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Submitted by: Owen D
Allstate Corporation (ALL) announced their fourth quarter net income for 2009 at $518 million, or about 96 cents a share. That is a big improvement from the fourth quarter of 2008 where Allstate had a net loss of $1.13 billion, which equated to a loss of $2.10 a share. Operating earnings were $592 million, or $1.09 a share. Operating earnings exclude net realized investment gains and losses and Allstate was expected to make $1.01 a share. The combined ratio, which measures claims and expenses as a percentage of premiums, was 88.1 in the fourth quarter of 2009. This ratio is a closely watched measure of an insurers underwriting performance. Allstate announced than in 2010 this ration will likely be between 88 and 90. Allstate-brand standard auto insurance premiums written climbed less than 1% in the fourth quarter or 2009. Average auto insurance premiums rose 2.6% while the number of policies declined 1%. Net investment income during Q4 2009 was $1.1 billion, $253 millions less than in the fourth quarter of 2008. Total revenues for the fourth quarter of 2009 were $8.1 billion, an increase of 22.7% compared to the fourth quarter of 2008. This reflected lower realized capital losses, which decrease revenues, than the prior year quarter. Partially offsetting this were decreases in net investment income of 19.0% and property-liability premiums of 2.3%. Allstates fourth quarter 2009 net income was $518 million compared to a net loss of $1.1 billion in the fourth quarter of 2008 due to lower realized capital losses and improved operating income. Operating income was $592 million in the fourth quarter of 2009 compared to $518 million in the same period of 2008, reflecting improved results in both Property-Liability and Allstate Financial.
Total 2009 revenues were $32.0 billion, an increase of 8.9% compared to 2008. Net income totaled $854 million in 2009 compared to a net loss of $1.7 billion in 2008. Revenue and net income increases during 2009 were due to lower realized capital losses. Operating income increased 7.0% during 2009 to $1.9 billion due to an increase in the Property-Liability business, partly offset by lower operating income in Allstate Financial.
Allstate remains focused on returning Allstate Financial to profitable growth through its Focus to Win restructuring program. During 2009, actions included reducing expenses, shifting fixed costs to variable, and targeting higher product returns. Expense savings initiatives during 2009 delivered approximately 90% of the target of $90 million in annual cost savings.
Pricing actions to produce higher returns and reduce concentrations in products with profits tied to investment performance contributed to a 25.8% decrease in premiums and deposits* in the fourth quarter of 2009 versus the same period of 2008. Premiums and deposits on life products increased 7.2% during the fourth quarter of 2009 when compared to the prior year quarter.
Allstate Financials operating income was $95 million in the fourth quarter of 2009. This represented a 6.7% increase from $89 million in the fourth quarter of 2008, primarily due to lower amortization of deferred policy acquisition costs (DAC) and reduced operating expenses, partly offset by lower benefit and investment spreads. The decline in DAC amortization was due to lower investment spreads and a lower amortization rate due to updated assumptions for fixed annuities. Operating expenses decreased 26.6% to $105 million in the fourth quarter of 2009 from $143 million in the same period of 2008, in part reflecting substantial progress made through Focus to Win. The benefit spread declined 30.1% from the prior year quarter to $100 million due to higher mortality experience and non-recurring benefit costs. The investment spread declined 23.0% from the prior year quarter to $107 million due to lower net investment income, partly offset by lower interest credited on contractholder funds.
The strong rebound in equities and corporate bonds relieved a lot of the pressure on Allstate that existed as a result of investment losses during the 2008 financial crisis. There will still be challenges for Allstate in 2010, including a still sluggish economy and lower investment income. Ultimately shares of Allstate climbed 0.7% in after hours trading following this announcement, rising to $28.80.
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