC, DSI and insurance Deferred policy acquisition costs 3,819 3,807 3,861 3,811 3,708 reserves (127) (90) (44) (64) (78) Reinsurance recoverables, net (1) 8,650 8,573 8,518 8,468 8,520 Total unrealized net capital gains and losses 1,624 1,200 620 879 1,419 Accrued investment income 564 567 569 575 610 Unrealized foreign currency translation Property and equipment, net 1,011 1,011 1,024 1,050 1,038 adjustments (41) (46) (60) (52) (38) Goodwill 1,219 1,219 1,219 1,219 1,219 Unrecognized pension and other Other assets 2,850 2,297 2,010 2,039 2,303 postretirement benefit cost (1,288) (1,304) (1,315) (1,289) (1,314) Separate Accounts 3,438 3,507 3,658 3,677 4,121 Total accumulated other comprehensive income (loss) 295 (150) (755) (462) 67 Total shareholders' equity 20,553 20,340 20,025 20,504 21,298 Total assets $ 107,284 $ 105,947 $ 104,656 $ 105,797 $ 107,064 Total liabilities and shareholders' equity $ 107,284 $ 105,947 $ 104,656 $ 105,797 $ 107,064 (1) THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in millions) Reinsurance recoverables of unpaid losses related to Property-Liability were $6.03 billion, $5.96 billion, $5.89 billion, $5.85 billion and $5.85 billion as of June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively.
5 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Book value per common share Numerator: Common shareholders' equity (1) $ 18,807 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433 Denominator: Common shares outstanding and dilutive potential common shares outstanding 375.8 380.3 386.1 394.6 407.7 415.4 Book value per common share $ 50.05 $ 48.89 $ 47.34 $ 47.54 $ 47.96 $ 49.19 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities * Numerator: Common shareholders' equity $ 18,807 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433 Unrealized net capital gains and losses on fixed income securities 1,407 993 443 807 1,196 1,871 Adjusted common shareholders' equity $ 17,400 $ 17,601 $ 17,836 $ 17,951 $ 18,356 $ 18,562 Denominator: Common shares outstanding and dilutive potential common shares outstanding 375.8 380.3 386.1 394.6 407.7 415.4 Book value per common share, excluding the impact of unrealized net capital gains and losses on fixed income securities $ 46.30 $ 46.28 $ 46.20 $ 45.49 $ 45.02 $ 44.68 (1) BOOK VALUE PER COMMON SHARE THE ALLSTATE CORPORATION ($ in millions, except per share data) Excludes equity related to preferred stock of $1,746 million in each period.
6 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Return on Common Shareholders' Equity Numerator: Net income applicable to common shareholders (1) $ 1,540 $ 1,624 $ 2,055 $ 2,390 $ 2,519 $ 2,807 Denominator: Beginning common shareholders' equity $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Ending common shareholders' equity 18,807 18,594 18,279 18,758 19,552 20,433 Average common shareholders' equity (2) $ 19,180 $ 19,514 $ 19,419 $ 19,671 $ 20,339 $ 20,517 Return on common shareholders' equity 8.0 % 8.3 % 10.6 % 12.2 % 12.4 % 13.7 % Operating Income Return on Common Shareholders' Equity * Numerator: Operating income (1) $ 1,792 $ 1,819 $ 2,113 $ 2,224 $ 2,212 $ 2,395 Denominator: Beginning common shareholders' equity $ 19,552 $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Unrealized net capital gains and losses 1,419 2,137 1,926 1,827 2,150 2,091 Adjusted beginning common shareholders' equity 18,133 18,296 18,632 18,756 18,976 18,509 Ending common shareholders' equity 18,807 18,594 18,279 18,758 19,552 20,433 Unrealized net capital gains and losses 1,624 1,200 620 879 1,419 2,137 Adjusted ending common shareholders' equity 17,183 17,394 17,659 17,879 18,133 18,296 Average adjusted common shareholders' equity (2) $ 17,658 $ 17,845 $ 18,146 $ 18,318 $ 18,555 $ 18,403 Operating income return on common shareholders' equity 10.1 % 10.2 % 11.6 % 12.1 % 11.9 % 13.0 % (1) Net income applicable to common shareholders and operating income reflect a trailing twelve-month period. (2) THE ALLSTATE CORPORATION RETURN ON COMMON SHAREHOLDERS' EQUITY ($ in millions) 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. Twelve months ended
7 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Debt Short-term debt $ - $ - $ - $ - $ - $ - Long-term debt 5,109 5,108 5,124 5,123 5,133 5,140 Total debt $ 5,109 $ 5,108 $ 5,124 $ 5,123 $ 5,133 $ 5,140 Capital resources Debt $ 5,109 $ 5,108 $ 5,124 $ 5,123 $ 5,133 $ 5,140 Shareholders' equity Preferred stock and additional capital paid-in 1,746 1,746 1,746 1,746 1,746 1,746 Common stock 9 9 9 9 9 9 Additional capital paid-in 3,203 3,237 3,245 3,224 3,205 3,109 Retained income 39,623 39,505 39,413 39,068 38,567 38,363 Deferred ESOP expense (13) (13) (13) (23) (23) (23) Treasury stock (24,310) (23,994) (23,620) (23,058) (22,273) (21,799) Unrealized net capital gains and losses 1,624 1,200 620 879 1,419 2,137 Unrealized foreign currency translation adjustments (41) (46) (60) (52) (38) (29) Unrecognized pension and other postretirement benefit cost (1,288) (1,304) (1,315) (1,289) (1,314) (1,334) Total shareholders' equity 20,553 20,340 20,025 20,504 21,298 22,179 Total capital resources $ 25,662 $ 25,448 $ 25,149 $ 25,627 $ 26,431 $ 27,319 Ratio of debt to shareholders' equity 24.9 % 25.1 % 25.6 % 25.0 % 24.1 % 23.2 % Ratio of debt to capital resources 19.9 % 20.1 % 20.4 % 20.0 % 19.4 % 18.8 % THE ALLSTATE CORPORATION DEBT TO CAPITAL ($ in millions)
8 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 271 $ 246 $ 489 $ 650 $ 355 $ 677 $ 517 $ 1,032 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 97 91 96 96 92 87 188 179 Realized capital gains and losses (24) 149 250 (33) (108) (139) 125 (247) (Gain) loss on disposition of operations (1) (2) (1) (2) (1) 1 (3) - Interest credited to contractholder funds 185 190 183 194 185 199 375 384 Changes in: Policy benefits and other insurance reserves 118 459 (27) (26) 411 115 577 526 Unearned premiums 267 (205) (124) 518 361 (117) 62 244 Deferred policy acquisition costs (65) (7) (20) (87) (97) (35) (72) (132) Premium installment receivables, net (38) 11 156 (132) (92) (66) (27) (158) Reinsurance recoverables, net (80) (40) (45) 11 (120) (24) (120) (144) Income taxes (150) (26) (59) 223 (342) 59 (176) (283) Other operating assets and liabilities 64 (152) 32 (29) 93 (191) (88) (98) Net cash provided by operating activities 644 714 930 1,383 737 566 1,358 1,303 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales Fixed income securities 6,373 6,216 5,897 6,784 6,559 9,453 12,589 16,012 Equity securities 823 1,664 1,066 614 922 1,152 2,487 2,074 Limited partnership interests 183 180 306 204 295 296 363 591 Mortgage loans (7) 7 - 6 - - - - Other investments 57 87 367 46 85 47 144 132 Investment collections Fixed income securities 1,189 949 1,184 1,005 1,030 1,213 2,138 2,243 Mortgage loans 71 79 233 (52) 243 114 150 357 Other investments 125 43 39 77 117 60 168 177 Investment purchases Fixed income securities (7,546) (5,401) (7,830) (6,446) (7,272) (9,210) (12,947) (16,482) Equity securities (939) (1,733) (1,722) (1,318) (748) (1,172) (2,672) (1,920) Limited partnership interests (433) (270) (413) (367) (198) (365) (703) (563) Mortgage loans (220) (44) (163) (15) (307) (202) (264) (509) Other investments (196) (253) (159) (225) (325) (193) (449) (518) Change in short-term investments, net 688 (1,357) 962 (186) (328) (63) (669) (391) Change in other investments, net (20) (19) (36) - (18) 2 (39) (16) Purchases of property and equipment, net (68) (52) (84) (86) (74) (59) (120) (133) Net cash provided by (used in) investing activities 80 96 (353) 41 (19) 1,073 176 1,054 CASH FLOWS FROM FINANCING ACTIVITIES Repayments of long-term debt - (16) - (11) (9) - (16) (9) Contractholder fund deposits 261 261 268 257 266 261 522 527 Contractholder fund withdrawals (521) (492) (534) (641) (580) (572) (1,013) (1,152) Dividends paid on common stock (125) (115) (118) (122) (125) (118) (240) (243) Dividends paid on preferred stock (29) (29) (29) (29) (29) (29) (58) (58) Treasury stock purchases (448) (456) (592) (792) (414) (1,010) (904) (1,424) Shares reissued under equity incentive plans, net 42 30 9 12 45 64 72 109 Excess tax benefits on share-based payment arrangements 8 12 1 1 17 26 20 43 Other 3 31 8 1 - (2) 34 (2) Net cash used in financing activities (809) (774) (987) (1,324) (829) (1,380) (1,583) (2,209) NET (DECREASE) INCREASE IN CASH (85) 36 (410) 100 (111) 259 (49) 148 CASH AT BEGINNING OF PERIOD 531 495 905 805 916 657 495 657 CASH AT END OF PERIOD $ 446 $ 531 $ 495 $ 905 $ 805 $ 916 $ 446 $ 805 THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW ($ in millions) Six months endedThree months ended
9 Amortization relating to realized capital gains and Amortization losses and (acceleration) Effect of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending balance costs before embedded derivatives for changes in capital gains balance Mar. 31, 2016 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2016 Property-Liability $ 2,041 $ 1,117 $ (1,057) $ - $ - $ - $ 2,101 Allstate Financial: Traditional life and accident and health 796 48 (38) - - - 806 Interest-sensitive life 924 26 (28) (1) - (53) 868 Fixed annuity 46 - (2) - - - 44 Subtotal 1,766 74 (68) (1) - (53) 1,718 Consolidated $ 3,807 $ 1,191 $ (1,125) $ (1) $ - $ (53) $ 3,819 Amortization relating to realized capital gains and Amortization losses and (acceleration) Effect of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending balance costs before embedded derivatives for changes in capital gains balance Mar. 31, 2015 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2015 Property-Liability $ 1,852 $ 1,111 $ (1,021) $ - $ - $ - $ 1,942 Allstate Financial: Traditional life and accident and health 757 44 (33) - - - 768 Interest-sensitive life 874 29 (27) (3) - 75 948 Fixed annuity 44 - (2) - - 8 50 Subtotal 1,675 73 (62) (3) - 83 1,766 Consolidated $ 3,527 $ 1,184 $ (1,083) $ (3) $ - $ 83 $ 3,708 (1) (2) Included as a component of amortization of DAC on the Consolidated Statements of Operations. Change in Deferred Policy Acquisition Costs For the three months ended June 30, 2015 Amortization before adjustments reflects total DAC amortization before amortization/accretion related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged and amortization acceleration/deceleration for changes in assumptions. THE ALLSTATE CORPORATION ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS ($ in millions) Change in Deferred Policy Acquisition Costs For the three months ended June 30, 2016
10 Amortization relating to realized capital gains and Amortization DAC before DAC after losses and (acceleration) Effect of impact of Impact of impact of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending unrealized unrealized unrealized balance costs before embedded derivatives for changes in capital gains balance capital gains capital gains capital gains Dec. 31, 2015 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2016 and losses and losses and losses Property-Liability $ 2,029 $ 2,185 $ (2,113) $ - $ - $ - $ 2,101 $ 2,101 $ - $ 2,101 Allstate Financial: Traditional life and accident and health 792 94 (80) - - - 806 806 - 806 Interest-sensitive life 993 52 (56) (3) - (118) 868 1,052 (184) 868 Fixed annuity 47 - (3) - - - 44 44 - 44 Subtotal 1,832 146 (139) (3) - (118) 1,718 1,902 (184) 1,718 Consolidated $ 3,861 $ 2,331 $ (2,252) $ (3) $ - $ (118) $ 3,819 $ 4,003 $ (184) $ 3,819 Amortization relating to realized capital gains and Amortization DAC before DAC after losses and (acceleration) Effect of impact of Impact of impact of Beginning Acquisition Amortization valuation changes on deceleration unrealized Ending unrealized unrealized unrealized balance costs before embedded derivatives for changes in capital gains balance capital gains capital gains capital gains Dec. 31, 2014 deferred adjustments (1) (2) that are not hedged (2) assumptions (2) and losses Jun. 30, 2015 and losses and losses and losses Property-Liability $ 1,820 $ 2,143 $ (2,021) $ - $ - $ - $ 1,942 $ 1,942 $ - $ 1,942 Allstate Financial: Traditional life and accident and health 753 88 (73) - - - 768 768 - 768 Interest-sensitive life 905 55 (55) (5) - 48 948 1,065 (117) 948 Fixed annuity 47 - (3) 1 - 5 50 50 - 50 Subtotal 1,705 143 (131) (4) - 53 1,766 1,883 (117) 1,766 Consolidated $ 3,525 $ 2,286 $ (2,152) $ (4) $ - $ 53 $ 3,708 $ 3,825 $ (117) $ 3,708 (1) (2) Included as a component of amortization of DAC on the Consolidated Statements of Operations. For the six months ended June 30, 2015 Reconciliation of Deferred Policy Acquisition Costs as of June 30, 2015 Amortization before adjustments reflects total DAC amortization before amortization/accretion related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged and amortization acceleration/deceleration for changes in assumptions. THE ALLSTATE CORPORATION ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS ($ in millions) Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy For the six months ended June 30, 2016 Acquisition Costs as of June 30, 2016 Change in Deferred Policy Acquisition Costs
11 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Premiums written $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183 (Increase) decrease in unearned premiums (264) 166 140 (485) (370) 166 (98) (204) Other 27 42 (7) (2) 42 (46) 69 (4) Premiums earned 7,814 7,723 7,684 7,650 7,549 7,426 15,537 14,975 Claims and claims expense (5,901) (5,684) (5,199) (5,255) (5,587) (4,993) (11,585) (10,580) Amortization of deferred policy acquisition costs (1,057) (1,056) (1,052) (1,029) (1,021) (1,000) (2,113) (2,021) Operating costs and expenses (912) (853) (812) (867) (934) (962) (1,765) (1,896) Restructuring and related charges (10) (5) (10) (8) (17) (4) (15) (21) Underwriting (loss) income* (66) 125 611 491 (10) 467 59 457 Net investment income 316 302 280 307 292 358 618 650 Periodic settlements and accruals on non-hedge derivative instruments - (1) (1) (1) - (1) (1) (1) Amortization of purchased intangible assets 9 9 13 12 13 12 18 25 Income tax expense on operations (73) (144) (304) (259) (97) (281) (217) (378) Operating income 186 291 599 550 198 555 477 753 Realized capital gains and losses, after-tax 18 (64) (99) (104) 31 18 (46) 49 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax - 1 1 - - 1 1 1 Amortization of purchased intangible assets, after-tax (6) (6) (8) (8) (8) (8) (12) (16) (Loss) gain on disposition of operations, after-tax - - - (1) 1 - - 1 Change in accounting for investments in qualified affordable housing projects, after-tax - - - - - (28) - (28) Net income applicable to common shareholders $ 198 $ 222 $ 493 $ 437 $ 222 $ 538 $ 420 $ 760 Catastrophe losses $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091 Operating ratios Claims and claims expense ("loss") ratio 75.5 73.6 67.6 68.7 74.0 67.2 74.6 70.6 Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3 Combined ratio 100.8 98.4 92.0 93.6 100.1 93.7 99.6 96.9 Loss ratio 75.5 73.6 67.6 68.7 74.0 67.2 74.6 70.6 Less: effect of catastrophe losses 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3 effect of prior year non-catastrophe reserve reestimates (0.2) 0.4 (0.2) 0.6 0.2 0.6 0.1 0.4 Underlying loss ratio * 63.4 62.5 63.1 64.6 63.2 62.6 63.0 62.9 Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3 Less: effect of amortization of purchased intangible assets 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1 Expense ratio, excluding the effect of amortization of purchased intangible assets 25.2 24.7 24.3 24.7 25.9 26.4 24.9 26.2 Underlying combined ratio * 88.6 87.2 87.4 89.3 89.1 89.0 87.9 89.1 Effect of catastrophe losses on combined ratio 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3 Effect of prior year non-catastrophe reserve reestimates (0.2) 0.4 (0.2) 0.6 0.2 0.6 0.1 0.4 Effect of amortization of purchased intangible assets on combined ratio 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1 Combined ratio 100.8 98.4 92.0 93.6 100.1 93.7 99.6 96.9 Effect of restructuring and related charges on combined ratio 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1 Effect of Discontinued Lines and Coverages on combined ratio - - - 0.7 - - - - THE ALLSTATE CORPORATION PROPERTY-LIABILITY RESULTS ($ in millions) Six months endedThree months ended
12 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Property-Liability Underwriting Summary Allstate Protection $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461 Discontinued Lines and Coverages (2) (2) (2) (49) (2) (2) (4) (4) Underwriting (loss) income $ (66) $ 125 $ 611 $ 491 $ (10) $ 467 $ 59 $ 457 Allstate Protection Underwriting Summary Premiums written $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183 Premiums earned $ 7,814 $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 $ 15,537 $ 14,975 Claims and claims expense (5,899) (5,683) (5,197) (5,207) (5,585) (4,992) (11,582) (10,577) Amortization of deferred policy acquisition costs (1,057) (1,056) (1,052) (1,029) (1,021) (1,000) (2,113) (2,021) Operating costs and expenses (912) (852) (812) (866) (934) (961) (1,764) (1,895) Restructuring and related charges (10) (5) (10) (8) (17) (4) (15) (21) Underwriting (loss) income $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461 Catastrophe losses $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091 Operating ratios Loss ratio 75.5 73.6 67.6 68.0 74.0 67.2 74.6 70.6 Expense ratio 25.3 24.8 24.4 24.9 26.1 26.5 25.0 26.3 Combined ratio 100.8 98.4 92.0 92.9 100.1 93.7 99.6 96.9 Effect of catastrophe losses on combined ratio 12.3 10.7 4.7 3.5 10.6 4.0 11.5 7.3 Effect of restructuring and related charges on combined ratio 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1 Effect of amortization of purchased intangible assets on combined ratio 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1 Discontinued Lines and Coverages Underwriting Summary Premiums written $ - $ - $ - $ - $ - $ - $ - $ - Premiums earned $ - $ - $ - $ - $ - $ - $ - $ - Claims and claims expense (2) (1) (2) (48) (2) (1) (3) (3) Operating costs and expenses - (1) - (1) - (1) (1) (1) Underwriting loss $ (2) $ (2) $ (2) $ (49) $ (2) $ (2) $ (4) $ (4) Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio - 0.1 - 0.7 - - - - Allstate Protection Underwriting Income (Loss) by Brand Allstate brand $ (10) $ 171 $ 629 $ 571 $ 86 $ 526 $ 161 $ 612 Esurance brand (37) (25) (28) (26) (41) (69) (62) (110) Encompass brand (15) (18) 14 (4) (50) 14 (33) (36) Answer Financial (2) (1) (2) (1) (3) (2) (3) (5) Underwriting (loss) income $ (64) $ 127 $ 613 $ 540 $ (8) $ 469 $ 63 $ 461 THE ALLSTATE CORPORATION PROPERTY-LIABILITY UNDERWRITING RESULTS BY AREA OF BUSINESS ($ in millions) Six months endedThree months ended
13 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Allstate brand (1) Auto (2) $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123 Homeowners (3) 1,831 1,392 1,634 1,879 1,819 1,379 3,223 3,198 Other personal lines 428 353 376 429 424 357 781 781 Commercial lines 135 126 126 124 138 128 261 266 Other business lines 183 183 168 205 199 184 366 383 7,344 6,800 6,880 7,383 7,168 6,583 14,144 13,751 Esurance brand Auto 376 439 368 411 363 434 815 797 Homeowners 14 11 9 9 7 5 25 12 Other personal lines 2 2 1 3 1 2 4 3 392 452 378 423 371 441 844 812 Encompass brand Auto 162 138 152 169 173 147 300 320 Homeowners 126 104 116 134 136 111 230 247 Other personal lines 27 21 25 28 29 24 48 53 315 263 293 331 338 282 578 620 Allstate Protection 8,051 7,515 7,551 8,137 7,877 7,306 15,566 15,183 Discontinued Lines and Coverages - - - - - - - - Property-Liability $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183 Allstate Protection Auto $ 5,305 $ 5,323 $ 5,096 $ 5,326 $ 5,124 $ 5,116 $ 10,628 $ 10,240 Homeowners 1,971 1,507 1,759 2,022 1,962 1,495 3,478 3,457 Other personal lines 457 376 402 460 454 383 833 837 Commercial lines 135 126 126 124 138 128 261 266 Other business lines 183 183 168 205 199 184 366 383 $ 8,051 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 $ 15,566 $ 15,183 (1) Canada premiums included in Allstate brand Auto $ 234 $ 164 $ 183 $ 215 $ 235 $ 173 $ 398 $ 408 Homeowners 64 41 50 60 63 41 105 104 Other personal lines 16 10 12 15 15 11 26 26 $ 314 $ 215 $ 245 $ 290 $ 313 $ 225 $ 529 $ 538 (2) (3) Fluctuation in the Canadian exchange rate has reduced the auto premiums written growth rate in the second quarter and first six months of 2016 by 0.2 points and 0.3 points, respectively. Fluctuation in the Canadian exchange rate has reduced the homeowner premiums written growth rate in both the second quarter and first six months of 2016 by 0.2 points. THE ALLSTATE CORPORATION PROPERTY-LIABILITY PREMIUMS WRITTEN BY BRAND ($ in millions) Six months endedThree months ended
14 Number of Location Number of Location Number of Location locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) Allstate brand Auto (2) 35 (6) 3.2 6.2 25 (6) 1.7 7.3 34 (6) 1.9 5.5 Homeowners (3) 11 (7) 0.8 4.9 15 (7) (0.4) (8) (2.3) 16 (7) 1.5 6.1 Esurance brand Auto 15 1.3 5.6 6 0.3 2.7 18 3.0 6.7 Encompass brand Auto 10 4.1 9.5 4 1.6 14.3 9 2.0 5.7 Homeowners 6 1.7 8.1 5 1.4 11.6 5 1.7 7.4 Number of Location Number of Location Number of Location locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) locations Total brand (%) (4) specific (%) (5) Allstate brand Auto (2) 23 (6) 1.6 5.1 34 (6) 1.5 3.6 18 (6) 0.4 3.9 Homeowners (3) 6 (7) 0.4 6.4 9 (7) 0.7 3.5 10 (7) 0.2 3.0 Esurance brand Auto 13 1.3 5.1 13 1.5 5.9 13 1.3 4.4 Encompass brand Auto 8 1.3 7.6 16 4.8 8.5 6 1.3 6.9 Homeowners 8 1.2 5.9 15 3.2 8.8 4 0.4 8.1 (1) (2) (3) (4) (5) (6) Includes three, three, one, five, four and two Canadian provinces for auto for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively. (7) (8) Includes the impact of a rate decrease in California in first quarter 2016. Excluding California, Allstate brand homeowners total brand and location specific rate changes were 1.4% and 4.3% for the six months ended June 30, 2016, respectively. Represents the impact in the 50 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. Represents the impact in the 50 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. Allstate brand auto and homeowners operates in 50 states, the District of Columbia, and 5 Canadian provinces. Esurance brand auto operates in 43 states and 1 Canadian province. Esurance brand homeowners operates in 26 states. Encompass brand auto and homeowners operates in 40 states and the District of Columbia. Includes one, two, three, zero, one and two Canadian provinces for homeowners for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively. June 30, 2015 March 31, 2015 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 the three month period ending June 30, 2016 are estimated to total $692 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 the state. Impacts of Allstate brand auto effective rate changes as a percentage of total brand prior year-end premiums written were 3.4%, 1.4%, 1.8%, 1.5%, 1.1% and 0.8% for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively. Rate changes are included in the effective calculations in the period the rate change is effective for renewal contracts. Impacts of Allstate brand homeowners effective rate changes as a percentage of total brand prior year-end premiums written were 0.5%, 0.7%, 0.5%, 0.5%, 0.4% and 0.9% for the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively. December 31, 2015 September 30, 2015 Three months ended Three months ended Three months ended March 31, 2016June 30, 2016 (1) Three months ended Three months ended THE ALLSTATE CORPORATION PROPERTY-LIABILITY IMPACT OF NET RATE CHANGES APPROVED ON PREMIUMS WRITTEN Three months ended
15 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Policies in Force (in thousands) (1) Allstate Brand Auto (2) 20,061 20,145 20,326 20,367 20,258 20,036 Homeowners (3) 6,135 6,152 6,174 6,163 6,141 6,114 Landlord 726 732 737 736 737 738 Renter 1,554 1,556 1,555 1,550 1,518 1,494 Condominium 667 667 668 665 662 658 Other 1,256 1,253 1,259 1,257 1,253 1,245 Other personal lines 4,203 4,208 4,219 4,208 4,170 4,135 Commercial lines 308 318 324 328 330 326 Other business lines 824 856 894 920 937 941 Excess and surplus 23 24 25 26 26 27 Total 31,554 31,703 31,962 32,012 31,862 31,579 Esurance Brand Auto 1,409 1,428 1,415 1,433 1,458 1,470 Homeowners 44 37 32 26 20 15 Other personal lines 47 46 44 44 44 42 Total 1,500 1,511 1,491 1,503 1,522 1,527 Encompass Brand Auto 676 701 723 746 767 778 Homeowners 318 329 338 347 355 361 Other personal lines 105 108 111 114 118 120 Total 1,099 1,138 1,172 1,207 1,240 1,259 Total Policies in Force 34,153 34,352 34,625 34,722 34,624 34,365 Non-Proprietary Premiums ($ in millions) Ivantage (4) $ 1,528 $ 1,504 $ 1,490 $ 1,481 $ 1,461 $ 1,446 Answer Financial (5) 150 151 138 149 145 149 Agency Data Total Allstate agencies (6)(7) 12,200 12,100 12,300 12,100 12,000 Licensed sales professionals (7)(8) 23,800 24,000 24,400 24,000 23,500 Allstate independent agencies (7)(9) 2,200 2,100 2,100 2,200 2,000 (1) (2) (3) (4) (5) (6) (7) (8) (9) Rounded to the nearest hundred. Employees of Allstate agencies who are licensed to sell Allstate products. Includes 450 and 880 engaged Allstate independent agencies (“AIAs”) as of June 30, 2016 and December 31, 2015, respectively. Engaged AIAs, as currently determined, include those that increase the number of policies in force from the prior year. 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 June 30, 2016 were $25.4 million. Represents non-proprietary premiums written for the period. Commissions earned for the three months ended June 30, 2016 were $18.9 million. THE ALLSTATE CORPORATION POLICIES IN FORCE AND OTHER STATISTICS Policies in Force: 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. Allstate Dealer Services (service contracts and other products sold in conjunction with auto lending and vehicle sales transactions) and Partnership Marketing Group (roadside assistance products) statistics are not included in total policies in force since these are not meaningful. Additionally, non-proprietary products offered by Ivantage (insurance agency) and Answer Financial (independent insurance agency) are not included. Total Allstate agencies represents exclusive Allstate agencies and financial representatives in the United States and Canada. Allstate brand auto PIF increased in 19 states, including 4 out of our largest 10 states, as of June 30, 2016 compared to June 30, 2015. Allstate brand homeowners PIF increased in 23 states, including 4 out of our largest 10 states, as of June 30, 2016 compared to June 30, 2015.
16 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written $ 7,344 $ 6,800 $ 6,880 $ 7,383 $ 7,168 $ 6,583 $ 14,144 $ 13,751 Net premiums earned Auto $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956 Homeowners 1,684 1,678 1,674 1,663 1,645 1,631 3,362 3,276 Other personal lines 397 393 395 396 395 391 790 786 Commercial lines 127 129 129 128 128 125 256 253 Other business lines 142 143 135 148 137 141 285 278 Total 7,095 7,010 6,971 6,932 6,829 6,720 14,105 13,549 Incurred losses Auto $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606 Homeowners 1,260 1,190 816 820 1,147 894 2,450 2,041 Other personal lines 256 261 216 241 259 244 517 503 Commercial lines 135 119 100 97 105 98 254 203 Other business lines 64 61 57 71 66 69 125 135 Total 5,349 5,150 4,684 4,684 5,008 4,480 10,499 9,488 Expenses Auto $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268 Homeowners 373 377 372 385 372 389 750 761 Other personal lines 106 103 101 109 105 105 209 210 Commercial lines 35 38 36 36 40 38 73 78 Other business lines 74 68 72 61 63 69 142 132 Total 1,756 1,689 1,658 1,677 1,735 1,714 3,445 3,449 Underwriting income (loss) Auto $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82 Homeowners 51 111 486 458 126 348 162 474 Other personal lines 35 29 78 46 31 42 64 73 Commercial lines (43) (28) (7) (5) (17) (11) (71) (28) Other business lines 4 14 6 16 8 3 18 11 Total (10) 171 629 571 86 526 161 612 Loss ratio 75.4 73.5 67.2 67.6 73.3 66.7 74.5 70.0 Expense ratio 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5 Combined ratio 100.1 97.6 91.0 91.8 98.7 92.2 98.9 95.5 Loss ratio 75.4 73.5 67.2 67.6 73.3 66.7 74.5 70.0 Less: effect of catastrophe losses 12.9 11.2 4.9 3.6 10.7 4.1 12.1 7.4 effect of prior year non-catastrophe reserve reestimates (0.3) 0.3 (0.1) (0.1) 0.3 0.7 - 0.5 Underlying loss ratio 62.8 62.0 62.4 64.1 62.3 61.9 62.4 62.1 Expense ratio 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5 Less: effect of amortization of purchased intangible assets - - - - - - - - Expense ratio, excluding the effect of amortization of purchased intangible assets 24.7 24.1 23.8 24.2 25.4 25.5 24.4 25.5 Underlying combined ratio 87.5 86.1 86.2 88.3 87.7 87.4 86.8 87.6 Effect of catastrophe losses 12.9 11.2 4.9 3.6 10.7 4.1 12.1 7.4 Effect of prior year non-catastrophe reserve reestimates (0.3) 0.3 (0.1) (0.1) 0.3 0.7 - 0.5 Combined ratio 100.1 97.6 91.0 91.8 98.7 92.2 98.9 95.5 Effect of prior year reserve reestimates on combined ratio - 0.2 (0.3) (0.2) 0.4 0.7 0.1 0.5 Effect of advertising expenses on combined ratio 2.2 1.5 1.5 2.0 2.4 2.3 1.9 2.3 THE ALLSTATE CORPORATION ALLSTATE BRAND PROFITABILITY MEASURES ($ in millions) Three months ended Six months ended
17 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 New Issued Applications (in thousands) (2) Auto 582 584 562 790 818 792 1,166 1,610 Homeowners 193 164 174 218 212 177 357 389 Average Premium - Gross Written ($) (3) Auto (4) 516 507 502 494 488 484 511 486 Homeowners (5) 1,171 1,174 1,163 1,158 1,150 1,148 1,173 1,149 Average Premium - Net Earned ($) (6) Auto 471 461 456 452 450 444 466 447 Homeowners 1,090 1,082 1,078 1,074 1,066 1,060 1,086 1,063 Renewal Ratio (%) (7) Auto 88.0 88.0 88.2 88.6 88.9 88.8 88.0 88.8 Homeowners 87.8 88.1 88.5 88.7 88.4 88.4 88.0 88.4 Auto Claim Frequency (8) (% change year-over-year) Bodily Injury Gross 2.8 1.1 3.9 6.4 6.8 6.8 2.0 6.8 Bodily Injury Paid 1.5 5.9 - 3.5 6.0 2.3 3.6 4.2 Property Damage Gross (9) 5.6 2.1 7.5 8.9 6.9 2.1 3.8 4.4 Property Damage Paid (0.1) 2.4 3.7 4.7 4.2 2.5 1.1 3.4 Auto Paid Claim Severity (10) (% change year-over-year) Bodily injury (2.3) (5.5) (7.0) (2.9) 0.6 3.9 (3.9) 2.2 Property damage 5.3 7.5 4.0 5.4 3.7 4.8 6.3 4.2 Homeowners Excluding Catastrophe Losses (% change year-over-year) Gross Claim frequency (8) (12.5) (7.7) 0.9 (1.9) 0.4 (7.9) (10.2) (3.7) Paid Claim frequency (8) (14.3) (2.0) (2.1) (3.7) (0.9) (7.0) (8.6) (3.8) Paid Claim severity 4.7 (2.7) 2.6 4.5 3.6 6.6 1.4 5.0 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 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. 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. The percent change in paid or gross frequency is calculated as the increase or decrease in the paid or gross frequency amount in the current period compared to the same period in the prior year; divided by the prior year paid or gross frequency amount. The paid frequency amount 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. The gross frequency amount 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. Frequency statistics exclude counts associated with catastrophe events. A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims, however, experience indicates that for these types of claims, payments are not always required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the change was more broadly adopted. Quarterly increases (decreases) in property damage gross claim frequency consistently measured were 3.0%, (0.8)%, 5.5% and 7.4% in the three months ended June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted. 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 rate of change in paid severity is the year over year percent increase or decrease in paid claim severity for the period. Statistics presented for Allstate brand exclude excess and surplus lines. 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 on a policy, which in 2015 was either four or ten depending on the state. In 2016, all states allow ten automobiles on a policy. 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. Fluctuation in the Canadian exchange rate has reduced the auto average premium written growth rate in the second quarter and first six months of 2016 by 0.2 points and 0.3 points, respectively. Fluctuation in the Canadian exchange rate has reduced the homeowner premiums written growth rate in both the second quarter and first six months of 2016 by 0.2 points, respectively. THE ALLSTATE CORPORATION ALLSTATE BRAND STATISTICS (1) Six months endedThree months ended
18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Change in auto claim frequency (2) (% change in frequency rate year over year) % Change in gross claim frequency 2.1% -3.2% -4.4% -4.1% -2.9% 1.2% -1.8% -3.1% -2.4% -1.1% 0.8% -1.7% -0.3% -2.8% -1.3% 4.0% 6.8% 6.8% 6.4% 3.9% 1.1% 2.8% % Change in paid claim frequency 4.5% 1.5% -0.9% -2.4% -0.2% 1.1% -1.0% 0.7% -2.3% -2.7% -2.1% -4.7% -4.7% -3.8% 0.2% 4.7% 2.3% 6.0% 3.5% 0.0% 5.9% 1.5% (1) Frequency statistics exclude counts associated with catastrophe events. (2) 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 amount of prior year paid or gross claim frequency. The paid claim frequency amount 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. The gross claim frequency amount 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. THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1) BODILY INJURY % CHANGE IN GROSS AND PAID CLAIM FREQUENCY RATE 2011 2012 2013 2014 2015 2016 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 2016 % c ha ng e ye ar -o ve r- ye ar Rates of change in auto bodily injury frequency % change in gross claim frequency % change in paid claim frequency
19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Change in auto claim frequency (2) (% change in frequency rate year over year) % Change in gross claim frequency (3) 0.6% -4.4% -3.3% -3.1% -4.8% 0.7% -1.8% -4.3% -0.7% -0.3% 0.6% 1.4% 5.1% -2.4% -1.0% 0.5% 2.1% 6.9% 8.9% 7.5% 2.1% 5.6% % Change in paid claim frequency 0.4% -2.9% -4.3% -2.4% -4.3% -0.3% -3.4% -4.1% -4.5% 0.5% 3.7% 0.8% 2.9% -0.4% 0.4% 2.5% 2.5% 4.2% 4.7% 3.7% 2.4% -0.1% (1) Frequency statistics exclude counts associated with catastrophe events. (2) (3) 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 amount of prior year paid or gross claim frequency. The paid claim frequency amount 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. The gross claim frequency amount 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. A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims; however, experience indicates that for these types of claims, payments are not always required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the change was more broadly adopted. Quarterly increases (decreases) in property damage gross claim frequency consistently measured were 3.0%, (0.8)%, 5.5% and 7.4% in the three months ended June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted. THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1) PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY 2011 2012 2013 2014 2015 2016 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 2016 % c ha ng e ye ar -o ve r- ye ar Rates of change in auto property damage frequency % change in gross claim frequency % change in paid claim frequency
20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016 (% change in frequency rate year over year) % Change in gross claim frequency (2) (3) -2.7% -1.3% 1.7% -0.9% -1.3% -5.2% -6.3% -1.8% -2.0% -2.9% 2.9% -6.7% 5.7% 1.4% -2.6% -2.6% 0.3% 0.5% 6.3% 3.4% % Change in gross claim frequency indexed to 1996 (4) 97.3% 96.0% 97.7% 96.8% 95.5% 90.6% 84.9% 83.3% 81.7% 79.3% 81.6% 76.1% 80.5% 81.6% 79.5% 77.4% 77.6% 78.0% 82.9% 85.8% % Change in paid claim frequency (2) -2.1% -1.5% 2.9% -2.7% 0.3% -1.8% -3.2% -2.6% -2.6% -2.4% 0.8% -3.6% 6.1% 0.7% -2.3% -3.1% 0.1% 1.3% 3.8% -0.6% % Change in paid claim frequency indexed to 1996 (4) 97.9% 96.4% 99.2% 96.5% 96.8% 95.1% 92.1% 89.7% 87.3% 85.2% 85.9% 82.8% 87.9% 88.5% 86.5% 83.8% 83.9% 84.9% 88.2% 87.6% (1) Frequency statistics exclude counts associated with catastrophe events. (2) (3) (4) The percent change in gross or paid claim frequency indexed to 1996 equals the current year percent change plus 100%, times the prior year indexed amount beginning with 100% in 1996. 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 amount of prior year paid or gross claim frequency. The paid claim frequency amount 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. The gross claim frequency amount 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. The Q2 2016 amounts are calculated using the amounts for the three months ended June 30, 2016 and the twelve months ended December 31, 2015. A decision to more completely capture information on claims involving a vehicle collision with non-vehicle property gave rise to an increase in the number of counted claims; however, experience indicates that for these types of claims, payments are not always required to be made. Accordingly, claims closed without payment also increased. This change introduced in the third quarter of 2015, resulted in a steady increase in notice counts as the change was more broadly adopted. Full year increases in property damage gross claim frequency and indexed amounts consistently measured were 1.7% and 83.6% in the three months ended June 30, 2016 compared to 12 months ended December 31, 2015 and 5.4% and 82.2% for the 12 months ended December 31, 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted. THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO CLAIM FREQUENCY ANALYSIS (1) PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY AND INDEXED TO 1996 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016 % c ha ng e ye ar -o ve r- ye ar Rates of change in auto property damage frequency % Change in gross claim frequency indexed to 1996 % Change in paid claim frequency indexed to 1996
21 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written $ 392 $ 452 $ 378 $ 423 $ 371 $ 441 $ 844 $ 812 Net premiums earned Auto $ 403 $ 394 $ 391 $ 392 $ 397 $ 382 $ 797 $ 779 Homeowners 10 8 7 5 4 3 18 7 Other personal lines 2 2 2 2 1 2 4 3 Total 415 404 400 399 402 387 819 789 Incurred losses Auto $ 308 $ 289 $ 294 $ 285 $ 300 $ 297 $ 597 $ 597 Homeowners 10 4 4 4 3 1 14 4 Other personal lines 1 1 1 1 1 1 2 2 Total 319 294 299 290 304 299 613 603 Expenses Auto $ 107 $ 123 $ 119 $ 125 $ 132 $ 155 $ 230 $ 287 Homeowners 25 11 9 10 7 - 36 7 Other personal lines 1 1 1 - - 2 2 2 Total 133 135 129 135 139 157 268 296 Underwriting income (loss) Auto $ (12) $ (18) $ (22) $ (18) $ (35) $ (70) $ (30) $ (105) Homeowners (25) (7) (6) (9) (6) 2 (32) (4) Other personal lines - - - 1 - (1) - (1) Total (37) (25) (28) (26) (41) (69) (62) (110) Loss ratio 76.9 72.8 74.8 72.7 75.6 77.2 74.9 76.4 Expense ratio 32.0 33.4 32.2 33.8 34.6 40.6 32.7 37.5 Combined ratio 108.9 106.2 107.0 106.5 110.2 117.8 107.6 113.9 Loss ratio 76.9 72.8 74.8 72.7 75.6 77.2 74.9 76.4 Less: effect of catastrophe losses 3.4 0.7 0.8 0.8 2.0 - 2.1 1.0 effect of prior year non-catastrophe reserve reestimates (1.0) (1.0) (1.3) (1.6) (0.7) (1.0) (1.0) (0.9) Underlying loss ratio 74.5 73.1 75.3 73.5 74.3 78.2 73.8 76.3 Expense ratio 32.0 33.4 32.2 33.8 34.6 40.6 32.7 37.5 Less: effect of amortization of purchased intangible assets 1.7 1.5 2.2 2.0 2.2 2.3 1.6 2.3 Expense ratio, excluding the effect of amortization of purchased intangible assets 30.3 31.9 30.0 31.8 32.4 38.3 31.1 35.2 Underlying combined ratio 104.8 105.0 105.3 105.3 106.7 116.5 104.9 111.5 Effect of catastrophe losses 3.4 0.7 0.8 0.8 2.0 - 2.1 1.0 Effect of prior year non-catastrophe reserve reestimates (1.0) (1.0) (1.3) (1.6) (0.7) (1.0) (1.0) (0.9) Effect of amortization of purchased intangible assets 1.7 1.5 2.2 2.0 2.2 2.3 1.6 2.3 Combined ratio 108.9 106.2 107.0 106.5 110.2 117.8 107.6 113.9 Effect of prior year reserve reestimates on combined ratio (1.0) (1.0) (1.3) (1.3) (0.7) (1.0) (1.0) (0.9) Effect of advertising expenses on combined ratio 12.2 11.6 9.8 11.0 12.4 17.3 12.0 14.8 Policies in Force (in thousands) Auto 1,409 1,428 1,415 1,433 1,458 1,470 1,409 1,458 Homeowners 44 37 32 26 20 15 44 20 Other personal lines 47 46 44 44 44 42 47 44 1,500 1,511 1,491 1,503 1,522 1,527 1,500 1,522 New Issued Applications (in thousands) Auto 141 168 139 145 148 195 309 343 Homeowners 11 7 7 8 7 6 18 13 Other personal lines 8 10 7 9 10 12 18 22 160 185 153 162 165 213 345 378 Average Premium - Gross Written ($) Auto 538 547 526 513 506 520 543 514 Homeowners 855 891 821 838 814 849 870 832 Renewal Ratio (%) Auto 80.0 79.6 78.8 78.7 80.4 79.9 79.8 80.1 THE ALLSTATE CORPORATION ESURANCE PROFITABILITY MEASURES AND STATISTICS ($ in millions) Three months ended Six months ended
22 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written $ 315 $ 263 $ 293 $ 331 $ 338 $ 282 $ 578 $ 620 Net premiums earned Auto $ 158 $ 159 $ 162 $ 165 $ 165 $ 165 $ 317 $ 330 Homeowners 121 124 124 127 126 127 245 253 Other personal lines 25 26 27 27 27 27 51 54 Total 304 309 313 319 318 319 613 637 Incurred losses Auto $ 130 $ 123 $ 126 $ 135 $ 129 $ 116 $ 253 $ 245 Homeowners 85 85 61 75 117 74 170 191 Other personal lines 16 31 27 23 27 23 47 50 Total 231 239 214 233 273 213 470 486 Expenses Auto $ 45 $ 45 $ 44 $ 46 $ 50 $ 47 $ 90 $ 97 Homeowners 36 36 34 36 38 37 72 75 Other personal lines 7 7 7 8 7 8 14 15 Total 88 88 85 90 95 92 176 187 Underwriting income (loss) Auto $ (17) $ (9) $ (8) $ (16) $ (14) $ 2 $ (26) $ (12) Homeowners - 3 29 16 (29) 16 3 (13) Other personal lines 2 (12) (7) (4) (7) (4) (10) (11) Total (15) (18) 14 (4) (50) 14 (33) (36) Loss ratio 76.0 77.3 68.4 73.1 85.8 66.8 76.7 76.3 Expense ratio 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4 Combined ratio 104.9 105.8 95.5 101.3 115.7 95.6 105.4 105.7 Loss ratio 76.0 77.3 68.4 73.1 85.8 66.8 76.7 76.3 Less: effect of catastrophe losses 11.2 13.3 4.8 5.3 18.6 6.3 12.3 12.4 effect of prior year non-catastrophe reserve reestimates 0.9 4.2 (1.6) 5.1 0.6 (1.3) 2.6 (0.3) Underlying loss ratio 63.9 59.8 65.2 62.7 66.6 61.8 61.8 64.2 Expense ratio 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4 Less: effect of amortization of purchased intangible assets - - - - - - - - Expense ratio, excluding the effect of amortization of purchased intangible assets 28.9 28.5 27.1 28.2 29.9 28.8 28.7 29.4 Underlying combined ratio 92.8 88.3 92.3 90.9 96.5 90.6 90.5 93.6 Effect of catastrophe losses 11.2 13.3 4.8 5.3 18.6 6.3 12.3 12.4 Effect of prior year non-catastrophe reserve reestimates 0.9 4.2 (1.6) 5.1 0.6 (1.3) 2.6 (0.3) Combined ratio 104.9 105.8 95.5 101.3 115.7 95.6 105.4 105.7 Effect of prior year reserve reestimates on combined ratio 0.3 4.5 (1.9) 5.4 0.9 (2.2) 2.4 (0.6) Effect of advertising expenses on combined ratio 0.3 - - 0.3 0.6 0.6 0.2 0.6 Policies in Force (in thousands) Auto 676 701 723 746 767 778 676 767 Homeowners 318 329 338 347 355 361 318 355 Other personal lines 105 108 111 114 118 120 105 118 1,099 1,138 1,172 1,207 1,240 1,259 1,099 1,240 New Issued Applications (in thousands) Auto 15 15 16 20 23 23 30 46 Homeowners 9 9 10 12 14 12 18 26 Average Premium - Gross Written ($) Auto 988 981 981 963 925 913 985 919 Homeowners 1,629 1,618 1,587 1,583 1,532 1,519 1,624 1,526 Renewal Ratio (%) Auto 75.5 76.1 76.1 76.7 78.0 78.5 75.8 78.2 Homeowners 79.9 81.5 81.3 82.5 83.2 83.2 80.6 83.2 THE ALLSTATE CORPORATION ENCOMPASS BRAND PROFITABILITY MEASURES AND STATISTICS ($ in millions) Three months ended Six months ended
23 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, ($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written Allstate brand $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123 Esurance brand 376 439 368 411 363 434 815 797 Encompass brand 162 138 152 169 173 147 300 320 5,305 5,323 5,096 5,326 5,124 5,116 10,628 10,240 Net premiums earned Allstate brand $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956 Esurance brand 403 394 391 392 397 382 797 779 Encompass brand 158 159 162 165 165 165 317 330 5,306 5,220 5,191 5,154 5,086 4,979 10,526 10,065 Incurred losses Allstate brand $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606 Esurance brand 308 289 294 285 300 297 597 597 Encompass brand 130 123 126 135 129 116 253 245 4,072 3,931 3,915 3,875 3,860 3,588 8,003 7,448 Expenses Allstate brand $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268 Esurance brand 107 123 119 125 132 155 230 287 Encompass brand 45 45 44 46 50 47 90 97 1,320 1,271 1,240 1,257 1,337 1,315 2,591 2,652 Underwriting income (loss) Allstate brand $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82 Esurance brand (12) (18) (22) (18) (35) (70) (30) (105) Encompass brand (17) (9) (8) (16) (14) 2 (26) (12) (86) 18 36 22 (111) 76 (68) (35) Loss ratio Allstate brand 76.6 75.4 75.4 75.2 75.9 71.7 76.0 73.8 Esurance brand 76.4 73.4 75.2 72.7 75.6 77.7 74.9 76.6 Encompass brand 82.3 77.4 77.8 81.8 78.2 70.3 79.8 74.2 Allstate Protection 76.7 75.3 75.4 75.2 75.9 72.1 76.0 74.0 Expense ratio Allstate brand 24.6 23.6 23.2 23.6 25.5 25.1 24.1 25.3 Esurance brand 26.6 31.2 30.4 31.9 33.2 40.6 28.9 36.9 Encompass brand 28.5 28.3 27.1 27.9 30.3 28.5 28.4 29.4 Allstate Protection 24.9 24.4 23.9 24.4 26.3 26.4 24.6 26.3 Combined ratio Allstate brand 101.2 99.0 98.6 98.8 101.4 96.8 100.1 99.1 Esurance brand 103.0 104.6 105.6 104.6 108.8 118.3 103.8 113.5 Encompass brand 110.8 105.7 104.9 109.7 108.5 98.8 108.2 103.6 Allstate Protection 101.6 99.7 99.3 99.6 102.2 98.5 100.6 100.3 Effect of catastrophe losses on combined ratio Allstate brand 4.1 2.9 1.1 0.5 3.2 0.3 3.5 1.7 Esurance brand 2.2 0.5 0.5 0.5 1.8 - 1.4 0.9 Encompass brand 1.9 1.3 0.6 0.6 3.0 - 1.6 1.5 Allstate Protection 3.9 2.7 1.0 0.5 3.1 0.3 3.3 1.7 Effect of prior year reserve reestimates on combined ratio Allstate brand (0.8) 0.1 (0.3) 0.1 0.4 0.8 (0.3) 0.6 Esurance brand (1.0) (1.0) (1.3) (1.3) (0.8) (1.0) (1.0) (0.9) Encompass brand 3.2 1.3 (0.6) 7.9 (1.2) (4.8) 2.2 (3.0) Allstate Protection (0.7) 0.1 (0.4) 0.3 0.2 0.5 (0.3) 0.3 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand (0.1) (0.1) (0.2) (0.1) - (0.1) - (0.1) Esurance brand - - - 0.2 - - - - Encompass brand (0.6) - - - - (0.6) (0.3) (0.3) Allstate Protection (0.1) (0.1) (0.2) - (0.1) - - - Effect of amortization of purchased intangible assets on combined ratio Esurance brand 1.8 1.5 2.3 2.0 2.3 2.3 1.6 2.3 Allstate Protection 0.1 0.1 0.2 0.2 0.1 0.2 0.1 - THE ALLSTATE CORPORATION AUTO PROFITABILITY MEASURES Six months endedThree months ended
24 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, ($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written Allstate brand $ 1,831 $ 1,392 $ 1,634 $ 1,879 $ 1,819 $ 1,379 $ 3,223 $ 3,198 Esurance brand 14 11 9 9 7 5 25 12 Encompass brand 126 104 116 134 136 111 230 247 1,971 1,507 1,759 2,022 1,962 1,495 3,478 3,457 Net premiums earned Allstate brand $ 1,684 $ 1,678 $ 1,674 $ 1,663 $ 1,645 $ 1,631 $ 3,362 $ 3,276 Esurance brand 10 8 7 5 4 3 18 7 Encompass brand 121 124 124 127 126 127 245 253 1,815 1,810 1,805 1,795 1,775 1,761 3,625 3,536 Incurred losses Allstate brand $ 1,260 $ 1,190 $ 816 $ 820 $ 1,147 $ 894 $ 2,450 $ 2,041 Esurance brand 10 4 4 4 3 1 14 4 Encompass brand 85 85 61 75 117 74 170 191 1,355 1,279 881 899 1,267 969 2,634 2,236 Expenses Allstate brand $ 373 $ 377 $ 372 $ 385 $ 372 $ 389 $ 750 $ 761 Esurance brand 25 11 9 10 7 - 36 7 Encompass brand 36 36 34 36 38 37 72 75 434 424 415 431 417 426 858 843 Underwriting income (loss) Allstate brand $ 51 $ 111 $ 486 $ 458 $ 126 $ 348 $ 162 $ 474 Esurance brand (25) (7) (6) (9) (6) 2 (32) (4) Encompass brand - 3 29 16 (29) 16 3 (13) 26 107 509 465 91 366 133 457 Loss ratio Allstate brand 74.8 70.9 48.8 49.3 69.7 54.8 72.9 62.3 Esurance brand 100.0 50.0 57.1 80.0 75.0 33.3 77.8 57.1 Encompass brand 70.2 68.6 49.2 59.1 92.8 58.3 69.4 75.5 Allstate Protection 74.7 70.7 48.8 50.1 71.4 55.0 72.6 63.2 Expense ratio Allstate brand 22.2 22.5 22.2 23.2 22.6 23.9 22.3 23.2 Esurance brand 250.0 137.5 128.6 200.0 175.0 - 200.0 100.0 Encompass brand 29.8 29.0 27.4 28.3 30.2 29.1 29.4 29.6 Allstate Protection 23.9 23.4 23.0 24.0 23.5 24.2 23.7 23.9 Combined ratio Allstate brand 97.0 93.4 71.0 72.5 92.3 78.7 95.2 85.5 Esurance brand 350.0 187.5 185.7 280.0 250.0 33.3 277.8 157.1 Encompass brand 100.0 97.6 76.6 87.4 123.0 87.4 98.8 105.1 Allstate Protection 98.6 94.1 71.8 74.1 94.9 79.2 96.3 87.1 Effect of catastrophe losses on combined ratio Allstate brand 38.3 34.2 15.0 12.4 32.1 13.9 36.2 23.0 Esurance brand 50.0 12.5 14.3 20.0 25.0 - 33.4 14.2 Encompass brand 24.0 30.7 9.7 11.8 41.3 14.2 27.4 27.7 Allstate Protection 37.4 33.9 14.6 12.4 32.7 13.9 35.6 23.4 Effect of prior year reserve reestimates on combined ratio Allstate brand 1.1 (0.5) (0.5) (0.9) - 0.2 0.3 0.1 Esurance brand - - - - - - - - Encompass brand - 0.8 (4.9) - 2.3 (1.6) 0.4 0.4 Allstate Protection 1.0 (0.4) (0.8) (0.8) 0.2 0.1 0.3 0.1 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand 1.0 (0.3) (0.5) (0.1) 0.5 (0.1) 0.3 0.2 Esurance brand - - - - - - - - Encompass brand (0.8) 1.6 (0.8) 1.6 - (1.6) 0.4 (0.7) Allstate Protection 0.8 (0.2) (0.5) 0.1 0.4 (0.1) 0.3 0.1 THE ALLSTATE CORPORATION HOMEOWNERS PROFITABILITY MEASURES Six months endedThree months ended
25 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, ($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written Allstate brand $ 428 $ 353 $ 376 $ 429 $ 424 $ 357 $ 781 $ 781 Esurance brand 2 2 1 3 1 2 4 3 Encompass brand 27 21 25 28 29 24 48 53 457 376 402 460 454 383 833 837 Net premiums earned Allstate brand $ 397 $ 393 $ 395 $ 396 $ 395 $ 391 $ 790 $ 786 Esurance brand 2 2 2 2 1 2 4 3 Encompass brand 25 26 27 27 27 27 51 54 424 421 424 425 423 420 845 843 Incurred losses Allstate brand $ 256 $ 261 $ 216 $ 241 $ 259 $ 244 $ 517 $ 503 Esurance brand 1 1 1 1 1 1 2 2 Encompass brand 16 31 27 23 27 23 47 50 273 293 244 265 287 268 566 555 Expenses Allstate brand $ 106 $ 103 $ 101 $ 109 $ 105 $ 105 $ 209 $ 210 Esurance brand 1 1 1 - - 2 2 2 Encompass brand 7 7 7 8 7 8 14 15 114 111 109 117 112 115 225 227 Underwriting income (loss) Allstate brand $ 35 $ 29 $ 78 $ 46 $ 31 $ 42 $ 64 $ 73 Esurance brand - - - 1 - (1) - (1) Encompass brand 2 (12) (7) (4) (7) (4) (10) (11) 37 17 71 43 24 37 54 61 Loss ratio Allstate brand 64.5 66.4 54.7 60.9 65.6 62.4 65.4 64.0 Esurance brand 50.0 50.0 50.0 50.0 100.0 50.0 50.0 66.7 Encompass brand 64.0 119.3 100.0 85.2 100.0 85.2 92.2 92.6 Allstate Protection 64.4 69.6 57.6 62.4 67.8 63.8 67.0 65.9 Expense ratio Allstate brand 26.7 26.2 25.6 27.5 26.6 26.9 26.5 26.7 Esurance brand 50.0 50.0 50.0 - - 100.0 50.0 66.6 Encompass brand 28.0 26.9 25.9 29.6 25.9 29.6 27.4 27.8 Allstate Protection 26.9 26.4 25.7 27.5 26.5 27.4 26.6 26.9 Combined ratio Allstate brand 91.2 92.6 80.3 88.4 92.2 89.3 91.9 90.7 Esurance brand 100.0 100.0 100.0 50.0 100.0 150.0 100.0 133.3 Encompass brand 92.0 146.2 125.9 114.8 125.9 114.8 119.6 120.4 Allstate Protection 91.3 96.0 83.3 89.9 94.3 91.2 93.6 92.8 Effect of catastrophe losses on combined ratio Allstate brand 15.6 16.0 8.4 4.5 11.9 7.4 15.8 9.7 Esurance brand - - - - - - - - Encompass brand 8.0 3.8 7.4 3.7 7.4 7.4 5.9 7.4 Allstate Protection 15.1 15.2 8.3 4.5 11.6 7.4 15.1 9.5 Effect of prior year reserve reestimates on combined ratio Allstate brand (1.7) (1.5) (0.3) 1.8 1.1 (0.5) (1.6) 0.2 Esurance brand - - - - - - - - Encompass brand (16.0) 42.3 3.7 14.8 7.4 11.1 13.7 9.3 Allstate Protection (2.6) 1.2 - 2.6 1.4 0.2 (0.7) 0.9 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand - - (0.3) - - (0.3) - (0.1) Esurance brand - - - - - - - - Encompass brand - (3.9) - (3.7) 3.7 - (2.0) 1.9 Allstate Protection - (0.3) (0.2) (0.2) 0.3 (0.3) (0.1) - (1) Other personal lines include renter, condominium, landlord and other personal lines products. THE ALLSTATE CORPORATION OTHER PERSONAL LINES PROFITABILITY MEASURES (1) Six months endedThree months ended
26 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, ($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written $ 135 $ 126 $ 126 $ 124 $ 138 $ 128 $ 261 $ 266 Net premiums earned $ 127 $ 129 $ 129 $ 128 $ 128 $ 125 $ 256 $ 253 Incurred losses $ 135 $ 119 $ 100 $ 97 $ 105 $ 98 $ 254 $ 203 Expenses $ 35 $ 38 $ 36 $ 36 $ 40 $ 38 $ 73 $ 78 Underwriting loss $ (43) $ (28) $ (7) $ (5) $ (17) $ (11) $ (71) $ (28) Loss ratio 106.3 92.2 77.5 75.8 82.0 78.4 99.2 80.3 Expense ratio 27.6 29.5 27.9 28.1 31.3 30.4 28.5 30.8 Combined ratio 133.9 121.7 105.4 103.9 113.3 108.8 127.7 111.1 Effect of catastrophe losses on combined ratio 9.5 7.0 4.6 2.3 9.4 4.0 8.2 6.7 Effect of prior year reserve reestimates on combined ratio 18.1 15.5 - (9.3) 3.1 8.0 16.8 5.5 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio 0.8 2.4 0.8 - 2.3 0.8 1.6 1.5 (1) Commercial lines are all Allstate Brand products. THE ALLSTATE CORPORATION COMMERCIAL LINES PROFITABILITY MEASURES (1) Six months endedThree months ended
27 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, ($ in millions) 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written $ 183 $ 183 $ 168 $ 205 $ 199 $ 184 $ 366 $ 383 Net premiums earned $ 142 $ 143 $ 135 $ 148 $ 137 $ 141 $ 285 $ 278 Incurred losses $ 64 $ 61 $ 57 $ 71 $ 66 $ 69 $ 125 $ 135 Expenses $ 74 $ 68 $ 72 $ 61 $ 63 $ 69 $ 142 $ 132 Underwriting income $ 4 $ 14 $ 6 $ 16 $ 8 $ 3 $ 18 $ 11 Loss ratio 45.1 42.7 42.2 48.0 48.2 49.0 43.9 48.5 Expense ratio 52.1 47.5 53.4 41.2 46.0 48.9 49.8 47.5 Combined ratio 97.2 90.2 95.6 89.2 94.2 97.9 93.7 96.0 Effect of catastrophe losses on combined ratio - - - - - - - - Effect of prior year reserve reestimates on combined ratio - - - 0.7 0.7 - - 0.3 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio - - - - - - - - Effect of amortization of purchased intangible assets 0.7 0.7 0.8 0.7 0.8 0.7 0.7 0.7 (1) Other business lines include Allstate Roadside Services and Allstate Dealer Services. THE ALLSTATE CORPORATION OTHER BUSINESS LINES PROFITABILITY MEASURES (1) Six months endedThree months ended
28 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Auto Allstate brand underlying combined ratio 97.8 95.9 97.6 98.1 97.8 95.6 96.9 96.7 Effect of catastrophe losses on combined ratio 4.1 2.9 1.1 0.5 3.2 0.3 3.5 1.7 Effect of prior year non-catastrophe reserve reestimates on combined ratio (0.7) 0.2 (0.1) 0.2 0.4 0.9 (0.3) 0.7 Allstate brand combined ratio 101.2 99.0 98.6 98.8 101.4 96.8 100.1 99.1 Esurance brand underlying combined ratio 100.0 103.6 104.1 103.6 105.5 117.0 101.8 111.2 Effect of catastrophe losses on combined ratio 2.2 0.5 0.5 0.5 1.8 - 1.4 0.9 Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.0) (1.0) (1.3) (1.5) (0.8) (1.0) (1.0) (0.9) Effect of amortization of purchased intangible assets on combined ratio 1.8 1.5 2.3 2.0 2.3 2.3 1.6 2.3 Esurance brand combined ratio 103.0 104.6 105.6 104.6 108.8 118.3 103.8 113.5 Encompass brand underlying combined ratio 105.1 103.1 104.9 101.2 106.7 103.0 104.1 104.8 Effect of catastrophe losses on combined ratio 1.9 1.3 0.6 0.6 3.0 - 1.6 1.5 Effect of prior year non-catastrophe reserve reestimates on combined ratio 3.8 1.3 (0.6) 7.9 (1.2) (4.2) 2.5 (2.7) Encompass brand combined ratio 110.8 105.7 104.9 109.7 108.5 98.8 108.2 103.6 Homeowners Allstate brand underlying combined ratio 58.6 59.4 56.0 60.9 60.7 64.5 59.0 62.6 Effect of catastrophe losses on combined ratio 38.3 34.2 15.0 12.4 32.1 13.9 36.2 23.0 Effect of prior year non-catastrophe reserve reestimates on combined ratio 0.1 (0.2) - (0.8) (0.5) 0.3 - (0.1) Allstate brand combined ratio 97.0 93.4 71.0 72.5 92.3 78.7 95.2 85.5 Encompass brand underlying combined ratio 75.2 67.7 71.0 77.2 79.4 73.2 71.4 76.3 Effect of catastrophe losses on combined ratio 24.0 30.7 9.7 11.8 41.3 14.2 27.4 27.7 Effect of prior year non-catastrophe reserve reestimates on combined ratio 0.8 (0.8) (4.1) (1.6) 2.3 - - 1.1 Encompass brand combined ratio 100.0 97.6 76.6 87.4 123.0 87.4 98.8 105.1 Other Personal Lines Allstate brand underlying combined ratio 77.3 78.1 71.9 82.1 79.2 82.1 77.7 80.7 Effect of catastrophe losses on combined ratio 15.6 16.0 8.4 4.5 11.9 7.4 15.8 9.7 Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.7) (1.5) - 1.8 1.1 (0.2) (1.6) 0.3 Allstate brand combined ratio 91.2 92.6 80.3 88.4 92.2 89.3 91.9 90.7 Encompass brand underlying combined ratio 100.0 96.2 114.8 92.6 114.8 96.3 98.0 105.6 Effect of catastrophe losses on combined ratio 8.0 3.8 7.4 3.7 7.4 7.4 5.9 7.4 Effect of prior year non-catastrophe reserve reestimates on combined ratio (16.0) 46.2 3.7 18.5 3.7 11.1 15.7 7.4 Encompass brand combined ratio 92.0 146.2 125.9 114.8 125.9 114.8 119.6 120.4 THE ALLSTATE CORPORATION AUTO, HOMEOWNERS AND OTHER PERSONAL LINES UNDERLYING COMBINED RATIOS Six months endedThree months ended
29 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Auto Annualized average premium (1) $ 946 $ 927 $ 913 $ 903 $ 893 $ 885 Underlying combined ratios 97.8 95.9 97.6 98.1 97.8 95.6 Average underlying loss (incurred pure premium) and expense * $ 925 $ 889 $ 891 $ 886 $ 874 $ 846 Homeowners Annualized average premium (1) $ 1,098 $ 1,091 $ 1,085 $ 1,079 $ 1,071 $ 1,067 Underlying combined ratios 58.6 59.4 56.0 60.9 60.7 64.5 Average underlying loss (incurred pure premium) and expense $ 643 $ 648 $ 607 $ 657 $ 650 $ 688 (1) THE ALLSTATE CORPORATION Calculated by annualizing net earned premium reported in the quarter divided by policies in force at quarter end. ALLSTATE BRAND AUTO AND HOMEOWNERS UNDERLYING LOSS AND EXPENSE
30 Annual impact of Effect of rate changes Earned Incurred Catastrophe catastrophes Number of Number of on state specific Primary Exposure Groupings (1) premiums losses Loss ratios losses on loss ratio catastrophes locations premiums written Florida $ 51 $ 35 68.6% $ 4 7.8% Other hurricane exposure states 1,941 1,635 84.2% 980 50.5% Total hurricane exposure states (2) 1,992 1,670 83.8% 984 49.4% 13 6.6% Other catastrophe exposure states (4) 1,633 964 59.0% 307 18.8% 18 -3.0% Total $ 3,625 $ 2,634 72.6% $ 1,291 35.6% 40 31 1.7% (1) Basis of Presentation (2) (3) (4) Includes Canada. THE ALLSTATE CORPORATION HOMEOWNERS SUPPLEMENTAL INFORMATION ($ in millions) Represents the impact in the locations where rate changes were approved during the year as a percentage of total prior year-end premiums written in those locations. This homeowners supplemental information schedule displays financial results for the homeowners business (defined to include standard homeowners, scheduled personal property and other than primary residence lines). Each state in which the Company writes business has been categorized into one of two exposure groupings (Hurricane or Other). Hurricane exposure states are comprised of those states in which hurricanes are the primary catastrophe exposure. However, the catastrophe losses for these states include losses due to other kinds of catastrophes. A catastrophe is defined by Allstate as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Premium rate changes (3) Hurricane exposure states include the following coastal locations: Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington, D.C. Six months ended June 30, 2016
31 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Allstate brand Auto $ 195 $ 137 $ 50 $ 22 $ 143 $ 13 $ 332 $ 156 Homeowners 644 574 251 207 528 227 1,218 755 Other personal lines 62 63 33 18 47 29 125 76 Commercial lines 12 9 6 3 12 5 21 17 Other business lines - - - - - - - - Total 913 783 340 250 730 274 1,696 1,004 Esurance brand Auto 9 2 2 2 7 - 11 7 Homeowners 5 1 1 1 1 - 6 1 Other personal lines - - - - - - - - Total 14 3 3 3 8 - 17 8 Encompass brand Auto 3 2 1 1 5 - 5 5 Homeowners 29 38 12 15 52 18 67 70 Other personal lines 2 1 2 1 2 2 3 4 Total 34 41 15 17 59 20 75 79 Allstate Protection $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091 Allstate Protection Auto $ 207 $ 141 $ 53 $ 25 $ 155 $ 13 $ 348 $ 168 Homeowners 678 613 264 223 581 245 1,291 826 Other personal lines 64 64 35 19 49 31 128 80 Commercial lines 12 9 6 3 12 5 21 17 Other business lines - - - - - - - - $ 961 $ 827 $ 358 $ 270 $ 797 $ 294 $ 1,788 $ 1,091 THE ALLSTATE CORPORATION CATASTROPHE LOSSES BY BRAND ($ in millions) Six months endedThree months ended
32 Premiums Total Total Effect on the earned catastrophe catastrophe Property-Liability Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year year-to-date losses by year losses by year combined ratio 2007 2.4 6.3 5.0 7.0 5.2 $ 27,233 $ 1,409 $ 1,336 4.9 2008 8.4 10.3 26.8 3.9 12.4 26,967 3,342 1,876 7.0 2009 7.8 12.5 6.2 5.0 7.9 26,194 2,069 2,159 8.2 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 10.7 12.3 11.5 15,537 1,788 1,789 11.5 Average 6.4 13.1 8.3 5.3 8.4 7.3 Effect of all catastrophe losses on the Property-Liability combined ratio catastrophe losses relating to Excludes the effect of THE ALLSTATE CORPORATION PROPERTY-LIABILITY EFFECT OF CATASTROPHE LOSSES ON THE COMBINED RATIO ($ in millions) earthquakes and hurricanes
33 Average Number Claims and Combined catastrophe Size of catastrophe of events claims expense ratio impact loss per event Greater than $250 million 1 4.4 % $ 341 35.5 % 4.4 % $ 341 $101 million to $250 million - - - - - - $50 million to $100 million 3 13.0 207 21.5 2.6 69 Less than $50 million 19 82.6 458 47.6 5.9 24 Total 23 100.0 % 1,006 104.6 12.9 44 Prior year reserve reestimates 13 1.4 0.2 Prior quarter reserve reestimates (58) (6.0) (0.8) Total catastrophe losses $ 961 100.0 % 12.3 % Average Number Claims and Combined catastrophe Size of catastrophe of events claims expense ratio impact loss per event Greater than $250 million 2 5.0 % $ 638 35.7 % 4.1 % $ 319 $101 million to $250 million 1 2.5 186 10.4 1.2 186 $50 million to $100 million 4 10.0 263 14.7 1.7 66 Less than $50 million 33 82.5 691 38.6 4.5 21 Total 40 100.0 % 1,778 99.4 11.5 44 Prior year reserve reestimates 10 0.6 - Total catastrophe losses $ 1,788 100.0 % 11.5 % Six months ended June 30, 2016 THE ALLSTATE CORPORATION CATASTROPHE BY SIZE OF EVENT ($ in millions) Three months ended June 30, 2016
34 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Prior Year Reserve Reestimates (1) Auto $ (36) $ 5 $ (19) $ 14 $ 11 $ 24 $ (31) $ 35 Homeowners 19 (7) (14) (15) 4 1 12 5 Other personal lines (11) 5 - 11 6 1 (6) 7 Commercial lines 23 20 - (12) 4 10 43 14 Other business lines - - - 1 1 - - 1 Allstate Protection (5) 23 (33) (1) 26 36 18 62 Discontinued Lines and Coverages 2 1 2 48 2 1 3 3 Property-Liability $ (3) $ 24 $ (31) $ 47 $ 28 $ 37 $ 21 $ 65 Allstate brand (2) $ (2) $ 13 $ (22) $ (13) $ 26 $ 47 $ 11 $ 73 Esurance brand (2) (4) (4) (5) (5) (3) (4) (8) (7) Encompass brand (2) 1 14 (6) 17 3 (7) 15 (4) Allstate Protection (2) $ (5) $ 23 $ (33) $ (1) $ 26 $ 36 $ 18 $ 62 Effect of Prior Year Reserve Reestimates on Combined Ratio (1)(3) Auto (0.5) - (0.2) 0.2 0.2 0.3 (0.2) 0.2 Homeowners 0.3 (0.1) (0.2) (0.2) - - 0.1 - Other personal lines (0.1) - - 0.1 0.1 - (0.1) 0.1 Commercial lines 0.3 0.3 - (0.1) - 0.2 0.3 0.1 Other business lines - - - - - - - - Allstate Protection - 0.2 (0.4) - 0.3 0.5 0.1 0.4 Discontinued Lines and Coverages - 0.1 - 0.6 - - - - Property-Liability - 0.3 (0.4) 0.6 0.3 0.5 0.1 0.4 Allstate brand (2) - 0.1 (0.3) (0.2) 0.3 0.6 0.1 0.5 Esurance brand (2) - (0.1) - - - - (0.1) (0.1) Encompass brand (2) - 0.2 (0.1) 0.2 - (0.1) 0.1 - Allstate Protection (2) - 0.2 (0.4) - 0.3 0.5 0.1 0.4 (1) (2) (3) Calculated using Property-Liability premiums earned for the respective period. THE ALLSTATE CORPORATION PROPERTY-LIABILITY PRIOR YEAR RESERVE REESTIMATES ($ in millions) Six months ended Favorable reserve reestimates are shown in parentheses. Unfavorable (favorable) reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $15 million, $0 million, $(2) million, $13 million and $7 million, $0 million, $1 million and $8 million, respectively, in the three months ended June 30, 2016 and 2015, respectively. Unfavorable (favorable) reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $11 million, $0 million, $(1) million, $10 million and $5 million, $0 million, $(2) million and $3 million, respectively, in the six months ended June 30, 2016 and 2015, respectively. Three months ended
35 June 30, March 31, 2016 2016 2015 2014 2013 2012 2011 (net of reinsurance) Asbestos claims Beginning reserves $ 907 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078 $ 1,100 Incurred claims and claims expense - - 39 87 74 26 26 Claims and claims expense paid (17) (53) (93) (90) (83) (78) (48) Ending reserves $ 890 $ 907 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078 Claims and claims expense paid as a percent of ending reserves 1.9% 5.8% 9.7% 8.9% 8.2% 7.6% 4.5% Environmental claims Beginning reserves $ 177 $ 179 $ 203 $ 208 $ 193 $ 185 $ 201 Incurred claims and claims expense - - 1 15 30 22 - Claims and claims expense paid (4) (2) (25) (20) (15) (14) (16) Ending reserves $ 173 $ 177 $ 179 $ 203 $ 208 $ 193 $ 185 Claims and claims expense paid as a percent of ending reserves 2.3% 1.1% 14.0% 9.9% 7.2% 7.3% 8.6% THE ALLSTATE CORPORATION ASBESTOS AND ENVIRONMENTAL RESERVES ($ in millions) Twelve months ended December 31,Three months ended
36 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written Auto $ 4,767 $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 $ 9,513 $ 9,123 Homeowners 1,831 1,392 1,634 1,879 1,819 1,379 3,223 3,198 Landlord 133 122 137 143 138 128 255 266 Renter 75 67 65 84 73 67 142 140 Condominium 67 53 58 64 63 51 120 114 Other 153 111 116 138 150 111 264 261 Other personal lines 428 353 376 429 424 357 781 781 Commercial lines 135 126 126 124 138 128 261 266 Total 7,161 6,617 6,712 7,178 6,969 6,399 13,778 13,368 Net premiums earned Auto $ 4,745 $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 $ 9,412 $ 8,956 Homeowners 1,684 1,678 1,674 1,663 1,645 1,631 3,362 3,276 Other personal lines 397 393 395 396 395 391 790 786 Commercial lines 127 129 129 128 128 125 256 253 Total 6,953 6,867 6,836 6,784 6,692 6,579 13,820 13,271 Incurred losses Auto $ 3,634 $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 $ 7,153 $ 6,606 Homeowners 1,260 1,190 816 820 1,147 894 2,450 2,041 Other personal lines 256 261 216 241 259 244 517 503 Commercial lines 135 119 100 97 105 98 254 203 Total 5,285 5,089 4,627 4,613 4,942 4,411 10,374 9,353 Expenses Auto $ 1,168 $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 $ 2,271 $ 2,268 Homeowners 373 377 372 385 372 389 750 761 Other personal lines 106 103 101 109 105 105 209 210 Commercial lines 35 38 36 36 40 38 73 78 Total 1,682 1,621 1,586 1,616 1,672 1,645 3,303 3,317 Underwriting income (loss) Auto $ (57) $ 45 $ 66 $ 56 $ (62) $ 144 $ (12) $ 82 Homeowners 51 111 486 458 126 348 162 474 Other personal lines 35 29 78 46 31 42 64 73 Commercial lines (43) (28) (7) (5) (17) (11) (71) (28) Total (14) 157 623 555 78 523 143 601 Loss ratio 76.0 74.1 67.7 68.0 73.8 67.1 75.1 70.5 Expense ratio 24.2 23.6 23.2 23.8 25.0 25.0 23.9 25.0 Combined ratio 100.2 97.7 90.9 91.8 98.8 92.1 99.0 95.5 Effect of catastrophe losses on combined ratio 13.1 11.4 5.0 3.7 10.9 4.2 12.3 7.6 Effect of prior year reserve reestimates on combined ratio - 0.2 (0.3) (0.2) 0.3 0.7 0.1 0.5 Underlying combined ratio 87.3 86.1 86.0 88.3 87.7 87.1 86.7 87.4 Effect of catastrophe losses 13.1 11.4 5.0 3.7 10.9 4.2 12.3 7.6 Effect of prior year non-catastrophe reserve reestimates (0.2) 0.2 (0.1) (0.2) 0.2 0.8 - 0.5 Combined ratio 100.2 97.7 90.9 91.8 98.8 92.1 99.0 95.5 Policies in Force (in thousands) Auto 20,061 20,145 20,326 20,367 20,258 20,036 20,061 20,258 Homeowners 6,135 6,152 6,174 6,163 6,141 6,114 6,135 6,141 Other personal lines 4,203 4,208 4,219 4,208 4,170 4,135 4,203 4,170 Commercial lines 308 318 324 328 330 326 308 330 Excess and surplus 23 24 25 26 26 27 23 26 Total 30,730 30,847 31,068 31,092 30,925 30,638 30,730 30,925 (1) Allstate Personal Lines comprise Allstate brand auto, homeowners, other personal lines and commercial lines. Allstate Protection segment comprises Allstate Personal Lines and Emerging Businesses. THE ALLSTATE CORPORATION ALLSTATE PERSONAL LINES - AUTO, HOMEOWNERS, OTHER PERSONAL LINES AND COMMERCIAL LINES PROFITABILITY MEASURES (1) ($ in millions) Six months endedThree months ended
37 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net premiums written Esurance $ 392 $ 452 $ 378 $ 423 $ 371 $ 441 $ 844 $ 812 Encompass 315 263 293 331 338 282 578 620 Allstate Roadside Services 77 77 70 87 88 91 154 179 Allstate Dealer Services 106 106 98 118 111 93 212 204 Other business lines 183 183 168 205 199 184 366 383 Total 890 898 839 959 908 907 1,788 1,815 Net premiums earned Esurance $ 415 $ 404 $ 400 $ 399 $ 402 $ 387 $ 819 $ 789 Encompass 304 309 313 319 318 319 613 637 Other business lines 142 143 135 148 137 141 285 278 Total 861 856 848 866 857 847 1,717 1,704 Incurred losses Esurance $ 319 $ 294 $ 299 $ 290 $ 304 $ 299 $ 613 $ 603 Encompass 231 239 214 233 273 213 470 486 Other business lines 64 61 57 71 66 69 125 135 Total 614 594 570 594 643 581 1,208 1,224 Expenses Esurance $ 133 $ 135 $ 129 $ 135 $ 139 $ 157 $ 268 $ 296 Encompass 88 88 85 90 95 92 176 187 Other business lines 74 68 72 61 63 69 142 132 Answer Financial 2 1 2 1 3 2 3 5 Total 297 292 288 287 300 320 589 620 Underwriting income (loss) Esurance $ (37) $ (25) $ (28) $ (26) $ (41) $ (69) $ (62) $ (110) Encompass (15) (18) 14 (4) (50) 14 (33) (36) Other business lines 4 14 6 16 8 3 18 11 Answer Financial (2) (1) (2) (1) (3) (2) (3) (5) Total (50) (30) (10) (15) (86) (54) (80) (140) Loss ratio 71.3 69.4 67.2 68.6 75.0 68.6 70.4 71.8 Expense ratio 34.5 34.1 34.0 33.1 35.0 37.8 34.3 36.4 Combined ratio 105.8 103.5 101.2 101.7 110.0 106.4 104.7 108.2 Effect of catastrophe losses on combined ratio 5.6 5.1 2.1 2.3 7.8 2.4 5.4 5.1 Effect of prior year reserve reestimates on combined ratio (0.3) 1.2 (1.3) 1.5 0.1 (1.3) 0.4 (0.6) Effect of amortization of purchased intangible assets 1.0 1.0 1.6 1.4 1.5 1.4 1.0 1.5 Underlying combined ratio 99.3 96.3 98.7 96.8 100.7 103.5 97.8 102.1 Effect of catastrophe losses 5.6 5.1 2.1 2.3 7.8 2.4 5.4 5.1 Effect of prior year non-catastrophe reserve reestimates (0.1) 1.1 (1.2) 1.2 - (0.9) 0.5 (0.5) Effect of amortization of purchased intangible assets 1.0 1.0 1.6 1.4 1.5 1.4 1.0 1.5 Combined ratio 105.8 103.5 101.2 101.7 110.0 106.4 104.7 108.2 Policies in Force (in thousands) Esurance 1,500 1,511 1,491 1,503 1,522 1,527 1,500 1,522 Encompass 1,099 1,138 1,172 1,207 1,240 1,259 1,099 1,240 Other business lines 824 856 894 920 937 941 824 937 Total 3,423 3,505 3,557 3,630 3,699 3,727 3,423 3,699 (1) Emerging businesses include Esurance, Encompass, Allstate Roadside Services, Allstate Dealer Services, Ivantage and Answer Financial. THE ALLSTATE CORPORATION EMERGING BUSINESSES - ESURANCE, ENCOMPASS, OTHER BUSINESS LINES AND ANSWER FINANCIAL PROFITABILITY MEASURES (1) ($ in millions) Six months endedThree months ended
38 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Premiums $ 353 $ 354 $ 339 $ 329 $ 326 $ 328 $ 707 $ 654 Contract charges 211 212 208 209 210 209 423 419 Net investment income 435 419 420 491 489 484 854 973 Contract benefits (454) (455) (456) (460) (446) (441) (909) (887) Interest credited to contractholder funds (179) (184) (186) (191) (191) (192) (363) (383) Amortization of deferred policy acquisition costs (68) (71) (65) (61) (62) (69) (139) (131) Operating costs and expenses (121) (123) (119) (112) (118) (123) (244) (241) Restructuring and related charges (1) - 3 (1) (2) - (1) (2) Income tax expense on operations (56) (48) (46) (66) (67) (62) (104) (129) Operating income 120 104 98 138 139 134 224 273 Realized capital gains and losses, after-tax - (32) (62) 125 38 72 (32) 110 Valuation changes on embedded derivatives that are not hedged, after-tax (4) (4) 2 (2) 4 (5) (8) (1) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (1) (1) - (1) (2) - (2) (2) Gain (loss) on disposition of operations, after-tax 1 1 1 2 - (1) 2 (1) Change in accounting for investments in qualified affordable housing projects, after-tax - - - - - (17) - (17) Net income applicable to common shareholders $ 116 $ 68 $ 39 $ 262 $ 179 $ 183 $ 184 $ 362 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL RESULTS ($ in millions) Six months endedThree months ended
39 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Return on Attributed Equity Numerator: Net income applicable to common shareholders (1) $ 485 $ 548 $ 663 $ 832 $ 686 $ 652 Denominator: Beginning attributed equity (2) $ 7,621 $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812 Ending attributed equity 8,055 7,680 7,350 7,475 7,621 7,920 Average attributed equity (3) $ 7,838 $ 7,800 $ 7,511 $ 7,416 $ 7,442 $ 7,866 Return on attributed equity 6.2 % 7.0 % 8.8 % 11.2 % 9.2 % 8.3 % Operating Income Return on Attributed Equity Numerator: Operating income (1) $ 460 $ 479 $ 509 $ 539 $ 526 $ 552 Denominator: Beginning attributed equity (2) $ 7,621 $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812 Unrealized net capital gains and losses 1,030 1,499 1,420 1,305 1,285 1,280 Adjusted beginning attributed equity 6,591 6,421 6,252 6,051 5,977 6,532 Ending attributed equity 8,055 7,680 7,350 7,475 7,621 7,920 Unrealized net capital gains and losses 1,077 824 556 722 1,030 1,499 Adjusted ending attributed equity 6,978 6,856 6,794 6,753 6,591 6,421 Average adjusted attributed equity (3) $ 6,785 $ 6,639 $ 6,523 $ 6,402 $ 6,284 $ 6,477 Operating income return on attributed equity 6.8 % 7.2 % 7.8 % 8.4 % 8.4 % 8.5 % (1) (2) (3) Allstate Financial attributed equity is the sum of equity for Allstate Life Insurance Company and the applicable equity for Allstate Financial Insurance Holdings Corporation. Average attributed equity and average adjusted attributed equity are determined using a two-point average, with the beginning and ending attributed equity and adjusted attributed equity, respectively, for the twelve-month period as data points. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL RETURN ON ATTRIBUTED EQUITY ($ in millions) Net income applicable to common shareholders and operating income reflect a trailing twelve-month period. Twelve months ended
40 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 PREMIUMS AND CONTRACT CHARGES - BY PRODUCT Underwritten Products Traditional life insurance premiums $ 139 $ 138 $ 144 $ 135 $ 131 $ 132 $ 277 $ 263 Accident and health insurance premiums 214 216 195 194 195 196 430 391 Interest-sensitive life insurance contract charges 208 209 204 205 207 206 417 413 561 563 543 534 533 534 1,124 1,067 Annuities Immediate annuities with life contingencies premiums - - - - - - - - Other fixed annuity contract charges 3 3 4 4 3 3 6 6 3 3 4 4 3 3 6 6 Total $ 564 $ 566 $ 547 $ 538 $ 536 $ 537 $ 1,130 $ 1,073 PREMIUMS AND CONTRACT CHARGES - BY DISTRIBUTION CHANNEL Allstate agencies $ 306 $ 305 $ 304 $ 300 $ 297 $ 297 $ 611 $ 594 Workplace enrolling agents 232 233 215 212 209 210 465 419 Other (1) 26 28 28 26 30 30 54 60 Total $ 564 $ 566 $ 547 $ 538 $ 536 $ 537 $ 1,130 $ 1,073 PROPRIETARY LIFE INSURANCE POLICIES SOLD BY ALLSTATE AGENCIES (2) (3) 29,839 25,458 39,701 16,402 34,494 30,091 55,297 64,585 ALLSTATE BENEFITS NEW BUSINESS WRITTEN PREMIUMS (4) $ 70 $ 82 $ 179 $ 69 $ 64 $ 65 $ 152 $ 129 (1) Primarily represents independent master brokerage agencies. (2) Policies sold reduced by lapses within twelve months of sale. (3) (4) Beginning on August 1, 2015, sales are measured at policy issuance rather than application submission. This change led to a lag in the recognition of policies sold which impacted the third quarter 2015 results. New business written premiums reflect annualized premiums at initial customer enrollment (including new accounts and new employees or policies of existing accounts), reduced by an estimate for certain policies that are expected to lapse. A significant portion of Allstate Benefits business is seasonally written in the fourth quarter during many clients’ annual employee benefits enrollment. Three months ended THE ALLSTATE CORPORATION ALLSTATE FINANCIAL PREMIUMS AND CONTRACT CHARGES ($ in millions) Six months ended
41 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Contractholders funds, beginning balance $ 21,092 $ 21,295 $ 21,559 $ 21,968 $ 22,267 $ 22,529 $ 21,295 $ 22,529 Deposits Interest-sensitive life insurance 251 252 251 251 253 249 503 502 Fixed annuities 40 44 39 56 53 51 84 104 Total deposits 291 296 290 307 306 300 587 606 Interest credited 184 189 183 193 185 199 373 384 Benefits, withdrawals, maturities and other adjustments Benefits (225) (252) (247) (272) (285) (273) (477) (558) Surrenders and partial withdrawals (300) (245) (295) (375) (303) (305) (545) (608) Maturities of and interest payments on institutional products - - - - (1) - - (1) Contract charges (206) (206) (207) (205) (203) (203) (412) (406) Net transfers from separate accounts 1 1 2 2 2 1 2 3 Other adjustments 8 14 10 (59) - 19 22 19 Total benefits, withdrawals, maturities and other adjustments (722) (688) (737) (909) (790) (761) (1,410) (1,551) Contractholder funds, ending balance $ 20,845 $ 21,092 $ 21,295 $ 21,559 $ 21,968 $ 22,267 $ 20,845 $ 21,968 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL CHANGE IN CONTRACTHOLDER FUNDS ($ in millions) Six months ended Three months ended
42 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Benefit spread Premiums $ 353 $ 354 $ 339 $ 329 $ 326 $ 328 $ 707 $ 654 Cost of insurance contract charges (1) 140 141 137 137 138 138 281 276 Contract benefits excluding the implied interest on immediate annuities with life contingencies (2) (325) (327) (328) (333) (319) (312) (652) (631) Total benefit spread 168 168 148 133 145 154 336 299 Investment spread Net investment income 435 419 420 491 489 484 854 973 Implied interest on immediate annuities with life contingencies (2) (129) (128) (128) (127) (127) (129) (257) (256) Interest credited to contractholder funds (185) (190) (183) (194) (185) (199) (375) (384) Total investment spread 121 101 109 170 177 156 222 333 Surrender charges and contract maintenance expense fees (1) 71 71 71 72 72 71 142 143 Realized capital gains and losses - (49) (97) 194 59 111 (49) 170 Amortization of deferred policy acquisition costs (69) (73) (64) (63) (65) (70) (142) (135) Operating costs and expenses (121) (123) (119) (112) (118) (123) (244) (241) Restructuring and related charges (1) - 3 (1) (2) - (1) (2) Gain (loss) on disposition of operations 1 2 1 3 1 (2) 3 (1) Income tax expense (54) (29) (13) (134) (90) (114) (83) (204) Net income applicable to common shareholders $ 116 $ 68 $ 39 $ 262 $ 179 $ 183 $ 184 $ 362 Benefit spread by product group Life insurance $ 85 $ 80 $ 75 $ 66 $ 65 $ 68 $ 165 $ 133 Accident and health insurance 108 105 92 90 97 107 213 204 Annuities (25) (17) (19) (23) (17) (21) (42) (38) Total benefit spread $ 168 $ 168 $ 148 $ 133 $ 145 $ 154 $ 336 $ 299 Investment spread by product group Annuities and institutional products $ 35 $ 17 $ 10 $ 82 $ 77 $ 69 $ 52 $ 146 Life insurance 29 34 41 33 33 33 63 66 Accident and health insurance 4 4 4 4 4 4 8 8 Net investment income on investments supporting capital 59 52 52 54 57 57 111 114 Investment spread before valuation changes on embedded derivatives that are not hedged 127 107 107 173 171 163 234 334 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged (6) (6) 2 (3) 6 (7) (12) (1) Total investment spread $ 121 $ 101 $ 109 $ 170 $ 177 $ 156 $ 222 $ 333 (1) Reconciliation of contract charges Cost of insurance contract charges $ 140 $ 141 $ 137 $ 137 $ 138 $ 138 $ 281 $ 276 Surrender charges and contract maintenance expense fees 71 71 71 72 72 71 142 143 Total contract charges $ 211 $ 212 $ 208 $ 209 $ 210 $ 209 $ 423 $ 419 (2) Reconciliation of contract benefits Contract benefits excluding the implied interest on immediate annuities with life contingencies $ (325) $ (327) $ (328) $ (333) $ (319) $ (312) $ (652) $ (631) Implied interest on immediate annuities with life contingencies (129) (128) (128) (127) (127) (129) (257) (256) Total contract benefits $ (454) $ (455) $ (456) $ (460) $ (446) $ (441) $ (909) $ (887) THE ALLSTATE CORPORATION ALLSTATE FINANCIAL ANALYSIS OF NET INCOME ($ in millions) Six months endedThree months ended
43 Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads Interest-sensitive life insurance 4.8 % 3.9 % 0.9 % 5.1 % 3.9 % 1.2 % Deferred fixed annuities and institutional products 4.2 2.8 1.4 4.4 2.8 1.6 Immediate fixed annuities with and without life contingencies 6.5 5.8 0.7 7.5 5.9 1.6 Investments supporting capital, traditional life and other products 3.9 n/a n/a 4.1 n/a n/a Weighted average Weighted average Weighted average Weighted average Weighted average Weighted average investment yield interest crediting rate investment spreads investment yield interest crediting rate investment spreads Interest-sensitive life insurance 4.9 % 3.9 % 1.0 % 5.1 % 3.9 % 1.2 % Deferred fixed annuities and institutional products 4.1 2.8 1.3 4.4 2.8 1.6 Immediate fixed annuities with and without life contingencies 6.3 5.9 0.4 7.4 5.9 1.5 Investments supporting capital, traditional life and other products 3.8 n/a n/a 4.2 n/a n/a Six months ended June 30, 2016 Six months ended June 30, 2015 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL WEIGHTED AVERAGE INVESTMENT SPREADS Three months ended June 30, 2016 Three months ended June 30, 2015
44 Twelve months ended June 30, 2016 Attributed equity Reserves and excluding unrealized June March Dec. Sept. June March Contractholder funds capital gains/losses (3)(4) Operating income (5) 2016 2016 2015 2015 2015 2015 Underwritten products Life insurance $ 10,735 $ 2,594 $ 275 10.8 % 11.1 % 10.6 % 10.0 % 9.3 % 9.8 % Accident and health insurance 854 648 81 12.4 12.2 12.7 13.7 14.9 15.9 Subtotal 11,589 3,242 356 11.1 11.3 11.1 10.8 10.5 11.1 Immediate Annuities: Sub-standard structured settlements and group pension terminations (1) 5,029 1,907 (15) (0.9) (0.2) 0.5 1.6 0.5 0.6 Standard structured settlements and SPIA (2) 6,769 1,194 47 4.1 4.9 6.8 9.4 8.8 8.4 Subtotal (6) 11,798 3,101 32 1.1 2.0 3.1 4.7 3.8 3.7 Deferred Annuities 9,588 634 71 10.0 10.4 10.1 10.1 10.6 10.3 Institutional products 85 1 1 Subtotal 21,471 3,736 104 2.9 3.7 4.8 6.2 6.1 6.0 Total Allstate Financial $ 33,060 $ 6,978 $ 460 6.8 7.2 7.8 8.4 8.4 8.5 Life Accident and Annuities and Allstate insurance health insurance institutional products Financial Operating income $ 139 $ 43 $ 42 $ 224 Realized capital gains and losses, after-tax (11) (2) (19) (32) Valuation changes on embedded derivatives that are not hedged, after-tax - - (8) (8) DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (2) - - (2) Gain on disposition of operations, after-tax - - 2 2 Net income applicable to common shareholders $ 126 $ 41 $ 17 $ 184 (1) (2) (3) (4) (5) (6) Structured settlement annuities for annuitants with 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. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL SUPPLEMENTAL PRODUCT INFORMATION ($ in millions) As of June 30, 2016 Six months ended June 30, 2016 Annuities and institutional products: Twelve months ended Operating income return on attributed equity (%) Of the total immediate annuities, $8,657 are reported in reserve for life-contingent contract benefits and $3,141 are reported in contractholder funds. Attributed equity is allocated to each product line based on statutory capital adjusted for GAAP reporting differences and the amount of capital held in Allstate Financial may vary from economic capital. The calculation of statutory capital by product incorporates internal factors for invested asset risk, insurance risk (mortality and morbidity), interest rate risk and business risk. Due to the unavailability of final statutory financial statements at the time we release our GAAP financial results, the allocation is derived from prior quarter statutory capital. Statutory capital is adjusted for appropriate GAAP accounting differences. Changes in internal capital factors, investment portfolio mix and risk as well as changes in GAAP and statutory reporting differences will result in changes to the allocation of attributed equity to products. Product line operating income includes allocation of income on investments supporting capital. Operating income reflects a trailing twelve-month period. Life-contingent structured settlement annuities for annuitants with standard life expectancy, period certain structured settlements and single premium immediate annuities with and without life contingencies. Total Allstate Financial attributed equity is the sum of equity for Allstate Life Insurance Company and the applicable equity for Allstate Financial Insurance Holdings Corporation, excluding unrealized capital gains and losses.
45 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE BY PRODUCT Underwritten products Life insurance 2,478 2,467 2,463 2,459 2,456 2,448 Accident and health insurance 3,294 3,278 2,873 2,848 2,843 2,777 5,772 5,745 5,336 5,307 5,299 5,225 Annuities Deferred annuities 163 168 172 176 181 186 Immediate annuities 100 101 102 104 105 106 263 269 274 280 286 292 Total 6,035 6,014 5,610 5,587 5,585 5,517 ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE BY SOURCE OF BUSINESS Allstate Agencies (2) 1,924 1,922 1,924 1,917 1,911 1,904 Allstate Benefits 3,755 3,729 3,315 3,292 3,287 3,218 Other (3) 356 363 371 378 387 395 Total 6,035 6,014 5,610 5,587 5,585 5,517 (1) (2) (3) Primarily business sold by banks/broker-dealers, independent master brokerage agencies and specialized structured settlement brokers. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE (1) (in thousands) Allstate Financial insurance policies and 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. Policy counts associated with our voluntary employee benefits group business reflect certificate counts as opposed to group counts. Excludes Allstate Benefits products sold through Allstate Agencies, which are included in the Allstate Benefits line.
46 Allstate Allstate Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial Life Annuities Benefits Segment Life Annuities Benefits Segment $ 131 $ - $ 222 $ 353 $ 124 $ - $ 202 $ 326 179 3 29 211 180 3 27 210 118 299 18 435 120 351 18 489 (177) (156) (121) (454) (189) (146) (111) (446) (71) (98) (10) (179) (71) (112) (8) (191) Amortization of deferred policy acquisition costs (32) (1) (35) (68) (30) (2) (30) (62) (54) (7) (60) (121) (53) (10) (55) (118) (1) - - (1) (2) - - (2) (29) (13) (14) (56) (24) (28) (15) (67) 64 27 29 120 55 56 28 139 (2) 2 - - 10 28 - 38 - (4) - (4) - 4 - 4 (1) - - (1) (2) - - (2) Gain on disposition of operations, after-tax - 1 - 1 - - - - $ 61 $ 26 $ 29 $ 116 $ 63 $ 88 $ 28 $ 179 Premiums and Contract Charges - by Product Underwritten Products $ 130 $ - $ 9 $ 139 $ 124 $ - $ 7 $ 131 1 - 213 214 - - 195 195 179 - 29 208 180 - 27 207 310 - 251 561 304 - 229 533 - - - - - - - - - 3 - 3 - 3 - 3 - 3 - 3 - 3 - 3 $ 310 $ 3 $ 251 $ 564 $ 304 $ 3 $ 229 $ 536 Life Insurance $ 78 $ - $ 7 $ 85 $ 59 $ - $ 6 $ 65 Accident and health insurance (2) - 110 108 (3) - 100 97 Annuities - (25) - (25) - (17) - (17) $ 76 $ (25) $ 117 $ 168 $ 56 $ (17) $ 106 $ 145 Annuities and institutional products $ - $ 35 $ - $ 35 $ - $ 77 $ - $ 77 Life insurance 26 - 3 29 30 - 3 33 Accident and health insurance 2 - 2 4 1 - 3 4 Net investment income on investments supporting capital 19 37 3 59 19 34 4 57 derivatives that are not hedged 47 72 8 127 50 111 10 171 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged - (6) - (6) - 6 - 6 Total investment spread $ 47 $ 66 $ 8 $ 121 $ 50 $ 117 $ 10 $ 177 Premiums THE ALLSTATE CORPORATION ALLSTATE LIFE, ALLSTATE ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION ($ in millions) For the three months ended June 30, 2016 For the three months ended June 30, 2015 Valuation changes on embedded derivatives Contract charges Net investment income Contract benefits Interest credited to contractholder funds Operating costs and expenses Restructuring and related charges Income tax expense on operations Operating income Realized capital gains and losses, after-tax Annuities that are not hedged, after-tax DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax Net income Traditional life insurance premiums Accident and health insurance Interest-sensitive life insurance contract charges Investment Spread by Product Group Investment spread before valuation changes on embedded Immediate annuities with life contingencies premiums Other fixed annuity contract charges Total life and annuity premiums and contract charges Benefit Spread by Product Group Total benefit spread
47 Allstate Allstate Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial Life Annuities Benefits Segment Life Annuities Benefits Segment $ 261 $ - $ 446 $ 707 $ 249 $ - $ 405 $ 654 361 6 56 423 360 6 53 419 238 580 36 854 241 696 36 973 (357) (303) (249) (909) (373) (299) (215) (887) (141) (203) (19) (363) (140) (225) (18) (383) Amortization of deferred policy acquisition costs (63) (3) (73) (139) (62) (3) (66) (131) (110) (15) (119) (244) (111) (20) (110) (241) (1) - - (1) (2) - - (2) (58) (20) (26) (104) (48) (51) (30) (129) 130 42 52 224 114 104 55 273 (10) (19) (3) (32) 12 98 - 110 - (8) - (8) - (1) - (1) (2) - - (2) (3) 1 - (2) Gain (loss) on disposition of operations, after-tax - 2 - 2 (1) - - (1) Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (6) (11) - (17) $ 118 $ 17 $ 49 $ 184 $ 116 $ 191 $ 55 $ 362 Premiums and Contract Charges - by Product Underwritten Products $ 260 $ - $ 17 $ 277 $ 248 $ - $ 15 $ 263 1 - 429 430 1 - 390 391 361 - 56 417 360 - 53 413 622 - 502 1,124 609 - 458 1,067 - - - - - - - - - 6 - 6 - 6 - 6 - 6 - 6 - 6 - 6 $ 622 $ 6 $ 502 $ 1,130 $ 609 $ 6 $ 458 $ 1,073 Life Insurance $ 153 $ - $ 12 $ 165 $ 122 $ - $ 11 $ 133 Accident and health insurance (2) - 215 213 (4) - 208 204 Annuities - (42) - (42) - (38) - (38) $ 151 $ (42) $ 227 $ 336 $ 118 $ (38) $ 219 $ 299 Annuities and institutional products $ - $ 52 $ - $ 52 $ - $ 146 $ - $ 146 Life insurance 58 - 5 63 61 - 5 66 Accident and health insurance 3 - 5 8 3 - 5 8 Net investment income on investments supporting capital 36 68 7 111 39 67 8 114 derivatives that are not hedged 97 120 17 234 103 213 18 334 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged - (12) - (12) - (1) - (1) Total investment spread $ 97 $ 108 $ 17 $ 222 $ 103 $ 212 $ 18 $ 333 Investment Spread by Product Group Investment spread before valuation changes on embedded Immediate annuities with life contingencies premiums Other fixed annuity contract charges Total life and annuity premiums and contract charges Benefit Spread by Product Group Total benefit spread Annuities that are not hedged, after-tax DAC and DSI amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax Net income Traditional life insurance premiums Accident and health insurance Interest-sensitive life insurance contract charges Valuation changes on embedded derivatives Contract charges Net investment income Contract benefits Interest credited to contractholder funds Operating costs and expenses Income tax expense on operations Operating income Realized capital gains and losses, after-tax Restructuring and related charges Premiums THE ALLSTATE CORPORATION ALLSTATE LIFE, ALLSTATE ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION ($ in millions) For the six months ended June 30, 2016 For the six months ended June 30, 2015
48 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Net investment income $ 11 $ 10 $ 10 $ 9 $ 8 $ 8 $ 21 $ 16 Operating costs and expenses (7) (6) (7) (13) (9) (5) (13) (14) Interest expense (72) (73) (73) (73) (73) (73) (145) (146) Income tax benefit on operations 26 25 27 28 28 26 51 54 Preferred stock dividends (29) (29) (29) (29) (29) (29) (58) (58) Operating loss (71) (73) (72) (78) (75) (73) (144) (148) Realized capital gains and losses, after-tax (1) - - - - - (1) - Net loss applicable to common shareholders $ (72) $ (73) $ (72) $ (78) $ (75) $ (73) $ (145) $ (148) THE ALLSTATE CORPORATION CORPORATE AND OTHER RESULTS ($ in millions) Six months endedThree months ended
49 June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30, 2016 2016 2015 2015 2015 2016 2016 2015 2015 2015 Fixed income securities, at fair value: Tax-exempt $ 4,612 $ 4,466 $ 4,285 $ 4,289 $ 4,418 $ 2 $ 2 $ 4 $ 17 $ 23 Taxable 25,139 24,615 25,447 24,868 25,192 26,169 25,858 26,034 26,583 27,768 Equity securities, at fair value 3,632 3,709 3,480 2,808 3,018 1,630 1,405 1,599 1,425 979 Mortgage loans 313 294 296 339 343 4,140 4,008 4,042 4,063 4,000 Limited partnership interests 2,842 2,688 2,575 2,558 2,466 2,564 2,399 2,295 2,261 2,066 Short-term, at fair value 1,619 1,452 959 1,692 1,108 1,197 1,626 861 991 1,053 Other 1,532 1,512 1,437 1,659 1,602 2,058 2,038 1,957 1,929 1,909 Total $ 39,689 $ 38,736 $ 38,479 $ 38,213 $ 38,147 $ 37,760 $ 37,336 $ 36,792 $ 37,269 $ 37,798 Fixed income securities, amortized cost: Tax-exempt $ 4,509 $ 4,384 $ 4,218 $ 4,214 $ 4,362 $ 2 $ 2 $ 4 $ 17 $ 24 Taxable 24,746 24,454 25,672 24,883 24,990 24,357 24,481 25,145 25,335 26,091 Ratio of fair value to amortized cost 101.7% 100.8% 99.5% 100.2% 100.9% 107.4% 105.6% 103.5% 104.9% 106.4% Equity securities, cost $ 3,337 $ 3,417 $ 3,236 $ 2,656 $ 2,699 $ 1,584 $ 1,372 $ 1,567 $ 1,464 $ 947 Short-term, amortized cost 1,619 1,452 959 1,692 1,108 1,197 1,626 861 991 1,053 June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, March 31, Dec. 31, Sept. 30, June 30, 2016 2016 2015 2015 2015 2016 2016 2015 2015 2015 Fixed income securities, at fair value: Tax-exempt $ 609 $ 591 $ 585 $ 589 $ 569 $ 5,223 $ 5,059 $ 4,874 $ 4,895 $ 5,010 Taxable 1,598 1,759 1,593 1,911 1,960 52,906 52,232 53,074 53,362 54,920 Equity securities, at fair value 3 3 3 3 3 5,265 5,117 5,082 4,236 4,000 Mortgage loans - - - - - 4,453 4,302 4,338 4,402 4,343 Limited partnership interests 1 4 4 4 4 5,407 5,091 4,874 4,823 4,536 Short-term, at fair value 34 448 302 353 660 2,850 3,526 2,122 3,036 2,821 Other - - - - - 3,590 3,550 3,394 3,588 3,511 Total $ 2,245 $ 2,805 $ 2,487 $ 2,860 $ 3,196 $ 79,694 $ 78,877 $ 77,758 $ 78,342 $ 79,141 Fixed income securities, amortized cost: Tax-exempt $ 585 $ 569 $ 566 $ 569 $ 551 $ 5,096 $ 4,955 $ 4,788 $ 4,800 $ 4,937 Taxable 1,571 1,737 1,596 1,900 1,953 50,674 50,672 52,413 52,118 53,034 Ratio of fair value to amortized cost 102.4% 101.9% 100.7% 101.3% 101.0% 104.2% 103.0% 101.3% 102.4% 103.4% Equity securities, cost $ 3 $ 3 $ 3 $ 3 $ 3 $ 4,924 $ 4,792 $ 4,806 $ 4,123 $ 3,649 Short-term, amortized cost 34 448 302 353 660 2,850 3,526 2,122 3,036 2,821 THE ALLSTATE CORPORATION INVESTMENTS ($ in millions) PROPERTY-LIABILITY CORPORATE AND OTHER ALLSTATE FINANCIAL CONSOLIDATED
50 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 Investment position Accounting basis Cost method $ 1,284 $ 1,193 $ 1,154 $ 1,148 $ 1,130 $ 1,137 Equity method ("EMA") (1) 4,123 3,898 3,720 3,675 3,406 3,562 Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Cost method-fair value (2) $ 1,511 $ 1,466 $ 1,450 $ 1,506 $ 1,482 $ 1,494 Underlying investment Private equity $ 3,833 $ 3,494 $ 3,344 $ 3,282 $ 3,012 $ 2,969 Real estate 1,204 1,229 1,166 1,160 1,164 1,366 Other 370 368 364 381 360 364 Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Segment Property-Liability $ 2,842 $ 2,688 $ 2,575 $ 2,558 $ 2,466 $ 2,571 Allstate Financial 2,564 2,399 2,295 2,261 2,066 2,124 Corporate and Other 1 4 4 4 4 4 Total $ 5,407 $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Total Income Accounting basis Cost method $ 47 $ 39 $ 42 $ 63 $ 75 $ 42 Equity method 79 82 24 104 43 156 Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198 Underlying investment Private equity $ 114 $ 88 $ 46 $ 162 $ 113 $ 80 Real estate 12 33 20 5 10 123 Other - - - - (5) (5) Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198 Segment Property-Liability $ 60 $ 58 $ 29 $ 62 $ 45 $ 126 Allstate Financial 66 63 37 105 73 72 Corporate and Other - - - - - - Total $ 126 $ 121 $ 66 $ 167 $ 118 $ 198 (1) (2) The fair value of cost method limited partnerships is determined using reported net asset values. THE ALLSTATE CORPORATION LIMITED PARTNERSHIP INVESTMENTS ($ in millions) As of or for the three months ended As of June 30, 2016, valuations of EMA limited partnerships include approximately $469 million of cumulative pre-tax appreciation that has been recognized in earnings but has not been distributed to investors.
51 Unrealized net Fair value Unrealized net Fair value Unrealized net Fair value capital gains Fair as a percent of capital gains Fair as a percent of capital gains Fair as a percent of and losses value amortized cost (1) and losses value amortized cost (1) and losses value amortized cost (1) Fixed income securities U.S. government and agencies $ 122 $ 3,523 103.6 $ 114 $ 3,504 103.4 $ 86 $ 3,922 102.2 Municipal 532 7,818 107.3 442 7,616 106.2 369 7,401 105.2 Corporate 1,566 42,700 103.8 989 41,272 102.5 153 41,827 100.4 Foreign government 61 1,152 105.6 55 1,054 105.5 50 1,033 105.1 Asset-backed securities ("ABS") (11) 1,726 99.4 (27) 2,499 98.9 (32) 2,327 98.6 Residential mortgage-backed securities ("RMBS") 70 818 109.4 68 875 108.4 90 947 110.5 Commercial mortgage-backed securities ("CMBS") 16 368 104.5 20 447 104.7 28 466 106.4 Redeemable preferred stock 3 24 114.3 3 24 114.3 3 25 113.6 Total fixed income securities 2,359 58,129 104.2 1,664 57,291 103.0 747 57,948 101.3 Equity securities 341 5,265 106.9 325 5,117 106.8 276 5,082 105.7 Short-term investments - 2,850 100.0 - 3,526 100.0 - 2,122 100.0 Derivatives 2 71 n/a 4 58 n/a 6 53 n/a EMA limited partnership interests (2) (5) n/a n/a (5) n/a n/a (4) n/a n/a Unrealized net capital gains and losses, pre-tax 2,697 1,988 1,025 Amounts recognized for: Insurance reserves (3) - - - DAC and DSI (4) (195) (138) (67) Amounts recognized (195) (138) (67) Deferred income taxes (878) (650) (338) Unrealized net capital gains and losses, after-tax $ 1,624 $ 1,200 $ 620 Unrealized net Fair value Unrealized net Fair value Unrealized net Fair value capital gains Fair as a percent of capital gains Fair as a percent of capital gains Fair as a percent of and losses value amortized cost (1) and losses value amortized cost (1) and losses value amortized cost (1) Fixed income securities U.S. government and agencies $ 118 $ 3,760 103.2 $ 109 $ 3,936 102.8 $ 134 $ 4,106 103.4 Municipal 412 7,494 105.8 483 8,594 106.0 670 8,713 108.3 Corporate 632 41,629 101.5 1,164 42,317 102.8 2,120 42,375 105.3 Foreign government 59 1,085 105.8 66 1,324 105.2 85 1,375 106.6 ABS (16) 2,711 99.4 (5) 2,076 99.8 8 3,055 100.3 RMBS 98 1,011 110.7 101 1,083 110.3 105 1,154 110.0 CMBS 32 542 106.3 37 575 106.9 42 600 107.5 Redeemable preferred stock 4 25 119.0 4 25 119.0 4 25 119.0 Total fixed income securities 1,339 58,257 102.4 1,959 59,930 103.4 3,168 61,403 105.4 Equity securities 113 4,236 102.7 351 4,000 109.6 414 4,166 111.0 Short-term investments - 3,036 100.0 - 2,821 100.0 - 2,497 100.0 Derivatives 7 29 n/a 3 60 n/a 3 79 n/a EMA limited partnership interests (2) (5) n/a n/a (5) n/a n/a (4) n/a n/a Unrealized net capital gains and losses, pre-tax 1,454 2,308 3,581 Amounts recognized for: Insurance reserves (3) - - (79) DAC and DSI (4) (98) (121) (212) Amounts recognized (98) (121) (291) Deferred income taxes (477) (768) (1,153) Unrealized net capital gains and losses, after-tax $ 879 $ 1,419 $ 2,137 (1) (2) (3) (4) THE ALLSTATE CORPORATION UNREALIZED NET CAPITAL GAINS AND LOSSES ON SECURITY PORTFOLIO BY TYPE ($ in millions) June 30, 2016 March 31, 2016 December 31, 2015 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. Although we evaluate premium deficiencies on the combined performance of our life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies. 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 comparison of percentages from period to period may be distorted by investment transactions such as sales, purchases and impairment write-downs. Unrealized net capital gains and losses for limited partnership interest represent the Company's share of EMA limited partnerships' other comprehensive income. Fair value and amortized cost are not applicable. September 30, 2015 June 30, 2015 March 31, 2015
52 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 NET INVESTMENT INCOME Fixed income securities $ 520 $ 518 $ 537 $ 546 $ 567 $ 568 $ 1,038 $ 1,135 Equity securities 44 28 33 23 31 23 72 54 Mortgage loans 53 53 63 53 57 55 106 112 Limited partnership interests 126 121 66 167 118 198 247 316 Short-term 3 4 1 4 3 1 7 4 Other 57 51 49 49 49 45 108 94 Subtotal 803 775 749 842 825 890 1,578 1,715 Less: Investment expense (41) (44) (39) (35) (36) (40) (85) (76) Net investment income $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639 PRE-TAX YIELDS (1) Fixed income securities 3.7 % 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % 3.7 % 3.9 % Equity securities 3.7 2.3 2.9 2.4 3.4 2.5 3.0 2.9 Mortgage loans 4.9 4.9 5.8 4.8 5.3 5.2 4.8 5.3 Limited partnership interests 9.6 9.7 5.4 14.4 10.1 17.2 9.6 13.7 Total portfolio 4.1 4.0 3.9 4.4 4.3 4.6 4.1 4.4 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (63) $ (59) $ (118) $ (47) $ (11) $ (19) $ (122) $ (30) Change in intent write-downs (16) (22) (32) (127) (32) (30) (38) (62) Net other-than-temporary impairment losses recognized in earnings (79) (81) (150) (174) (43) (49) (160) (92) Sales and other 104 (59) (75) 183 146 216 45 362 Valuation and settlements of derivative instruments (1) (9) (25) 24 5 (28) (10) (23) Total $ 24 $ (149) $ (250) $ 33 $ 108 $ 139 $ (125) $ 247 TOTAL RETURN ON INVESTMENT PORTFOLIO (2) 1.9 % 2.0 % (0.2) % - % (0.6) % 1.7 % 3.9 % 1.2 % AVERAGE INVESTMENT BALANCES (in billions) (3) $ 76.9 $ 76.8 $ 76.8 $ 76.9 $ 76.8 $ 77.4 $ 76.9 $ 77.2 (1) (2) (3) Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) 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, generally before investment expense (including dividend income in the case of equity securities) 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, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses. 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, cost method limited partnerships, bank loans and agent loans divided by the average fair value balances. 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 are excluded. THE ALLSTATE CORPORATION NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Six months endedThree months ended
53 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 NET INVESTMENT INCOME Fixed income securities: Tax-exempt $ 23 $ 23 $ 27 $ 24 $ 26 $ 25 $ 46 $ 51 Taxable 198 200 201 197 195 190 398 385 Equity securities 30 20 24 16 23 18 50 41 Mortgage loans 3 3 4 4 3 4 6 7 Limited partnership interests (1) 60 58 29 62 45 126 118 171 Short-term 1 2 - 3 1 1 3 2 Other 23 20 18 20 20 17 43 37 Subtotal 338 326 303 326 313 381 664 694 Less: Investment expense (22) (24) (23) (19) (21) (23) (46) (44) Net investment income $ 316 $ 302 $ 280 $ 307 $ 292 $ 358 $ 618 $ 650 Net investment income, after-tax $ 215 $ 206 $ 192 $ 209 $ 199 $ 242 $ 421 $ 441 PRE-TAX YIELDS (2) Fixed income securities: Tax-exempt 2.1 % 2.1 % 2.6 % 2.3 % 2.3 % 2.4 % 2.1 % 2.4 % Equivalent yield for tax-exempt 3.1 3.1 3.8 3.4 3.4 3.5 3.1 3.5 Taxable 3.2 3.2 3.2 3.2 3.1 2.9 3.2 3.0 Equity securities 3.6 2.4 3.1 2.5 3.4 2.6 3.0 3.0 Mortgage loans 3.9 4.0 5.4 4.0 4.1 4.5 3.9 4.2 Limited partnership interests 8.6 8.9 4.5 10.1 7.0 19.9 8.7 13.5 Total portfolio 3.5 3.3 3.1 3.5 3.3 4.0 3.4 3.7 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities: Tax-exempt $ 4 $ 3 $ (10) $ 2 $ 1 $ 2 $ 7 $ 3 Taxable 20 (47) (75) (42) 13 10 (27) 23 Equity securities 15 (60) (13) (92) 32 46 (45) 78 Limited partnership interests (10) 13 (27) (35) (1) 2 3 1 Derivatives and other (3) (8) (28) 6 4 (32) (11) (28) Total $ 26 $ (99) $ (153) $ (161) $ 49 $ 28 $ (73) $ 77 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (42) $ (35) $ (84) $ (30) $ (6) $ (12) $ (77) $ (18) Change in intent write-downs (12) (19) (24) (77) (28) (27) (31) (55) Net other-than-temporary impairment losses recognized in earnings (54) (54) (108) (107) (34) (39) (108) (73) Sales and other 82 (41) (28) (63) 77 99 41 176 Valuation and settlements of derivative instruments (2) (4) (17) 9 6 (32) (6) (26) Total $ 26 $ (99) $ (153) $ (161) $ 49 $ 28 $ (73) $ 77 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 38.5 $ 38.3 $ 38.2 $ 37.8 $ 37.6 $ 37.9 $ 38.5 $ 37.8 (1) (2) (3) Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) 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, generally before investment expense (including dividend income in the case of equity securities) 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, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses. 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 are excluded. As of June 30, 2016, Property-Liability has commitments to invest in additional limited partnership interests totaling $1.49 billion. THE ALLSTATE CORPORATION PROPERTY-LIABILITY NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Six months endedThree months ended
54 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 NET INVESTMENT INCOME Fixed income securities $ 288 $ 284 $ 300 $ 314 $ 338 $ 344 $ 572 $ 682 Equity securities 14 8 9 7 8 5 22 13 Mortgage loans 50 50 59 49 54 51 100 105 Limited partnership interests (1) 66 63 37 105 73 72 129 145 Short-term 1 2 1 1 1 - 3 1 Other 33 30 30 29 28 27 63 55 Subtotal 452 437 436 505 502 499 889 1,001 Less: Investment expense (17) (18) (16) (14) (13) (15) (35) (28) Net investment income $ 435 $ 419 $ 420 $ 491 $ 489 $ 484 $ 854 $ 973 Net investment income, after-tax $ 282 $ 273 $ 273 $ 319 $ 318 $ 315 $ 555 $ 633 PRE-TAX YIELDS (2) Fixed income securities 4.7 % 4.6 % 4.8 % 4.9 % 5.1 % 5.2 % 4.6 % 5.2 % Equity securities 3.9 2.1 2.4 2.1 3.4 2.1 2.9 2.8 Mortgage loans 4.9 4.9 5.8 4.9 5.5 5.2 4.9 5.3 Limited partnership interests 10.7 10.7 6.5 19.4 14.0 13.8 10.7 14.0 Total portfolio 5.0 4.8 4.8 5.6 5.6 5.5 4.9 5.5 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities $ (1) $ (26) $ (64) $ 261 $ 46 $ 68 $ (27) $ 114 Equity securities (4) (30) (13) (58) 16 32 (34) 48 Mortgage loans 1 - 4 1 1 - 1 1 Limited partnership interests - 13 (14) (20) (2) 4 13 2 Derivatives and other 4 (6) (10) 10 (2) 7 (2) 5 Total $ - $ (49) $ (97) $ 194 $ 59 $ 111 $ (49) $ 170 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (18) $ (24) $ (34) $ (17) $ (5) $ (7) $ (42) $ (12) Change in intent write-downs (4) (3) (8) (50) (4) (3) (7) (7) Net other-than-temporary impairment losses recognized in earnings (22) (27) (42) (67) (9) (10) (49) (19) Sales and other 21 (17) (47) 246 69 117 4 186 Valuation and settlements of derivative instruments 1 (5) (8) 15 (1) 4 (4) 3 Total $ - $ (49) $ (97) $ 194 $ 59 $ 111 $ (49) $ 170 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 35.9 $ 35.9 $ 36.0 $ 36.1 $ 36.1 $ 36.3 $ 35.9 $ 36.2 (1) (2) (3) As of June 30, 2016, Allstate Financial has commitments to invest in additional limited partnership interests totaling $1.33 billion. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Six months endedThree months ended Quarterly pre-tax yield is calculated as annualized quarterly investment income, generally before investment expense (including dividend income in the case of equity securities) 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, generally before investment expense (including dividend income in the case of equity securities) 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, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses.
55 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Consolidated investment portfolio Interest-bearing (1) $ 68,519 $ 68,163 $ 67,390 $ 68,913 $ 70,243 $ 71,287 $ 68,519 $ 70,243 Equity/owned (2) 11,175 10,714 10,368 9,429 8,898 9,150 11,175 8,898 Total $ 79,694 $ 78,877 $ 77,758 $ 78,342 $ 79,141 $ 80,437 $ 79,694 $ 79,141 Consolidated portfolio total return (3) Interest-bearing 1.7 % 1.9 % (0.3) % 0.4 % (0.8) % 1.4 % 3.6 % 0.8 % Equity/owned 0.2 0.2 0.2 (0.3) 0.2 0.4 0.4 0.5 Investment expenses - (0.1) (0.1) (0.1) - (0.1) (0.1) (0.1) Total 1.9 2.0 (0.2) - (0.6) 1.7 3.9 1.2 Consolidated portfolio total return (3) Income 1.0 % 0.9 % 0.9 % 1.0 % 1.0 % 1.0 % 1.9 % 2.0 % Valuation 0.9 1.1 (1.1) (1.0) (1.6) 0.7 2.0 (0.8) Total 1.9 2.0 (0.2) - (0.6) 1.7 3.9 1.2 Consolidated net investment income Interest-bearing $ 623 $ 618 $ 643 $ 646 $ 670 $ 664 $ 1,241 $ 1,334 Equity/owned 180 157 106 196 155 226 337 381 Investment expenses (41) (44) (39) (35) (36) (40) (85) (76) Total $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639 Consolidated Interest-bearing pre-tax yield (4) 3.8 % 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % 3.7 % 3.9 % Property-Liability net investment income Interest-bearing excluding prepayment premiums $ 236 $ 241 $ 240 $ 240 $ 233 $ 226 $ 477 $ 459 Prepayment premiums 5 2 5 4 7 7 7 14 Total Interest-bearing 241 243 245 244 240 233 484 473 Equity/owned 97 83 58 82 73 148 180 221 Less: Investment expenses (22) (24) (23) (19) (21) (23) (46) (44) Total 316 302 280 307 292 358 618 650 Less: prepayment premiums (5) (2) (5) (4) (7) (7) (7) (14) Total excluding prepayment premiums $ 311 $ 300 $ 275 $ 303 $ 285 $ 351 $ 611 $ 636 Property-Liability interest-bearing pre-tax yield 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 2.9 % 3.0 % 2.9 % Property-Liability interest-bearing pre-tax yield excluding prepayment premiums 3.0 % 3.0 % 3.0 % 2.9 % 2.9 % 2.8 % 3.0 % 2.8 % Allstate Financial net investment income Interest-bearing excluding prepayment premiums $ 357 $ 361 $ 371 $ 386 $ 408 $ 413 $ 718 $ 821 Prepayment premiums 12 2 17 5 12 8 14 20 Total interest-bearing 369 363 388 391 420 421 732 841 Equity/owned 83 74 48 114 82 78 157 160 Less: Investment expenses (17) (18) (16) (14) (13) (15) (35) (28) Total 435 419 420 491 489 484 854 973 Less: prepayment premiums (12) (2) (17) (5) (12) (8) (14) (20) Total excluding prepayment premiums $ 423 $ 417 $ 403 $ 486 $ 477 $ 476 $ 840 $ 953 Allstate Financial interest-bearing pre-tax yield 4.6 % 4.6 % 4.8 % 4.8 % 5.1 % 5.1 % 4.6 % 5.1 % Allstate Financial interest-bearing pre-tax yield excluding prepayment premiums 4.5 % 4.5 % 4.6 % 4.7 % 4.9 % 5.0 % 4.5 % 5.0 % (1) Includes fixed income securities, mortgage loans, short-term and other investments. (2) Includes limited partnership interests, equity securities and real estate. (3) (4) 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 and cost method limited partnerships, divided by the average fair value balances. Quarterly pre-tax yield is calculated as annualized quarterly interest-bearing investment income, generally before investment expense divided by the average of the current and prior quarter interest-bearing investment balances. Year-to-date pre- tax yield is calculated as annualized year-to-date interest-bearing investment income, generally before investment expense divided by the average of interest-bearing investment balances at the beginning of the year and the end of each quarter during the year. For investments carried at fair value, investment balances exclude unrealized capital gains and losses. THE ALLSTATE CORPORATION INVESTMENT RESULTS ($ in millions) Six months endedThree months ended
56 June 30, 2016 Total Market-Based Core (1) Market-Based Active (2) Performance- Based Long-Term (3) Performance- Based Opportunistic (4) Fixed income securities $ 58,129 $ 50,788 $ 7,242 $ 64 $ 35 Equity securities 5,265 4,334 858 52 21 Mortgage loans 4,453 4,453 - - - Limited partnership interests 5,407 370 - 5,037 - Short-term investments 2,850 2,264 586 - - Other 3,590 2,902 157 505 26 Total $ 79,694 $ 65,111 $ 8,843 $ 5,658 $ 82 % of total 82% 11% 7% - Property-Liability $ 39,689 $ 28,826 $ 7,774 $ 3,034 $ 55 % of Property-Liability 73% 19% 8% - Allstate Financial $ 37,760 $ 34,040 $ 1,069 $ 2,624 $ 27 % of Allstate Financial 90% 3% 7% - Corporate & Other $ 2,245 $ 2,245 $ - $ - $ - % of Corporate & Other 100% - - - Unrealized net capital gains and losses $ 2,697 $ 2,550 $ 142 $ (1) $ 6 December 31, 2015 Total Market-Based Core (1) Market-Based Active (2) Performance- Based Long-Term (3) Performance- Based Opportunistic (4) Fixed income securities $ 57,948 $ 51,175 $ 6,691 $ 47 $ 35 Equity securities 5,082 4,210 764 77 31 Mortgage loans 4,338 4,338 - - - Limited partnership interests 4,874 364 - 4,510 - Short-term investments 2,122 1,631 491 - - Other 3,394 2,783 183 415 13 Total $ 77,758 $ 64,501 $ 8,129 $ 5,049 $ 79 % of total 83% 10% 7% - Property-Liability $ 38,479 $ 28,525 $ 7,137 $ 2,764 $ 53 % of Property-Liability 74% 19% 7% - Allstate Financial $ 36,792 $ 33,490 $ 992 $ 2,284 $ 26 % of Allstate Financial 91% 3% 6% - Corporate & Other $ 2,487 $ 2,486 $ - $ 1 $ - % of Corporate & Other 100% - - - (1) Market-based core is comprised primarily of highly diversified fixed income securities, mortgage loans and equity securities to align with business segment priorities. (2) Market-based active is comprised primarily of fixed income and equity securities to generate additional returns by taking advantage of market opportunities. (3) Performance-based long-term is comprised primarily of private equity and real estate investments to generate returns over an extended horizon. (4) Performance-based opportunistic primarily generates returns by taking advantage of asset dislocations and by selectively providing liquidity to distressed sellers. THE ALLSTATE CORPORATION INVESTMENT POSITION BY STRATEGY ($ in millions)
57 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Investment income Market-Based Core $ 595 $ 581 $ 614 $ 612 $ 640 $ 629 $ 1,176 $ 1,269 Market-Based Active 67 61 59 52 52 50 128 102 Performance-Based Long-Term 138 131 74 176 130 209 269 339 Performance-Based Opportunistic 3 2 2 2 3 2 5 5 Investment income, before expense 803 775 749 842 825 890 1,578 1,715 Investment expense (41) (44) (39) (35) (36) (40) (85) (76) Net investment income $ 762 $ 731 $ 710 $ 807 $ 789 $ 850 $ 1,493 $ 1,639 PBLT Asset level operating expense (1) $ (8) $ (8) $ (4) $ (4) $ (5) $ (6) $ (16) $ (11) Realized capital gains and losses Market-Based Core $ 13 $ (91) $ (153) $ 102 $ 63 $ 58 $ (78) $ 121 Market-Based Active 39 (47) (49) (63) 48 73 (8) 121 Performance-Based Long-Term (27) (11) (49) - (5) 8 (38) 3 Performance-Based Opportunistic (1) - 1 (6) 2 - (1) 2 Total $ 24 $ (149) $ (250) $ 33 $ 108 $ 139 $ (125) $ 247 (1) When calculating the pre-tax yields, asset level operating expenses are netted against income for directly held real estate, timber and other consolidated investments. THE ALLSTATE CORPORATION INVESTMENT RESULTS BY STRATEGY ($ in millions) Six months endedThree months ended
58 Total Market- Based Core Market- Based Active Performance- Based Long-Term Performance- Based Opportunistic Three months ended June 30, 2016 Investment income Fixed income securities $ 520 $ 461 $ 56 $ 1 $ 2 Equity securities 44 37 7 - - Mortgage loans 53 53 - - - Limited partnership interests 126 - - 126 - Short-term investments 3 2 1 - - Other 57 42 3 11 1 Investment income, before expense 803 $ 595 $ 67 $ 138 $ 3 Investment expense (41) Net investment income $ 762 Realized capital gains and losses Fixed income securities $ 24 $ (11) $ 36 $ - $ (1) Equity securities 11 13 9 (11) - Mortgage loans 1 1 - - - Limited partnership interests (13) 7 - (20) - Short-term investments - - - - - Other 1 3 (6) 4 - Total $ 24 $ 13 $ 39 $ (27) $ (1) Six months ended June 30, 2016 Investment income Fixed income securities $ 1,038 $ 922 $ 110 $ 2 $ 4 Equity securities 72 61 11 - - Mortgage loans 106 106 - - - Limited partnership interests 247 - - 247 - Short-term investments 7 5 2 - - Other 108 82 5 20 1 Investment income, before expense 1,578 $ 1,176 $ 128 $ 269 $ 5 Investment expense (85) Net investment income $ 1,493 Realized capital gains and losses Fixed income securities $ (47) $ (68) $ 23 $ - $ (2) Equity securities (79) (27) (18) (33) (1) Mortgage loans 1 1 - - - Limited partnership interests 13 20 - (7) - Short-term investments - - - - - Other (13) (4) (13) 2 2 Total $ (125) $ (78) $ (8) $ (38) $ (1) THE ALLSTATE CORPORATION INVESTMENT INCOME AND REALIZED CAPITAL GAINS AND LOSSES BY INVESTMENT TYPE AND STRATEGY ($ in millions)
59 June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, June 30, June 30, 2016 2016 2015 2015 2015 2015 2016 2015 Investment position Limited partnerships Private equity (1) $ 3,663 $ 3,324 $ 3,181 $ 3,131 $ 3,012 $ 2,969 $ 3,663 $ 3,012 Real estate (2) 1,204 1,229 1,166 1,160 1,164 1,366 1,204 1,164 Timber & agriculture-related (3) 170 170 163 151 - - 170 - PBLT - limited partnerships 5,037 4,723 4,510 4,442 4,176 4,335 5,037 4,176 Other (4) Private equity 97 103 71 93 70 67 97 70 Real estate 358 361 301 288 242 201 358 242 Timber & agriculture-related 166 167 167 167 167 168 166 167 PBLT - other 621 631 539 548 479 436 621 479 Total Private equity 3,760 3,427 3,252 3,224 3,082 3,036 3,760 3,082 Real estate 1,562 1,590 1,467 1,448 1,406 1,567 1,562 1,406 Timber & agriculture-related 336 337 330 318 167 168 336 167 Total PBLT $ 5,658 $ 5,354 $ 5,049 $ 4,990 $ 4,655 $ 4,771 $ 5,658 $ 4,655 Investment income Limited partnerships Private equity $ 113 $ 85 $ 47 $ 162 $ 113 $ 80 $ 198 $ 193 Real estate 12 33 20 5 10 123 45 133 Timber & agriculture-related 1 3 (1) - - - 4 - PBLT - limited partnerships 126 121 66 167 123 203 247 326 Other Private equity 1 - - 1 - - 1 - Real estate 8 8 6 7 5 4 16 9 Timber & agriculture-related 3 2 2 1 2 2 5 4 PBLT - other 12 10 8 9 7 6 22 13 Total Private equity 114 85 47 163 113 80 199 193 Real estate 20 41 26 12 15 127 61 142 Timber & agriculture-related 4 5 1 1 2 2 9 4 Total PBLT $ 138 $ 131 $ 74 $ 176 $ 130 $ 209 $ 269 $ 339 Asset level operating expense (5) $ (8) $ (8) $ (4) $ (4) $ (5) $ (6) $ (16) $ (11) Realized capital gains and losses Limited partnerships Private equity $ (20) $ 12 $ (49) $ (3) $ (3) $ 9 $ (8) $ 6 Real estate - 1 - (2) - (2) 1 (2) Timber & agriculture-related - - - - - - - - PBLT - limited partnerships (20) 13 (49) (5) (3) 7 (7) 4 Other Private equity (7) (25) 1 6 (1) - (32) (1) Real estate - 1 (1) (1) (1) - 1 (1) Timber & agriculture-related - - - - - 1 - 1 PBLT - other (7) (24) - 5 (2) 1 (31) (1) Total Private equity (27) (13) (48) 3 (4) 9 (40) 5 Real estate - 2 (1) (3) (1) (2) 2 (3) Timber & agriculture-related - - - - - 1 - 1 Total PBLT $ (27) $ (11) $ (49) $ - $ (5) $ 8 $ (38) $ 3 Pre-Tax Yield (6) 9.4 % 9.4 % 5.6 % 14.3 % 10.6 % 17.5 % 9.4 % 14.1 % Internal Rate of Return ("IRR") (7) 10.2 % 10.5 % 10.8 % 11.3 % 11.3 % 11.4 % (1) (2) (3) (4) (5) (6) (7) When calculating the pre-tax yields, asset level operating expenses are netted against income for directly held real estate, timber and other consolidated investments. Quarterly pre-tax yield is calculated as annualized quarterly PBLT investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of the current and prior quarter PBLT investment balances. Year-to-date pre-tax yield is calculated as annualized year-to-date PBLT investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of PBLT 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, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses. We calculate the internal rate of return (“IRR”) for our PBLT investments as an input to assess their performance. The IRR represents the rate of return on the investments considering the amount and timing of all associated cash flows, which may differ significantly from the recognition of income in the financial statements. Until an investment is liquidated, through final distribution or disposal, the IRR is an interim estimated return. Our IRR calculation method may differ from those used by other investors. Our PBLT portfolio is diversified by asset type and vintage year. We use IRR as a metric to evaluate the overall strategy’s performance relative to our long-term return expectations. The IRR calculation includes cash flows paid or received related to PBLT investments during the 10 year period ended as of the reporting date. Fluctuations in the timing and amount of cash invested in or distributed by the investments could have a significant impact on the IRR. Includes PBLT - fixed income securities, equity securities and other investments on page 56. Includes Timber and agriculture-related reflected in Private equity on page 50. Includes Real estate on page 50. Includes Private equity on page 50, excluding Timber and agriculture-related. THE ALLSTATE CORPORATION PERFORMANCE-BASED LONG-TERM INVESTMENTS ("PBLT") ($ in millions) As of or for the six months endedAs of or for the three months ended
60 Definitions of Non-GAAP Measures Operating income is net income applicable to common shareholders, excluding: - realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in operating income, - valuation changes on embedded derivatives that are not hedged, after-tax, - amortization of 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 that are not hedged, after-tax, - amortization of purchased intangible assets, after-tax, - gain (loss) on disposition of operations, after-tax, and - adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years. 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. Net income applicable to common shareholders is the GAAP measure that is most directly comparable to operating income. We use operating 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 services business that may be obscured by the net effect of realized capital gains and losses, valuation changes on embedded derivatives that are not hedged, 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, valuation changes on embedded derivatives that are 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, operating 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 operating 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. Amortization of purchased intangible assets is excluded because it relates to the acquisition purchase price and is not indicative of our underlying insurance business results or trends. Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Accordingly, operating 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 operating 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. Operating 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 operating income in incentive compensation. Therefore, we believe it is useful for investors to evaluate net income applicable to common shareholders, operating 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 operating 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 operating income as the denominator. Operating 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 operating income to net income applicable to common shareholders is provided in the schedule, "Contribution to Income". Underwriting income is calculated as premiums earned, less claims and claims expense (“losses”), amortization of DAC, operating costs and expenses and restructuring and related charges as determined using GAAP. Management uses this measure in its evaluation of the results of operations to analyze the profitability of our Property-Liability insurance operations separately from investment results. It is also an integral component of incentive compensation. It is useful for investors to evaluate the components of income separately and in the aggregate when reviewing performance. Net income applicable to common shareholders is the most directly comparable GAAP measure. Underwriting 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 Property- Liability underwriting income to net income applicable to common shareholders is provided in the schedule, "Property-Liability Results". Combined ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between two GAAP operating ratios: the combined ratio and the effect of catastrophes on the combined ratio. The most directly comparable GAAP measure is 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. 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. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. The combined ratio excluding the effect of catastrophes 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 combined ratio excluding the effect of catastrophes to combined ratio is provided in the schedule, "Property-Liability Results". Average underlying loss (incurred pure premium) and expense is calculated as the underlying combined ratio (a non-GAAP measure) multiplied by the GAAP quarterly earned premium, which is annualized (multiplied by 4) (“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. A reconciliation of average underlying loss and expense is provided in the schedule, "Allstate Brand Auto and Homeowners Underlying Loss and Expense". 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 "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics" and "Encompass Brand Profitability Measures and Statistics". 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. 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 "Allstate Brand Profitability Measures", "Esurance Brand Profitability Measures and Statistics", "Encompass Brand Profitability Measures and Statistics", "Auto, Homeowners and Other Personal Lines Underlying Combined Ratios", "Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures" and "Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures". Operating income return on common shareholders' equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating 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 operating income as the numerator for the same reasons we use operating 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 operating 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 operating income return on common shareholders' equity in incentive compensation. Therefore, we believe it is useful for investors to have operating 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 operating 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. Operating 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 operating income return on common shareholders' equity can be found in the schedule, "Return on Common Shareholders' Equity". 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".