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Allstate Increases Profits and Growth

August 1, 2018

NORTHBROOK, Ill.--(BUSINESS WIRE)--Aug 1, 2018--The Allstate Corporation (NYSE: ALL) today reported financial results for the second quarter of 2018.

* Measures used in this release that are not based on accounting principles generally accepted in the United States of America (“non-GAAP”) are denoted with an asterisk and defined and reconciled to the most directly comparable GAAP measure in the “Definitions of Non-GAAP Measures” section of this document.

“Allstate’s businesses continue to deliver excellent results, growth is accelerating and we are on pace to achieve 2018’s operating priorities,” said Tom Wilson, Chairman, President and Chief Executive Officer of The Allstate Corporation. “Net income increased to $637 million in the second quarter of 2018 and return on equity was 17.0% for the latest twelve months. Revenues rose to $10.1 billion for the quarter, reflecting higher average premiums and increased policies in force. Better serving customers increased the net promoter score for most businesses which, when combined with higher new business levels, supported policy growth for the Allstate and Esurance Property-Liability businesses, SquareTrade and Allstate Benefits. Increased profitability reflected operational excellence, a decline in auto accident frequency and lower catastrophe losses. We are improving our underlying combined ratio* outlook range by one point to 85 to 87 (1) for the full year 2018,” said Wilson.

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(1) A reconciliation of this non-GAAP measure to the combined ratio, a GAAP measure, is not possible on a forward-looking basis because it is not possible to provide a reliable forecast of catastrophes, and prior year reserve reestimates are expected to be zero because reserves are determined based on our best estimate of ultimate loss reserves as of the reporting date.

“The strategy to deliver differentiated products to consumers by leveraging our brands, customer base, technology and capital is also on track. The Allstate brand is a leader in using technology and analytics to offer telematics based auto insurance and settle claims. Esurance is doing the same and has successfully expanded into homeowners insurance. SquareTrade is on pace with its acquisition milestones and added 13.2 million policies in twelve months. While investment income is down slightly in the quarter, this reflects very strong performance-based returns last year. Allstate’s Life, Benefits and Annuities businesses are on track to meet their goals. Shareholders have also benefited from cash returns of almost three-quarters of a billion dollars in the quarter through dividends and share repurchases,” concluded Wilson.

Second Quarter 2018 Results

Total revenue of $10.1 billion in the second quarter of 2018 increased 2.9% compared to the prior year quarter. Property and casualty insurance premiums earned increased 5.5%. Life premiums and contract charges increased 3.6%. Net investment income decreased 8.1%. Realized capital losses reduced revenues by $25 million, compared to gains which generated $81 million of revenue in the prior year quarter. Net income applicable to common shareholders was $637 million, or $1.80 per diluted share, in the second quarter of 2018, compared to $550 million, or $1.49 per diluted share, in the second quarter of 2017. Adjusted net income* was $675 million in the second quarter of 2018, compared to $510 million in the second quarter of 2017, driven by higher premiums earned, lower catastrophe losses, higher favorable prior year reserve releases and a lower U.S. tax rate, partially offset by lower net investment income. Property-Liability underwriting income of $416 million was $151 million better than the prior year quarter. Increased premiums earned, lower catastrophe losses, lower auto insurance claim frequency and higher favorable non-catastrophe prior year reserve reestimates were partially offset by higher claim severity and operating expenses. The underlying combined ratio* of 85.5 for the second quarter of 2018 was 0.6 points higher than the prior year quarter due to increased expenses, primarily related to compensation linked to operating performance. The underlying loss ratio* of 60.2 in the second quarter was essentially flat to the prior year quarter. Second quarter results were better than the annual outlook range of 86 to 88 as auto insurance profitability was favorably impacted by a continued reduction in accident frequency. Given the positive first half 2018 performance, the underlying combined ratio* is now expected to be within 85 to 87 for the full year of 2018. Non-catastrophe prior year reserve releases of $135 million in the second quarter of 2018 included continued favorable personal lines auto injury coverages development and better than anticipated salvage and subrogation recoveries, partially offset by strengthening in our commercial business. Allstate brand auto insurance net written premium grew 5.8% in the second quarter of 2018, reflecting a 4.0% increase in average premium and a 1.3% increase in policies in force. Growth in policies in force was driven by continued improvement in the renewal ratio and higher new issued applications. The recorded combined ratio of 93.0 in the second quarter of 2018 was 2.6 points better than the prior year quarter, due to increased premiums earned, lower catastrophe losses and a broad-based decline in accident frequency, partially offset by higher severity and expenses, primarily related to agency and employee compensation costs. The underlying combined ratio* of 92.8 in the quarter was 0.2 points higher than the prior year quarter. Allstate brand homeowners insurance net written premium increased 5.5% in the second quarter of 2018 compared to the prior year quarter, due to increased average premium and policy growth. Policies in force increased 0.8% compared to the prior year quarter, driven by improvement in the renewal ratio and increased new issued applications. The recorded combined ratio was 98.3 in the second quarter of 2018, and the underlying combined ratio* of 63.3 was 3.5 points higher than the prior year quarter, mainly driven by adverse non-catastrophe weather and increased expenses. Allstate brand other personal lines insurance net written premium of $475 million increased 7.7% in the second quarter of 2018 compared to the prior year quarter. The recorded combined ratio of 86.6 was 4.2 points better than the prior year quarter, primarily driven by lower catastrophe losses. The underlying combined ratio* of 77.3 in the second quarter of 2018 was 0.2 points higher than the prior year period, primarily due to higher underlying loss costs partially offset by increased earned premium. Esurance net written premium grew 12.5% compared to the prior year quarter, reflecting increased average premium in auto and homeowners insurance, and a 4.1% increase in total policies in force. Auto policies in force increased 3.2% due to higher retention and new issued applications. The recorded combined ratio of 101.9 in the second quarter of 2018 was 4.2 points better than the prior year quarter, due to improvement in both the loss and expense ratios. The underlying combined ratio* of 95.9 was 4.6 points better than the prior year quarter, as both auto and homeowners insurance results improved. Encompass net written premium declined 3.5% in the second quarter of 2018 compared to the prior year quarter, reflecting the continued execution of profit improvement plans. The recorded combined ratio of 98.4 in the second quarter of 2018 was 6.0 points better than the prior year quarter, due to lower catastrophe losses and reduced auto insurance claim frequency, partially offset by a higher expense ratio related to technology initiatives and lower premiums. The underlying combined ratio* of 85.5 for the second quarter was 2.1 points better than the prior year quarter as the improvement in the underlying loss ratio more than offset a higher expense ratio. Service Businesses policies in force grew to 49.1 million, an increase of 13.0 million compared to the prior year quarter, driven by SquareTrade. Adjusted net income of $1 million in the second quarter of 2018 was $9 million better than the second quarter of 2017, due to improved loss experience at SquareTrade and Allstate Dealer Services.

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