The Allstate Corporation

This is our first report on one of the largest insurance companies, the Allstate Corporation. The company had a mediocre quarterly result and saw a 26% year-over-year increase in total revenues, totaling $13.8 billion. This was fueled by a rise in premiums, investment income, and realized capital gains, with total premiums showing a 9% year-over-year growth to reach $12.5 billion, driven by growth across all segments, especially the auto insurance segment which grew 11% year over year. Allstate’s investment income also escalated by 29% year over year to $1 billion, thanks to higher returns on its investment portfolio, and realized capital gains saw a significant 82% year-over-year increment to $1.1 billion due to the recovery in the financial markets. Further, Allstate’s underwriting income enjoyed a 36% year-over-year increase, reaching $1.2 billion, a result of improved combined ratio which fell to 90.4% from 93.1% a year ago, suggesting a lower loss ratio and expense ratio. Specifically, the loss ratio improved to 63.8% from 66.5% a year ago due to lower catastrophe losses and reduced frequency of auto accidents. Meanwhile, the expense ratio remained stable at 26.6% year over year, indicating lower operating costs attributed to efficiency initiatives. We initiate coverage on the stock of The Allstate Corporation with a ‘Hold’ rating.