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 First 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 Property-Liability Operations Property-Liability Results 10 Underwriting Results by Area of Business 11 Property-Liability Premiums Written by Brand 12 Impact of Net Rate Changes Approved on Premiums Written 13 Policies in Force and Other Statistics 14 Allstate Brand Profitability Measures 15 Allstate Brand Statistics 16 Allstate Brand Auto Claim Frequency Analysis 17,18 Esurance Brand Profitability Measures and Statistics 19 Encompass Brand Profitability Measures and Statistics 20 Auto Profitability Measures 21 Homeowners Profitability Measures 22 Other Personal Lines Profitability Measures 23 Commercial Lines Profitability Measures 24 Other Business Lines Profitability Measures 25 Auto, Homeowners and Other Personal Lines Underlying Combined Ratios 26 Allstate Brand Auto and Homeowners Underlying Loss and Expense 27 Homeowners Supplemental Information 28 Catastrophe Losses by Brand 29 Effect of Catastrophe Losses on the Combined Ratio 30 Catastrophe by Size of Event 31 Prior Year Reserve Reestimates 32 Asbestos and Environmental Reserves 33 Allstate Personal Lines - Auto, Homeowners, Other Personal Lines and Commercial Lines Profitability Measures 34 Emerging Businesses - Esurance, Encompass, Other Business Lines, and Answer Financial Profitability Measures 35 Allstate Financial Operations Allstate Financial Results 36 Return on Attributed Equity 37 Allstate Financial Premiums and Contract Charges 38 Allstate Financial Change in Contractholder Funds 39 Allstate Financial Analysis of Net Income 40 Allstate Financial Weighted Average Investment Spreads 41 Allstate Financial Supplemental Product Information 42 Allstate Financial Insurance Policies and Annuities in Force 43 Allstate Life, Allstate Annuities and Allstate Benefits Results and Product Information 44 Corporate and Other Results 45 Investments Investments 46 Limited Partnership Investments 47 Unrealized Net Capital Gains and Losses on Security Portfolio by Type 48 Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 49 Property-Liability Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 50 Allstate Financial Net Investment Income, Yields and Realized Capital Gains and Losses (Pre-tax) 51 Investment Results 52 Investment Position by Strategy 53 Investment Results by Strategy 54 Performance-Based Long-Term Investments 55 Definitions of Non-GAAP Measures 56 THE ALLSTATE CORPORATION Investor Supplement - First Quarter 2016 Table of Contents
1 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Revenues Property-liability insurance premiums $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 Life and annuity premiums and contract charges 566 547 538 536 537 Net investment income 731 710 807 789 850 Realized capital gains and losses: Total other-than-temporary impairment ("OTTI") losses (91) (166) (186) (47) (53) OTTI losses reclassified to (from) other comprehensive income 10 16 12 4 4 Net OTTI losses recognized in earnings (81) (150) (174) (43) (49) Sales and other realized capital gains and losses (68) (100) 207 151 188 Total realized capital gains and losses (149) (250) 33 108 139 Total revenues 8,871 8,691 9,028 8,982 8,952 Costs and expenses Property-liability insurance claims and claims expense 5,684 5,199 5,255 5,587 4,993 Life and annuity contract benefits 455 456 460 446 441 Interest credited to contractholder funds 190 183 194 185 199 Amortization of deferred policy acquisition costs 1,129 1,116 1,092 1,086 1,070 Operating costs and expenses 982 938 992 1,061 1,090 Restructuring and related charges 5 7 9 19 4 Interest expense 73 73 73 73 73 Total costs and expenses 8,518 7,972 8,075 8,457 7,870 Gain (loss) on disposition of operations 2 1 2 1 (1) Income from operations before income tax expense 355 720 955 526 1,081 Income tax expense 109 231 305 171 404 Net income $ 246 $ 489 $ 650 $ 355 $ 677 Preferred stock dividends 29 29 29 29 29 Net income applicable to common shareholders $ 217 $ 460 $ 621 $ 326 $ 648 Earnings per common share: Net income applicable to common shareholders per common share - Basic $ 0.57 $ 1.19 $ 1.56 $ 0.80 $ 1.56 Weighted average common shares - Basic 378.1 385.0 397.0 407.0 415.8 Net income applicable to common shareholders per common share - Diluted $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 Weighted average common shares - Diluted 382.9 390.2 402.1 412.6 422.6 Cash dividends declared per common share $ 0.33 $ 0.30 $ 0.30 $ 0.30 $ 0.30 THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS ($ in millions, except per share data) Three months ended
2 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Contribution to income Operating income before the impact of restructuring and related charges $ 325 $ 629 $ 616 $ 274 $ 619 Restructuring and related charges, after-tax (3) (4) (6) (12) (3) Operating income * 322 625 610 262 616 Realized capital gains and losses, after-tax (96) (161) 21 69 90 Valuation changes on embedded derivatives that are not hedged, after-tax (4) 2 (2) 4 (5) 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) (2) - Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax 1 1 - - 1 Amortization of purchased intangible assets, after-tax (6) (8) (8) (8) (8) Gain (loss) on disposition of operations, after-tax 1 1 1 1 (1) Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (45) Net income applicable to common shareholders $ 217 $ 460 $ 621 $ 326 $ 648 Income per common share - Diluted Operating income before the impact of restructuring and related charges $ 0.85 $ 1.61 $ 1.53 $ 0.66 $ 1.46 Restructuring and related charges, after-tax (0.01) (0.01) (0.01) (0.03) - Operating income 0.84 1.60 1.52 0.63 1.46 Realized capital gains and losses, after-tax (0.25) (0.41) 0.05 0.17 0.21 Valuation changes on embedded derivatives that are not hedged, after-tax (0.01) 0.01 (0.01) 0.01 (0.01) 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) (0.02) (0.02) (0.02) (0.02) Gain (loss) on disposition of operations, after-tax - - - - - Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (0.11) Net income applicable to common shareholders $ 0.57 $ 1.18 $ 1.54 $ 0.79 $ 1.53 Weighted average common shares - Diluted 382.9 390.2 402.1 412.6 422.6 THE ALLSTATE CORPORATION CONTRIBUTION TO INCOME ($ in millions, except per share data) Three months ended
3 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Property-Liability Property-Liability insurance premiums $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 Net investment income 302 280 307 292 358 Realized capital gains and losses (99) (153) (161) 49 28 Total Property-Liability revenues 7,926 7,811 7,796 7,890 7,812 Allstate Financial Life and annuity premiums and contract charges 566 547 538 536 537 Net investment income 419 420 491 489 484 Realized capital gains and losses (49) (97) 194 59 111 Total Allstate Financial revenues 936 870 1,223 1,084 1,132 Corporate and Other Service fees (1) 1 1 - 1 1 Net investment income 10 10 9 8 8 Realized capital gains and losses (1) - - - - Total Corporate and Other revenues before reclassification of services fees 10 11 9 9 9 Reclassification of service fees (1) (1) (1) - (1) (1) Total Corporate and Other revenues 9 10 9 8 8 Consolidated revenues $ 8,871 $ 8,691 $ 9,028 $ 8,982 $ 8,952 (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) Three months ended
4 March 31, Dec. 31, Sept. 30, June 30, March 31, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 2016 2015 2015 2015 2015 Assets Liabilities Investments Reserve for property-liability insurance claims and claims expense $ 24,605 $ 23,869 $ 23,757 $ 23,702 $ 23,103 Fixed income securities, at fair value Reserve for life-contingent contract benefits 12,224 12,247 12,229 12,227 12,318 (amortized cost $55,627, $57,201, Contractholder funds 21,092 21,295 21,559 21,968 22,267 $56,918, $57,971 and $58,235) $ 57,291 $ 57,948 $ 58,257 $ 59,930 $ 61,403 Unearned premiums 12,036 12,202 12,343 11,858 11,489 Equity securities, at fair value Claim payments outstanding 852 842 804 820 796 (cost $4,792, $4,806, $4,123, Deferred income taxes 479 90 243 475 779 $3,649 and $3,752) 5,117 5,082 4,236 4,000 4,166 Other liabilities and accrued expenses 5,704 5,304 5,558 5,462 5,635 Mortgage loans 4,302 4,338 4,402 4,343 4,276 Long-Term Debt 5,108 5,124 5,123 5,133 5,140 Limited partnership interests 5,091 4,874 4,823 4,536 4,699 Separate Accounts 3,507 3,658 3,677 4,121 4,304 Short-term, at fair value Total liabilities 85,607 84,631 85,293 85,766 85,831 (amortized cost $3,526, $2,122, $3,036, $2,821 and $2,497) 3,526 2,122 3,036 2,821 2,497 Other 3,550 3,394 3,588 3,511 3,396 Total investments 78,877 77,758 78,342 79,141 80,437 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, 375 million, 381 million, 390 million, 402 million and 409 million shares outstanding 9 9 9 9 9 Additional capital paid-in 3,237 3,245 3,224 3,205 3,109 Retained income 39,505 39,413 39,068 38,567 38,363 Deferred ESOP expense (13) (13) (23) (23) (23) Treasury stock, at cost (525 million, 519 million, 510 million, 498 million and 491 million shares) (23,994) (23,620) (23,058) (22,273) (21,799) 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 31 56 57 62 71 Cash 531 495 905 805 916 Other unrealized net capital gains and losses 1,259 608 886 1,435 2,255 Premium installment receivables, net 5,558 5,544 5,711 5,599 5,502 Unrealized adjustment to DAC, DSI and insurance Deferred policy acquisition costs 3,807 3,861 3,811 3,708 3,527 reserves (90) (44) (64) (78) (189) Reinsurance recoverables, net (1) 8,573 8,518 8,468 8,520 8,408 Total unrealized net capital gains and losses 1,200 620 879 1,419 2,137 Accrued investment income 567 569 575 610 597 Unrealized foreign currency translation Property and equipment, net 1,011 1,024 1,050 1,038 1,026 adjustments (46) (60) (52) (38) (29) Goodwill 1,219 1,219 1,219 1,219 1,219 Unrecognized pension and other Other assets 2,297 2,010 2,039 2,303 2,074 postretirement benefit cost (1,304) (1,315) (1,289) (1,314) (1,334) Separate Accounts 3,507 3,658 3,677 4,121 4,304 Total accumulated other comprehensive (loss) income (150) (755) (462) 67 774 Total shareholders' equity 20,340 20,025 20,504 21,298 22,179 Total assets $ 105,947 $ 104,656 $ 105,797 $ 107,064 $ 108,010 Total liabilities and shareholders' equity $ 105,947 $ 104,656 $ 105,797 $ 107,064 $ 108,010 (1) THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in millions) Reinsurance recoverables of unpaid losses related to Property-Liability were $5.96 billion, $5.89 billion, $5.85 billion, $5.85 billion and $5.72 billion as of March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.
5 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Book value per common share Numerator: Common shareholders' equity (1) $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433 Denominator: Common shares outstanding and dilutive potential common shares outstanding 380.3 386.1 394.6 407.7 415.4 Book value per common share $ 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 $ 18,594 $ 18,279 $ 18,758 $ 19,552 $ 20,433 Unrealized net capital gains and losses on fixed income securities 993 443 807 1,196 1,871 Adjusted common shareholders' equity $ 17,601 $ 17,836 $ 17,951 $ 18,356 $ 18,562 Denominator: Common shares outstanding and dilutive potential common shares outstanding 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 $ 46.28 $ 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 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Return on Common Shareholders' Equity Numerator: Net income applicable to common shareholders (1) $ 1,624 $ 2,055 $ 2,390 $ 2,519 $ 2,807 Denominator: Beginning common shareholders' equity $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Ending common shareholders' equity 18,594 18,279 18,758 19,552 20,433 Average common shareholders' equity (2) $ 19,514 $ 19,419 $ 19,671 $ 20,339 $ 20,517 Return on common shareholders' equity 8.3 % 10.6 % 12.2 % 12.4 % 13.7 % Operating Income Return on Common Shareholders' Equity * Numerator: Operating income (1) $ 1,819 $ 2,113 $ 2,224 $ 2,212 $ 2,395 Denominator: Beginning common shareholders' equity $ 20,433 $ 20,558 $ 20,583 $ 21,126 $ 20,600 Unrealized net capital gains and losses 2,137 1,926 1,827 2,150 2,091 Adjusted beginning common shareholders' equity 18,296 18,632 18,756 18,976 18,509 Ending common shareholders' equity 18,594 18,279 18,758 19,552 20,433 Unrealized net capital gains and losses 1,200 620 879 1,419 2,137 Adjusted ending common shareholders' equity 17,394 17,659 17,879 18,133 18,296 Average adjusted common shareholders' equity (2) $ 17,845 $ 18,146 $ 18,318 $ 18,555 $ 18,403 Operating income return on common shareholders' equity 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 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Debt Short-term debt $ - $ - $ - $ - $ - Long-term debt 5,108 5,124 5,123 5,133 5,140 Total debt $ 5,108 $ 5,124 $ 5,123 $ 5,133 $ 5,140 Capital resources Debt $ 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 Common stock 9 9 9 9 9 Additional capital paid-in 3,237 3,245 3,224 3,205 3,109 Retained income 39,505 39,413 39,068 38,567 38,363 Deferred ESOP expense (13) (13) (23) (23) (23) Treasury stock (23,994) (23,620) (23,058) (22,273) (21,799) Unrealized net capital gains and losses 1,200 620 879 1,419 2,137 Unrealized foreign currency translation adjustments (46) (60) (52) (38) (29) Unrecognized pension and other postretirement benefit cost (1,304) (1,315) (1,289) (1,314) (1,334) Total shareholders' equity 20,340 20,025 20,504 21,298 22,179 Total capital resources $ 25,448 $ 25,149 $ 25,627 $ 26,431 $ 27,319 Ratio of debt to shareholders' equity 25.1 % 25.6 % 25.0 % 24.1 % 23.2 % Ratio of debt to capital resources 20.1 % 20.4 % 20.0 % 19.4 % 18.8 % THE ALLSTATE CORPORATION DEBT TO CAPITAL ($ in millions)
8 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 246 $ 489 $ 650 $ 355 $ 677 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 91 96 96 92 87 Realized capital gains and losses 149 250 (33) (108) (139) (Gain) loss on disposition of operations (2) (1) (2) (1) 1 Interest credited to contractholder funds 190 183 194 185 199 Changes in: Policy benefits and other insurance reserves 459 (27) (26) 411 115 Unearned premiums (205) (124) 518 361 (117) Deferred policy acquisition costs (7) (20) (87) (97) (35) Premium installment receivables, net 11 156 (132) (92) (66) Reinsurance recoverables, net (40) (45) 11 (120) (24) Income taxes (26) (59) 223 (342) 59 Other operating assets and liabilities (152) 32 (29) 93 (191) Net cash provided by operating activities 714 930 1,383 737 566 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales Fixed income securities 6,216 5,897 6,784 6,559 9,453 Equity securities 1,664 1,066 614 922 1,152 Limited partnership interests 180 306 204 295 296 Mortgage loans 7 - 6 - - Other investments 87 367 46 85 47 Investment collections Fixed income securities 949 1,184 1,005 1,030 1,213 Mortgage loans 79 233 (52) 243 114 Other investments 43 39 77 117 60 Investment purchases Fixed income securities (5,401) (7,830) (6,446) (7,272) (9,210) Equity securities (1,733) (1,722) (1,318) (748) (1,172) Limited partnership interests (270) (413) (367) (198) (365) Mortgage loans (44) (163) (15) (307) (202) Other investments (253) (159) (225) (325) (193) Change in short-term investments, net (1,357) 962 (186) (328) (63) Change in other investments, net (19) (36) - (18) 2 Purchases of property and equipment, net (52) (84) (86) (74) (59) Net cash provided by (used in) investing activities 96 (353) 41 (19) 1,073 CASH FLOWS FROM FINANCING ACTIVITIES Repayments of long-term debt (16) - (11) (9) - Contractholder fund deposits 261 268 257 266 261 Contractholder fund withdrawals (492) (534) (641) (580) (572) Dividends paid on common stock (115) (118) (122) (125) (118) Dividends paid on preferred stock (29) (29) (29) (29) (29) Treasury stock purchases (456) (592) (792) (414) (1,010) Shares reissued under equity incentive plans, net 30 9 12 45 64 Excess tax benefits on share-based payment arrangements 12 1 1 17 26 Other 31 8 1 - (2) Net cash used in financing activities (774) (987) (1,324) (829) (1,380) NET INCREASE (DECREASE) IN CASH 36 (410) 100 (111) 259 CASH AT BEGINNING OF PERIOD 495 905 805 916 657 CASH AT END OF PERIOD $ 531 $ 495 $ 905 $ 805 $ 916 THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW ($ in millions) Three months ended
9 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 Mar. 31, 2016 and losses and losses and losses Property-Liability $ 2,029 $ 1,068 $ (1,056) $ - $ - $ - $ 2,041 $ 2,041 $ - $ 2,041 Allstate Financial: Traditional life and accident and health 792 46 (42) - - - 796 796 - 796 Interest-sensitive life 993 26 (28) (2) - (65) 924 1,055 (131) 924 Fixed annuity 47 - (1) - - - 46 46 - 46 Subtotal 1,832 72 (71) (2) - (65) 1,766 1,897 (131) 1,766 Consolidated $ 3,861 $ 1,140 $ (1,127) $ (2) $ - $ (65) $ 3,807 $ 3,938 $ (131) $ 3,807 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 Mar. 31, 2015 and losses and losses and losses Property-Liability $ 1,820 $ 1,032 $ (1,000) $ - $ - $ - $ 1,852 $ 1,852 $ - $ 1,852 Allstate Financial: Traditional life and accident and health 753 44 (40) - - - 757 757 - 757 Interest-sensitive life 905 26 (28) (2) - (27) 874 1,066 (192) 874 Fixed annuity 47 - (1) 1 - (3) 44 52 (8) 44 Subtotal 1,705 70 (69) (1) - (30) 1,675 1,875 (200) 1,675 Consolidated $ 3,525 $ 1,102 $ (1,069) $ (1) $ - $ (30) $ 3,527 $ 3,727 $ (200) $ 3,527 (1) (2) Included as a component of amortization of DAC on the Consolidated Statements of Operations. THE ALLSTATE CORPORATION ANALYSIS OF DEFERRED POLICY ACQUISITION COSTS ($ in millions) 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. Change in Deferred Policy Acquisition Costs Reconciliation of Deferred Policy For the three months ended March 31, 2016 Acquisition Costs as of March 31, 2016 Change in Deferred Policy Acquisition Costs For the three months ended March 31, 2015 Reconciliation of Deferred Policy Acquisition Costs as of March 31, 2015
10 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Premiums written $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 Decrease (increase) in unearned premiums 166 140 (485) (370) 166 Other 42 (7) (2) 42 (46) Premiums earned 7,723 7,684 7,650 7,549 7,426 Claims and claims expense (5,684) (5,199) (5,255) (5,587) (4,993) Amortization of deferred policy acquisition costs (1,056) (1,052) (1,029) (1,021) (1,000) Operating costs and expenses (853) (812) (867) (934) (962) Restructuring and related charges (5) (10) (8) (17) (4) Underwriting income (loss) * 125 611 491 (10) 467 Net investment income 302 280 307 292 358 Periodic settlements and accruals on non-hedge derivative instruments (1) (1) (1) - (1) Amortization of purchased intangible assets 9 13 12 13 12 Income tax expense on operations (144) (304) (259) (97) (281) Operating income 291 599 550 198 555 Realized capital gains and losses, after-tax (64) (99) (104) 31 18 Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax 1 1 - - 1 Amortization of purchased intangible assets, after-tax (6) (8) (8) (8) (8) (Loss) gain on disposition of operations, after-tax - - (1) 1 - Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (28) Net income applicable to common shareholders $ 222 $ 493 $ 437 $ 222 $ 538 Catastrophe losses $ 827 $ 358 $ 270 $ 797 $ 294 Operating ratios Claims and claims expense ("loss") ratio 73.6 67.6 68.7 74.0 67.2 Expense ratio 24.8 24.4 24.9 26.1 26.5 Combined ratio 98.4 92.0 93.6 100.1 93.7 Combined ratio excluding the effect of catastrophes * 87.7 87.3 90.1 89.5 89.7 Effect of catastrophe losses on combined ratio 10.7 4.7 3.5 10.6 4.0 Combined ratio 98.4 92.0 93.6 100.1 93.7 Underlying loss ratio * 62.5 63.1 64.6 63.2 62.6 Expense ratio, excluding the effect of amortization of purchased intangible assets 24.7 24.3 24.7 25.9 26.4 Underlying combined ratio 87.2 87.4 89.3 89.1 89.0 Combined ratio excluding the effect of catastrophes, prior year reserve reestimates and amortization of purchased intangible assets ("underlying combined ratio") * 87.2 87.4 89.3 89.1 89.0 Effect of catastrophe losses on combined ratio 10.7 4.7 3.5 10.6 4.0 Effect of prior year reserve reestimates on combined ratio 0.3 (0.4) 0.6 0.3 0.5 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio 0.1 0.2 - (0.1) 0.1 Effect of amortization of purchased intangible assets on combined ratio 0.1 0.1 0.2 0.2 0.1 Combined ratio 98.4 92.0 93.6 100.1 93.7 Effect of restructuring and related charges on combined ratio 0.1 0.1 0.1 0.2 0.1 Effect of Discontinued Lines and Coverages on combined ratio - - 0.7 - - THE ALLSTATE CORPORATION PROPERTY-LIABILITY RESULTS ($ in millions) Three months ended
11 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Property-Liability Underwriting Summary Allstate Protection $ 127 $ 613 $ 540 $ (8) $ 469 Discontinued Lines and Coverages (2) (2) (49) (2) (2) Underwriting income (loss) $ 125 $ 611 $ 491 $ (10) $ 467 Allstate Protection Underwriting Summary Premiums written $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 Premiums earned $ 7,723 $ 7,684 $ 7,650 $ 7,549 $ 7,426 Claims and claims expense (5,683) (5,197) (5,207) (5,585) (4,992) Amortization of deferred policy acquisition costs (1,056) (1,052) (1,029) (1,021) (1,000) Operating costs and expenses (852) (812) (866) (934) (961) Restructuring and related charges (5) (10) (8) (17) (4) Underwriting income (loss) $ 127 $ 613 $ 540 $ (8) $ 469 Catastrophe losses $ 827 $ 358 $ 270 $ 797 $ 294 Operating ratios Loss ratio 73.6 67.6 68.0 74.0 67.2 Expense ratio 24.8 24.4 24.9 26.1 26.5 Combined ratio 98.4 92.0 92.9 100.1 93.7 Effect of catastrophe losses on combined ratio 10.7 4.7 3.5 10.6 4.0 Effect of restructuring and related charges on combined ratio 0.1 0.1 0.1 0.2 0.1 Effect of amortization of purchased intangible assets on combined ratio 0.1 0.1 0.2 0.2 0.1 Discontinued Lines and Coverages Underwriting Summary Premiums written $ - $ - $ - $ - $ - Premiums earned $ - $ - $ - $ - $ - Claims and claims expense (1) (2) (48) (2) (1) Operating costs and expenses (1) - (1) - (1) Underwriting loss $ (2) $ (2) $ (49) $ (2) $ (2) Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio 0.1 - 0.7 - - Underwriting Income (Loss) by Brand Allstate brand $ 171 $ 629 $ 571 $ 86 $ 526 Esurance brand (25) (28) (26) (41) (69) Encompass brand (18) 14 (4) (50) 14 Answer Financial (1) (2) (1) (3) (2) Underwriting income (loss) $ 127 $ 613 $ 540 $ (8) $ 469 THE ALLSTATE CORPORATION PROPERTY-LIABILITY UNDERWRITING RESULTS BY AREA OF BUSINESS ($ in millions) Three months ended
12 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Allstate brand (1) Auto (2) $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 Homeowners (3) 1,392 1,634 1,879 1,819 1,379 Other personal lines 353 376 429 424 357 Commercial lines 126 126 124 138 128 Other business lines 183 168 205 199 184 6,800 6,880 7,383 7,168 6,583 Esurance brand Auto 439 368 411 363 434 Homeowners 11 9 9 7 5 Other personal lines 2 1 3 1 2 452 378 423 371 441 Encompass brand Auto 138 152 169 173 147 Homeowners 104 116 134 136 111 Other personal lines 21 25 28 29 24 263 293 331 338 282 Allstate Protection 7,515 7,551 8,137 7,877 7,306 Discontinued Lines and Coverages - - - - - Property-Liability $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 Allstate Protection Auto $ 5,323 $ 5,096 $ 5,326 $ 5,124 $ 5,116 Homeowners 1,507 1,759 2,022 1,962 1,495 Other personal lines 376 402 460 454 383 Commercial lines 126 126 124 138 128 Other business lines 183 168 205 199 184 $ 7,515 $ 7,551 $ 8,137 $ 7,877 $ 7,306 (1) Canada premiums included in Allstate brand Auto $ 164 $ 183 $ 215 $ 235 $ 173 Homeowners 41 50 60 63 41 Other personal lines 10 12 15 15 11 $ 215 $ 245 $ 290 $ 313 $ 225 (2) (3) Fluctuation in the Canadian exchange rate has reduced the auto premiums written growth rate in first quarter 2016 by 0.4 points. Fluctuation in the Canadian exchange rate has reduced the homeowner premiums written growth rate in first quarter 2016 by 0.3 points. THE ALLSTATE CORPORATION PROPERTY-LIABILITY PREMIUMS WRITTEN BY BRAND ($ in millions) Three months ended
13 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) 25 (6) 1.7 7.3 34 (6) 1.9 5.5 23 (6) 1.6 5.1 Homeowners (3) 15 (7) (0.4) (8) (2.3) 16 (7) 1.5 6.1 6 (7) 0.4 6.4 Esurance brand Auto 6 0.3 2.7 18 3.0 6.7 13 1.3 5.1 Encompass brand Auto 4 1.6 14.3 9 2.0 5.7 8 1.3 7.6 Homeowners 5 1.4 11.6 5 1.7 7.4 8 1.2 5.9 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) 34 (6) 1.5 3.6 18 (6) 0.4 3.9 14 (6) 0.7 3.4 Homeowners (3) 9 (7) 0.7 3.5 10 (7) 0.2 3.0 16 (7) 0.9 4.6 Esurance brand Auto 13 1.5 5.9 13 1.3 4.4 7 1.4 5.3 Encompass brand Auto 16 4.8 8.5 6 1.3 6.9 13 2.8 6.0 Homeowners 15 3.2 8.8 4 0.4 8.1 9 2.5 7.8 (1) (2) (3) (4) (5) (6) (7) (8) Includes the impact of a rate decrease in California. Excluding California, Allstate brand homeowners total brand and location specific rate changes were 0.6% and 3.7% for the three months ended March 31, 2016, respectively. Represents the impact in the states 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 states 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 25 states. Encompass brand auto and homeowners operates in 40 states and the District of Columbia. Includes two, three, zero, one, two and one Canadian provinces for homeowners for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively. March 31, 2015 December 31, 2014 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 states and Canadian provinces, rate changes approved for the three month period ending March 31, 2016 are estimated to total $314 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 1.4%, 1.8%, 1.5%, 1.1%, 0.8% and 0.4% for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, 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 0.7%, 0.5%, 0.5%, 0.4%, 0.9% and 0.3% for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively. Includes three, one, five, four, two and one Canadian provinces for auto for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively. September 30, 2015 June 30, 2015 Three months ended Three months ended Three months ended December 31, 2015March 31, 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
14 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Policies in Force (in thousands) (1) Allstate Brand Auto (2) 20,145 20,326 20,367 20,258 20,036 Homeowners (3) 6,152 6,174 6,163 6,141 6,114 Landlord 732 737 736 737 738 Renter 1,556 1,555 1,550 1,518 1,494 Condominium 667 668 665 662 658 Other 1,253 1,259 1,257 1,253 1,245 Other personal lines 4,208 4,219 4,208 4,170 4,135 Commercial lines 318 324 328 330 326 Other business lines 856 894 920 937 941 Excess and surplus 24 25 26 26 27 Total 31,703 31,962 32,012 31,862 31,579 Esurance Brand Auto 1,428 1,415 1,433 1,458 1,470 Homeowners 37 32 26 20 15 Other personal lines 46 44 44 44 42 Total 1,511 1,491 1,503 1,522 1,527 Encompass Brand Auto 701 723 746 767 778 Homeowners 329 338 347 355 361 Other personal lines 108 111 114 118 120 Total 1,138 1,172 1,207 1,240 1,259 Total Policies in Force 34,352 34,625 34,722 34,624 34,365 Non-Proprietary Premiums ($ in millions) Ivantage (4) $ 1,504 $ 1,490 $ 1,481 $ 1,461 $ 1,446 Answer Financial (5) 151 138 149 145 149 Agency Data Total Allstate agencies (6)(7) 12,100 12,300 12,100 12,000 Licensed sales professionals (7)(8) 24,000 24,400 24,000 23,500 Allstate independent agencies (7)(9) 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 500 and 880 engaged Allstate independent agencies (“AIAs”) as of March 31, 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 March 31, 2016 were $23.8 million. Represents non-proprietary premiums written for the period. Commissions earned for the three months ended March 31, 2016 were $18.7 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 31 states, including 6 out of our largest 10 states, as of March 31, 2016 compared to March 31, 2015. Allstate brand homeowners PIF increased in 31 states, including 7 out of our largest 10 states, as of March 31, 2016 compared to March 31, 2015.
15 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net premiums written $ 6,800 $ 6,880 $ 7,383 $ 7,168 $ 6,583 Net premiums earned Auto $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 Homeowners 1,678 1,674 1,663 1,645 1,631 Other personal lines 393 395 396 395 391 Commercial lines 129 129 128 128 125 Other business lines 143 135 148 137 141 Total 7,010 6,971 6,932 6,829 6,720 Incurred losses Auto $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 Homeowners 1,190 816 820 1,147 894 Other personal lines 261 216 241 259 244 Commercial lines 119 100 97 105 98 Other business lines 61 57 71 66 69 Total 5,150 4,684 4,684 5,008 4,480 Expenses Auto $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 Homeowners 377 372 385 372 389 Other personal lines 103 101 109 105 105 Commercial lines 38 36 36 40 38 Other business lines 68 72 61 63 69 Total 1,689 1,658 1,677 1,735 1,714 Underwriting income (loss) Auto $ 45 $ 66 $ 56 $ (62) $ 144 Homeowners 111 486 458 126 348 Other personal lines 29 78 46 31 42 Commercial lines (28) (7) (5) (17) (11) Other business lines 14 6 16 8 3 Total 171 629 571 86 526 Loss ratio 73.5 67.2 67.6 73.3 66.7 Expense ratio 24.1 23.8 24.2 25.4 25.5 Combined ratio 97.6 91.0 91.8 98.7 92.2 Underlying loss ratio 62.0 62.4 64.1 62.3 61.9 Expense ratio, excluding the effect of amortization of purchased intangible assets 24.1 23.8 24.2 25.4 25.5 Underlying combined ratio 86.1 86.2 88.3 87.7 87.4 Effect of catastrophe losses on combined ratio 11.2 4.9 3.6 10.7 4.1 Effect of prior year reserve reestimates on combined ratio 0.2 (0.3) (0.2) 0.4 0.7 Effect of advertising expenses on combined ratio 1.5 1.5 2.0 2.4 2.3 Underlying combined ratio 86.1 86.2 88.3 87.7 87.4 Effect of catastrophe losses 11.2 4.9 3.6 10.7 4.1 Effect of prior year non-catastrophe reserve reestimates 0.3 (0.1) (0.1) 0.3 0.7 Combined ratio 97.6 91.0 91.8 98.7 92.2 THE ALLSTATE CORPORATION ALLSTATE BRAND PROFITABILITY MEASURES ($ in millions) Three months ended
16 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 New Issued Applications (in thousands) (2) Auto 584 562 790 818 792 Homeowners 164 174 218 212 177 Average Premium - Gross Written ($) (3) Auto (4) 507 502 494 488 484 Homeowners (5) 1,174 1,163 1,158 1,150 1,148 Average Premium - Net Earned ($) (6) Auto 461 456 452 450 444 Homeowners 1,082 1,078 1,074 1,066 1,060 Renewal Ratio (%) (7) Auto 88.0 88.2 88.6 88.9 88.8 Homeowners 88.1 88.5 88.7 88.4 88.4 Auto Claim Frequency (8) (% change year-over-year) Bodily Injury Gross 1.1 3.9 6.4 6.8 6.8 Bodily Injury Paid 5.9 - 3.5 6.0 2.3 Property Damage Gross (9) 2.1 7.5 8.9 6.9 2.1 Property Damage Paid 2.4 3.7 4.7 4.2 2.5 Auto Paid Claim Severity (10) (% change year-over-year) Bodily injury (5.5) (7.0) (2.9) 0.6 3.9 Property damage 7.5 4.0 5.4 3.7 4.8 Homeowners Excluding Catastrophe Losses (% change year-over-year) Gross Claim frequency (8) (7.7) 0.9 (1.9) 0.4 (7.9) Paid Claim frequency (8) (2.0) (2.1) (3.7) (0.9) (7.0) Paid Claim severity (2.7) 2.6 4.5 3.6 6.6 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 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 frequency statistics are calculated excluding catastrophe impact. 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. 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. 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. Introduction 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 (0.8)%, 5.5% and 7.4% in the first quarter of 2016 and the fourth and third quarter of 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted. 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 first quarter 2016 by 0.4 points. Fluctuation in the Canadian exchange rate has reduced the homeowner average premium written growth rate in first quarter 2016 by 0.3 points. 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. THE ALLSTATE CORPORATION ALLSTATE BRAND STATISTICS (1) Three months ended Statistics presented for Allstate brand exclude excess and surplus lines.
17 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 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% % 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) The frequency statistics are calculated excluding catastrophe impact. (2) The percent change in paid or gross claim frequency is calculated as the increase or decrease in the paid or gross claim frequency amount in the current period compared to the same period in the prior year; divided by the prior year paid or gross claim frequency amount. 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 STATISTICS (1) BODILY INJURY % CHANGE IN GROSS AND PAID CLAIM FREQUENCY RATE 2011 2012 2013 2014 2015 -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 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
18 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 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% % Change in paid claim frequency (3) 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% (1) The frequency statistics are calculated excluding catastrophe impact. (2) (3) The percent change in paid or gross claim frequency is calculated as the increase or decrease in the paid or gross claim frequency amount in the current period compared to the same period in the prior year; divided by the prior year paid or gross claim frequency amount. 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. Introduction 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 (0.8)%, 5.5% and 7.4% in the first quarter of 2016 and the fourth and third quarter of 2015, respectively. Auto underwriting results for 2016 and 2015 were not impacted. THE ALLSTATE CORPORATION ALLSTATE BRAND AUTO CLAIM FREQUENCY STATISTICS (1) PROPERTY DAMAGE % CHANGE IN GROSS AND PAID CLAIM FREQUENCY 2011 2012 2013 2014 2015 -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 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
19 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net premiums written $ 452 $ 378 $ 423 $ 371 $ 441 Net premiums earned Auto $ 394 $ 391 $ 392 $ 397 $ 382 Homeowners 8 7 5 4 3 Other personal lines 2 2 2 1 2 404 400 399 402 387 Incurred losses Auto $ 289 $ 294 $ 285 $ 300 $ 297 Homeowners 4 4 4 3 1 Other personal lines 1 1 1 1 1 294 299 290 304 299 Expenses Auto $ 123 $ 119 $ 125 $ 132 $ 155 Homeowners 11 9 10 7 - Other personal lines 1 1 - - 2 135 129 135 139 157 Underwriting income (loss) Auto $ (18) $ (22) $ (18) $ (35) $ (70) Homeowners (7) (6) (9) (6) 2 Other personal lines - - 1 - (1) (25) (28) (26) (41) (69) Loss ratio 72.8 74.8 72.7 75.6 77.2 Expense ratio 33.4 32.2 33.8 34.6 40.6 Combined ratio 106.2 107.0 106.5 110.2 117.8 Underlying loss ratio 73.1 75.3 73.5 74.3 78.2 Expense ratio, excluding the effect of amortization of purchased intangible assets 31.9 30.0 31.8 32.4 38.3 Underlying combined ratio 105.0 105.3 105.3 106.7 116.5 Effect of catastrophe losses on combined ratio 0.7 0.8 0.8 2.0 - Effect of prior year reserve reestimates on combined ratio (1.0) (1.3) (1.3) (0.7) (1.0) Effect of amortization of purchased intangible assets on combined ratio 1.5 2.2 2.0 2.2 2.3 Effect of advertising expenses on combined ratio 11.6 9.8 11.0 12.4 17.3 Underlying combined ratio 105.0 105.3 105.3 106.7 116.5 Effect of catastrophe losses 0.7 0.8 0.8 2.0 - Effect of prior year non-catastrophe reserve reestimates (1.0) (1.3) (1.6) (0.7) (1.0) Effect of amortization of purchased intangible assets 1.5 2.2 2.0 2.2 2.3 Combined ratio 106.2 107.0 106.5 110.2 117.8 Policies in Force (in thousands) Auto 1,428 1,415 1,433 1,458 1,470 Homeowners 37 32 26 20 15 Other personal lines 46 44 44 44 42 1,511 1,491 1,503 1,522 1,527 New Issued Applications (in thousands) Auto 168 139 145 148 195 Homeowners 7 7 8 7 6 Other personal lines 10 7 9 10 12 185 153 162 165 213 Average Premium - Gross Written ($) Auto 547 526 513 506 520 Homeowners 891 821 838 814 849 Renewal Ratio (%) Auto 79.6 78.8 78.7 80.4 79.9 THE ALLSTATE CORPORATION ESURANCE PROFITABILITY MEASURES AND STATISTICS ($ in millions) Three months ended
20 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net premiums written $ 263 $ 293 $ 331 $ 338 $ 282 Net premiums earned Auto $ 159 $ 162 $ 165 $ 165 $ 165 Homeowners 124 124 127 126 127 Other personal lines 26 27 27 27 27 Total 309 313 319 318 319 Incurred losses Auto $ 123 $ 126 $ 135 $ 129 $ 116 Homeowners 85 61 75 117 74 Other personal lines 31 27 23 27 23 Total 239 214 233 273 213 Expenses Auto $ 45 $ 44 $ 46 $ 50 $ 47 Homeowners 36 34 36 38 37 Other personal lines 7 7 8 7 8 Total 88 85 90 95 92 Underwriting income (loss) Auto $ (9) $ (8) $ (16) $ (14) $ 2 Homeowners 3 29 16 (29) 16 Other personal lines (12) (7) (4) (7) (4) Total (18) 14 (4) (50) 14 Loss ratio 77.3 68.4 73.1 85.8 66.8 Expense ratio 28.5 27.1 28.2 29.9 28.8 Combined ratio 105.8 95.5 101.3 115.7 95.6 Underlying loss ratio 59.8 65.2 62.7 66.6 61.8 Expense ratio, excluding the effect of amortization of purchased intangible assets 28.5 27.1 28.2 29.9 28.8 Underlying combined ratio 88.3 92.3 90.9 96.5 90.6 Effect of catastrophe losses on combined ratio 13.3 4.8 5.3 18.6 6.3 Effect of prior year reserve reestimates on combined ratio 4.5 (1.9) 5.4 0.9 (2.2) Effect of advertising expenses on combined ratio - - 0.3 0.6 0.6 Underlying combined ratio 88.3 92.3 90.9 96.5 90.6 Effect of catastrophe losses 13.3 4.8 5.3 18.6 6.3 Effect of prior year non-catastrophe reserve reestimates 4.2 (1.6) 5.1 0.6 (1.3) Combined ratio 105.8 95.5 101.3 115.7 95.6 Policies in Force (in thousands) Auto 701 723 746 767 778 Homeowners 329 338 347 355 361 Other personal lines 108 111 114 118 120 1,138 1,172 1,207 1,240 1,259 New Issued Applications (in thousands) Auto 15 16 20 23 23 Homeowners 9 10 12 14 12 Average Premium - Gross Written ($) Auto 981 981 963 925 913 Homeowners 1,618 1,587 1,583 1,532 1,519 Renewal Ratio (%) Auto 76.1 76.1 76.7 78.0 78.5 Homeowners 81.5 81.3 82.5 83.2 83.2 THE ALLSTATE CORPORATION ENCOMPASS BRAND PROFITABILITY MEASURES AND STATISTICS ($ in millions) Three months ended
21 March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2016 2015 2015 2015 2015 Net premiums written Allstate brand $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 Esurance brand 439 368 411 363 434 Encompass brand 138 152 169 173 147 5,323 5,096 5,326 5,124 5,116 Net premiums earned Allstate brand $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 Esurance brand 394 391 392 397 382 Encompass brand 159 162 165 165 165 5,220 5,191 5,154 5,086 4,979 Incurred losses Allstate brand $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 Esurance brand 289 294 285 300 297 Encompass brand 123 126 135 129 116 3,931 3,915 3,875 3,860 3,588 Expenses Allstate brand $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 Esurance brand 123 119 125 132 155 Encompass brand 45 44 46 50 47 1,271 1,240 1,257 1,337 1,315 Underwriting income (loss) Allstate brand $ 45 $ 66 $ 56 $ (62) $ 144 Esurance brand (18) (22) (18) (35) (70) Encompass brand (9) (8) (16) (14) 2 18 36 22 (111) 76 Loss ratio Allstate brand 75.4 75.4 75.2 75.9 71.7 Esurance brand 73.4 75.2 72.7 75.6 77.7 Encompass brand 77.4 77.8 81.8 78.2 70.3 Allstate Protection 75.3 75.4 75.2 75.9 72.1 Expense ratio Allstate brand 23.6 23.2 23.6 25.5 25.1 Esurance brand 31.2 30.4 31.9 33.2 40.6 Encompass brand 28.3 27.1 27.9 30.3 28.5 Allstate Protection 24.4 23.9 24.4 26.3 26.4 Combined ratio Allstate brand 99.0 98.6 98.8 101.4 96.8 Esurance brand 104.6 105.6 104.6 108.8 118.3 Encompass brand 105.7 104.9 109.7 108.5 98.8 Allstate Protection 99.7 99.3 99.6 102.2 98.5 Effect of catastrophe losses on combined ratio Allstate brand 2.9 1.1 0.5 3.2 0.3 Esurance brand 0.5 0.5 0.5 1.8 - Encompass brand 1.3 0.6 0.6 3.0 - Allstate Protection 2.7 1.0 0.5 3.1 0.3 Effect of prior year reserve reestimates on combined ratio Allstate brand 0.1 (0.3) 0.1 0.4 0.8 Esurance brand (1.0) (1.3) (1.3) (0.8) (1.0) Encompass brand 1.3 (0.6) 7.9 (1.2) (4.8) Allstate Protection 0.1 (0.4) 0.3 0.2 0.5 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand (0.1) (0.2) (0.1) - (0.1) Esurance brand - - 0.2 - - Encompass brand - - - - (0.6) Allstate Protection (0.1) (0.2) - (0.1) - Effect of amortization of purchased intangible assets on combined ratio Esurance brand 1.5 2.3 2.0 2.3 2.3 Allstate Protection 0.1 0.2 0.2 0.1 0.2 THE ALLSTATE CORPORATION AUTO PROFITABILITY MEASURES Three months ended
22 March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2016 2015 2015 2015 2015 Net premiums written Allstate brand $ 1,392 $ 1,634 $ 1,879 $ 1,819 $ 1,379 Esurance brand 11 9 9 7 5 Encompass brand 104 116 134 136 111 1,507 1,759 2,022 1,962 1,495 Net premiums earned Allstate brand $ 1,678 $ 1,674 $ 1,663 $ 1,645 $ 1,631 Esurance brand 8 7 5 4 3 Encompass brand 124 124 127 126 127 1,810 1,805 1,795 1,775 1,761 Incurred losses Allstate brand $ 1,190 $ 816 $ 820 $ 1,147 $ 894 Esurance brand 4 4 4 3 1 Encompass brand 85 61 75 117 74 1,279 881 899 1,267 969 Expenses Allstate brand $ 377 $ 372 $ 385 $ 372 $ 389 Esurance brand 11 9 10 7 - Encompass brand 36 34 36 38 37 424 415 431 417 426 Underwriting income (loss) Allstate brand $ 111 $ 486 $ 458 $ 126 $ 348 Esurance brand (7) (6) (9) (6) 2 Encompass brand 3 29 16 (29) 16 107 509 465 91 366 Loss ratio Allstate brand 70.9 48.8 49.3 69.7 54.8 Esurance brand 50.0 57.1 80.0 75.0 33.3 Encompass brand 68.6 49.2 59.1 92.8 58.3 Allstate Protection 70.7 48.8 50.1 71.4 55.0 Expense ratio Allstate brand 22.5 22.2 23.2 22.6 23.9 Esurance brand 137.5 128.6 200.0 175.0 - Encompass brand 29.0 27.4 28.3 30.2 29.1 Allstate Protection 23.4 23.0 24.0 23.5 24.2 Combined ratio Allstate brand 93.4 71.0 72.5 92.3 78.7 Esurance brand 187.5 185.7 280.0 250.0 33.3 Encompass brand 97.6 76.6 87.4 123.0 87.4 Allstate Protection 94.1 71.8 74.1 94.9 79.2 Effect of catastrophe losses on combined ratio Allstate brand 34.2 15.0 12.4 32.1 13.9 Esurance brand 12.5 14.3 20.0 25.0 - Encompass brand 30.7 9.7 11.8 41.3 14.2 Allstate Protection 33.9 14.6 12.4 32.7 13.9 Effect of prior year reserve reestimates on combined ratio Allstate brand (0.5) (0.5) (0.9) - 0.2 Esurance brand - - - - - Encompass brand 0.8 (4.9) - 2.3 (1.6) Allstate Protection (0.4) (0.8) (0.8) 0.2 0.1 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand (0.3) (0.5) (0.1) 0.5 (0.1) Esurance brand - - - - - Encompass brand 1.6 (0.8) 1.6 - (1.6) Allstate Protection (0.2) (0.5) 0.1 0.4 (0.1) THE ALLSTATE CORPORATION HOMEOWNERS PROFITABILITY MEASURES Three months ended
23 March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2016 2015 2015 2015 2015 Net premiums written Allstate brand $ 353 $ 376 $ 429 $ 424 $ 357 Esurance brand 2 1 3 1 2 Encompass brand 21 25 28 29 24 376 402 460 454 383 Net premiums earned Allstate brand $ 393 $ 395 $ 396 $ 395 $ 391 Esurance brand 2 2 2 1 2 Encompass brand 26 27 27 27 27 421 424 425 423 420 Incurred losses Allstate brand $ 261 $ 216 $ 241 $ 259 $ 244 Esurance brand 1 1 1 1 1 Encompass brand 31 27 23 27 23 293 244 265 287 268 Expenses Allstate brand $ 103 $ 101 $ 109 $ 105 $ 105 Esurance brand 1 1 - - 2 Encompass brand 7 7 8 7 8 111 109 117 112 115 Underwriting income (loss) Allstate brand $ 29 $ 78 $ 46 $ 31 $ 42 Esurance brand - - 1 - (1) Encompass brand (12) (7) (4) (7) (4) 17 71 43 24 37 Loss ratio Allstate brand 66.4 54.7 60.9 65.6 62.4 Esurance brand 50.0 50.0 50.0 100.0 50.0 Encompass brand 119.3 100.0 85.2 100.0 85.2 Allstate Protection 69.6 57.6 62.4 67.8 63.8 Expense ratio Allstate brand 26.2 25.6 27.5 26.6 26.9 Esurance brand 50.0 50.0 - - 100.0 Encompass brand 26.9 25.9 29.6 25.9 29.6 Allstate Protection 26.4 25.7 27.5 26.5 27.4 Combined ratio Allstate brand 92.6 80.3 88.4 92.2 89.3 Esurance brand 100.0 100.0 50.0 100.0 150.0 Encompass brand 146.2 125.9 114.8 125.9 114.8 Allstate Protection 96.0 83.3 89.9 94.3 91.2 Effect of catastrophe losses on combined ratio Allstate brand 16.0 8.4 4.5 11.9 7.4 Esurance brand - - - - - Encompass brand 3.8 7.4 3.7 7.4 7.4 Allstate Protection 15.2 8.3 4.5 11.6 7.4 Effect of prior year reserve reestimates on combined ratio Allstate brand (1.5) (0.3) 1.8 1.1 (0.5) Esurance brand - - - - - Encompass brand 42.3 3.7 14.8 7.4 11.1 Allstate Protection 1.2 - 2.6 1.4 0.2 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio Allstate brand - (0.3) - - (0.3) Esurance brand - - - - - Encompass brand (3.9) - (3.7) 3.7 - Allstate Protection (0.3) (0.2) (0.2) 0.3 (0.3) (1) Other personal lines include renter, condominium, landlord and other personal lines products. THE ALLSTATE CORPORATION OTHER PERSONAL LINES PROFITABILITY MEASURES (1) Three months ended
24 March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2016 2015 2015 2015 2015 Net premiums written $ 126 $ 126 $ 124 $ 138 $ 128 Net premiums earned $ 129 $ 129 $ 128 $ 128 $ 125 Incurred losses $ 119 $ 100 $ 97 $ 105 $ 98 Expenses $ 38 $ 36 $ 36 $ 40 $ 38 Underwriting (loss) income $ (28) $ (7) $ (5) $ (17) $ (11) Loss ratio 92.2 77.5 75.8 82.0 78.4 Expense ratio 29.5 27.9 28.1 31.3 30.4 Combined ratio 121.7 105.4 103.9 113.3 108.8 Effect of catastrophe losses on combined ratio 7.0 4.6 2.3 9.4 4.0 Effect of prior year reserve reestimates on combined ratio 15.5 - (9.3) 3.1 8.0 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio 2.4 0.8 - 2.3 0.8 (1) Commercial lines are all Allstate Brand products. THE ALLSTATE CORPORATION COMMERCIAL LINES PROFITABILITY MEASURES (1) Three months ended
25 March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in millions) 2016 2015 2015 2015 2015 Net premiums written $ 183 $ 168 $ 205 $ 199 $ 184 Net premiums earned $ 143 $ 135 $ 148 $ 137 $ 141 Incurred losses $ 61 $ 57 $ 71 $ 66 $ 69 Expenses $ 68 $ 72 $ 61 $ 63 $ 69 Underwriting income $ 14 $ 6 $ 16 $ 8 $ 3 Loss ratio 42.7 42.2 48.0 48.2 49.0 Expense ratio 47.5 53.4 41.2 46.0 48.9 Combined ratio 90.2 95.6 89.2 94.2 97.9 Effect of catastrophe losses on combined ratio - - - - - Effect of prior year reserve reestimates on combined ratio - - 0.7 0.7 - Effect of catastrophe losses included in prior year reserve reestimates on combined ratio - - - - - Effect of amortization of purchased intangible assets 0.7 0.8 0.7 0.8 0.7 (1) Other business lines include Allstate Roadside Services, Allstate Dealer Services and other business lines, primarily Allstate Brand. THE ALLSTATE CORPORATION OTHER BUSINESS LINES PROFITABILITY MEASURES (1) Three months ended
26 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Auto Allstate brand underlying combined ratio 95.9 97.6 98.1 97.8 95.6 Effect of catastrophe losses on combined ratio 2.9 1.1 0.5 3.2 0.3 Effect of prior year non-catastrophe reserve reestimates on combined ratio 0.2 (0.1) 0.2 0.4 0.9 Allstate brand combined ratio 99.0 98.6 98.8 101.4 96.8 Esurance brand underlying combined ratio 103.6 104.1 103.6 105.5 117.0 Effect of catastrophe losses on combined ratio 0.5 0.5 0.5 1.8 - Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.0) (1.3) (1.5) (0.8) (1.0) Effect of amortization of purchased intangible assets on combined ratio 1.5 2.3 2.0 2.3 2.3 Esurance brand combined ratio 104.6 105.6 104.6 108.8 118.3 Encompass brand underlying combined ratio 103.1 104.9 101.2 106.7 103.0 Effect of catastrophe losses on combined ratio 1.3 0.6 0.6 3.0 - Effect of prior year non-catastrophe reserve reestimates on combined ratio 1.3 (0.6) 7.9 (1.2) (4.2) Encompass brand combined ratio 105.7 104.9 109.7 108.5 98.8 Homeowners Allstate brand underlying combined ratio 59.4 56.0 60.9 60.7 64.5 Effect of catastrophe losses on combined ratio 34.2 15.0 12.4 32.1 13.9 Effect of prior year non-catastrophe reserve reestimates on combined ratio (0.2) - (0.8) (0.5) 0.3 Allstate brand combined ratio 93.4 71.0 72.5 92.3 78.7 Encompass brand underlying combined ratio 67.7 71.0 77.2 79.4 73.2 Effect of catastrophe losses on combined ratio 30.7 9.7 11.8 41.3 14.2 Effect of prior year non-catastrophe reserve reestimates on combined ratio (0.8) (4.1) (1.6) 2.3 - Encompass brand combined ratio 97.6 76.6 87.4 123.0 87.4 Other Personal Lines Allstate brand underlying combined ratio 78.1 71.9 82.1 79.2 82.1 Effect of catastrophe losses on combined ratio 16.0 8.4 4.5 11.9 7.4 Effect of prior year non-catastrophe reserve reestimates on combined ratio (1.5) - 1.8 1.1 (0.2) Allstate brand combined ratio 92.6 80.3 88.4 92.2 89.3 Encompass brand underlying combined ratio 96.2 114.8 92.6 114.8 96.3 Effect of catastrophe losses on combined ratio 3.8 7.4 3.7 7.4 7.4 Effect of prior year non-catastrophe reserve reestimates on combined ratio 46.2 3.7 18.5 3.7 11.1 Encompass brand combined ratio 146.2 125.9 114.8 125.9 114.8 THE ALLSTATE CORPORATION AUTO, HOMEOWNERS AND OTHER PERSONAL LINES UNDERLYING COMBINED RATIOS Three months ended
27 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Auto Annualized average premium (1) $ 927 $ 913 $ 903 $ 893 $ 885 Underlying combined ratios 95.9 97.6 98.1 97.8 95.6 Average underlying loss (incurred pure premium) and expense * $ 889 $ 891 $ 886 $ 874 $ 846 Homeowners Annualized average premium (1) $ 1,091 $ 1,085 $ 1,079 $ 1,071 $ 1,067 Underlying combined ratios 59.4 56.0 60.9 60.7 64.5 Average underlying loss (incurred pure premium) and expense $ 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 Three months ended
28 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 $ 26 $ 18 69.2% $ - 0.0% Other hurricane exposure states 969 876 90.4% 549 56.7% Total hurricane exposure states (2) 995 894 89.8% 549 55.2% 8 7.6% Other catastrophe exposure states (4) 815 385 47.2% 64 7.9% 11 (7.5)% Total $ 1,810 $ 1,279 70.7% $ 613 33.9% 17 19 (1.6)% (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. Three months ended March 31, 2016
29 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Allstate brand Auto $ 137 $ 50 $ 22 $ 143 $ 13 Homeowners 574 251 207 528 227 Other personal lines 63 33 18 47 29 Commercial lines 9 6 3 12 5 Other business lines - - - - - Total 783 340 250 730 274 Esurance brand Auto 2 2 2 7 - Homeowners 1 1 1 1 - Other personal lines - - - - - Total 3 3 3 8 - Encompass brand Auto 2 1 1 5 - Homeowners 38 12 15 52 18 Other personal lines 1 2 1 2 2 Total 41 15 17 59 20 Allstate Protection $ 827 $ 358 $ 270 $ 797 $ 294 Allstate Protection Auto $ 141 $ 53 $ 25 $ 155 $ 13 Homeowners 613 264 223 581 245 Other personal lines 64 35 19 49 31 Commercial lines 9 6 3 12 5 Other business lines - - - - - $ 827 $ 358 $ 270 $ 797 $ 294 THE ALLSTATE CORPORATION CATASTROPHE LOSSES BY BRAND ($ in millions) Three months ended
30 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 7,723 827 827 10.7 Average 6.4 13.2 8.3 5.3 8.3 7.2 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
31 Average Number Claims and Combined catastrophe Size of catastrophe of events claims expense ratio impact loss per event Greater than $250 million 1 5.9 % $ 340 41.1 % 4.4 % $ 340 $101 million to $250 million 1 5.9 196 23.7 2.6 196 $50 million to $100 million 1 5.9 63 7.6 0.8 63 Less than $50 million 14 82.3 231 27.9 3.0 17 Total 17 100.0 % 830 100.3 10.8 49 Prior year reserve reestimates (3) (0.3) (0.1) Total catastrophe losses $ 827 100.0 % 10.7 % THE ALLSTATE CORPORATION CATASTROPHE BY SIZE OF EVENT ($ in millions) Three months ended March 31, 2016
32 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Prior Year Reserve Reestimates (1) Auto $ 5 $ (19) $ 14 $ 11 $ 24 Homeowners (7) (14) (15) 4 1 Other personal lines 5 - 11 6 1 Commercial lines 20 - (12) 4 10 Other business lines - - 1 1 - Allstate Protection 23 (33) (1) 26 36 Discontinued Lines and Coverages 1 2 48 2 1 Property-Liability $ 24 $ (31) $ 47 $ 28 $ 37 Allstate brand (2) $ 13 $ (22) $ (13) $ 26 $ 47 Esurance brand (4) (5) (5) (3) (4) Encompass brand (2) 14 (6) 17 3 (7) Allstate Protection (2) $ 23 $ (33) $ (1) $ 26 $ 36 Effect of Prior Year Reserve Reestimates on Combined Ratio (1)(3) Auto - (0.2) 0.2 0.2 0.3 Homeowners (0.1) (0.2) (0.2) - - Other personal lines - - 0.1 0.1 - Commercial lines 0.3 - (0.1) - 0.2 Other business lines - - - - - Allstate Protection 0.2 (0.4) - 0.3 0.5 Discontinued Lines and Coverages 0.1 - 0.6 - - Property-Liability 0.3 (0.4) 0.6 0.3 0.5 Allstate brand (2) 0.1 (0.3) (0.2) 0.3 0.6 Esurance brand (0.1) - - - - Encompass brand (2) 0.2 (0.1) 0.2 - (0.1) Allstate Protection (2) 0.2 (0.4) - 0.3 0.5 (1) (2) (3) Calculated using Property-Liability premiums earned for the respective period. THE ALLSTATE CORPORATION PROPERTY-LIABILITY PRIOR YEAR RESERVE REESTIMATES ($ in millions) Favorable reserve reestimates are shown in parentheses. (Favorable) unfavorable reserve reestimates included in catastrophe losses for Allstate brand, Esurance brand, Encompass brand and Allstate Protection totaled $(4) million, $0 million, $1 million, $(3) million and $(2) million, $0 million, $(3) million and $(5) million, respectively, in the three months ended March 31, 2016 and 2015, respectively. Three months ended
33 2015 2014 2013 2012 2011 (net of reinsurance) Asbestos claims Beginning reserves $ 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 (53) (93) (90) (83) (78) (48) Ending reserves $ 907 $ 960 $ 1,014 $ 1,017 $ 1,026 $ 1,078 Claims and claims expense paid as a percent of ending reserves 5.8% 9.7% 8.9% 8.2% 7.6% 4.5% Environmental claims Beginning reserves $ 179 $ 203 $ 208 $ 193 $ 185 $ 201 Incurred claims and claims expense - 1 15 30 22 - Claims and claims expense paid (2) (25) (20) (15) (14) (16) Ending reserves $ 177 $ 179 $ 203 $ 208 $ 193 $ 185 Claims and claims expense paid as a percent of ending reserves 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 March 31, 2016
34 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net premiums written Auto $ 4,746 $ 4,576 $ 4,746 $ 4,588 $ 4,535 Homeowners 1,392 1,634 1,879 1,819 1,379 Landlord 122 137 143 138 128 Renter 67 65 84 73 67 Condominium 53 58 64 63 51 Other 111 116 138 150 111 Other personal lines 353 376 429 424 357 Commercial lines 126 126 124 138 128 Total 6,617 6,712 7,178 6,969 6,399 Net premiums earned Auto $ 4,667 $ 4,638 $ 4,597 $ 4,524 $ 4,432 Homeowners 1,678 1,674 1,663 1,645 1,631 Other personal lines 393 395 396 395 391 Commercial lines 129 129 128 128 125 Total 6,867 6,836 6,784 6,692 6,579 Incurred losses Auto $ 3,519 $ 3,495 $ 3,455 $ 3,431 $ 3,175 Homeowners 1,190 816 820 1,147 894 Other personal lines 261 216 241 259 244 Commercial lines 119 100 97 105 98 Total 5,089 4,627 4,613 4,942 4,411 Expenses Auto $ 1,103 $ 1,077 $ 1,086 $ 1,155 $ 1,113 Homeowners 377 372 385 372 389 Other personal lines 103 101 109 105 105 Commercial lines 38 36 36 40 38 Total 1,621 1,586 1,616 1,672 1,645 Underwriting income (loss) Auto $ 45 $ 66 $ 56 $ (62) $ 144 Homeowners 111 486 458 126 348 Other personal lines 29 78 46 31 42 Commercial lines (28) (7) (5) (17) (11) Total 157 623 555 78 523 Loss ratio 74.1 67.7 68.0 73.8 67.1 Expense ratio 23.6 23.2 23.8 25.0 25.0 Combined ratio 97.7 90.9 91.8 98.8 92.1 Effect of catastrophe losses on combined ratio 11.4 5.0 3.7 10.9 4.2 Effect of prior year reserve reestimates on combined ratio 0.2 (0.3) (0.2) 0.3 0.7 Underlying combined ratio 86.1 86.0 88.3 87.7 87.1 Effect of catastrophe losses 11.4 5.0 3.7 10.9 4.2 Effect of prior year non-catastrophe reserve reestimates 0.2 (0.1) (0.2) 0.2 0.8 Combined ratio 97.7 90.9 91.8 98.8 92.1 Policies in Force (in thousands) Auto 20,145 20,326 20,367 20,258 20,036 Homeowners 6,152 6,174 6,163 6,141 6,114 Other personal lines 4,208 4,219 4,208 4,170 4,135 Commercial lines 318 324 328 330 326 Excess and surplus 24 25 26 26 27 Total 30,847 31,068 31,092 30,925 30,638 (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) Three months ended
35 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net premiums written Esurance $ 452 $ 378 $ 423 $ 371 $ 441 Encompass 263 293 331 338 282 Allstate Roadside Services 77 70 87 88 91 Allstate Dealer Services 106 98 118 111 93 Other business lines 183 168 205 199 184 Total 898 839 959 908 907 Net premiums earned Esurance $ 404 $ 400 $ 399 $ 402 $ 387 Encompass 309 313 319 318 319 Other business lines 143 135 148 137 141 Total 856 848 866 857 847 Incurred losses Esurance $ 294 $ 299 $ 290 $ 304 $ 299 Encompass 239 214 233 273 213 Other business lines 61 57 71 66 69 Total 594 570 594 643 581 Expenses Esurance $ 135 $ 129 $ 135 $ 139 $ 157 Encompass 88 85 90 95 92 Other business lines 68 72 61 63 69 Answer Financial 1 2 1 3 2 Total 292 288 287 300 320 Underwriting income (loss) Esurance $ (25) $ (28) $ (26) $ (41) $ (69) Encompass (18) 14 (4) (50) 14 Other business lines 14 6 16 8 3 Answer Financial (1) (2) (1) (3) (2) Total (30) (10) (15) (86) (54) Loss ratio 69.4 67.2 68.6 75.0 68.6 Expense ratio 34.1 34.0 33.1 35.0 37.8 Combined ratio 103.5 101.2 101.7 110.0 106.4 Effect of catastrophe losses on combined ratio 5.1 2.1 2.3 7.8 2.4 Effect of prior year reserve reestimates on combined ratio 1.2 (1.3) 1.5 0.1 (1.3) Effect of amortization of purchased intangible assets - 1.6 1.4 1.5 1.4 Underlying combined ratio 97.3 98.7 96.8 100.7 103.5 Effect of catastrophe losses 5.1 2.1 2.3 7.8 2.4 Effect of prior year non-catastrophe reserve reestimates 1.1 (1.2) 1.2 - (0.9) Effect of amortization of purchased intangible assets - 1.6 1.4 1.5 1.4 Combined ratio 103.5 101.2 101.7 110.0 106.4 Policies in Force (in thousands) Esurance 1,511 1,491 1,503 1,522 1,527 Encompass 1,138 1,172 1,207 1,240 1,259 Other business lines 856 894 920 937 941 Total 3,505 3,557 3,630 3,699 3,727 (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) Three months ended
36 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Premiums $ 354 $ 339 $ 329 $ 326 $ 328 Contract charges 212 208 209 210 209 Net investment income 419 420 491 489 484 Contract benefits (455) (456) (460) (446) (441) Interest credited to contractholder funds (184) (186) (191) (191) (192) Amortization of deferred policy acquisition costs (71) (65) (61) (62) (69) Operating costs and expenses (123) (119) (112) (118) (123) Restructuring and related charges - 3 (1) (2) - Income tax expense on operations (48) (46) (66) (67) (62) Operating income 104 98 138 139 134 Realized capital gains and losses, after-tax (32) (62) 125 38 72 Valuation changes on embedded derivatives that are not hedged, after-tax (4) 2 (2) 4 (5) 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) (2) - Gain (loss) on disposition of operations, after-tax 1 1 2 - (1) Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (17) Net income applicable to common shareholders $ 68 $ 39 $ 262 $ 179 $ 183 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL RESULTS ($ in millions) Three months ended
37 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Return on Attributed Equity Numerator: Net income applicable to common shareholders (1) $ 548 $ 663 $ 832 $ 686 $ 652 Denominator: Beginning attributed equity (2) $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812 Ending attributed equity 7,680 7,350 7,475 7,621 7,920 Average attributed equity (3) $ 7,800 $ 7,511 $ 7,416 $ 7,442 $ 7,866 Return on attributed equity 7.0 % 8.8 % 11.2 % 9.2 % 8.3 % Operating Income Return on Attributed Equity Numerator: Operating income (1) $ 479 $ 509 $ 539 $ 526 $ 552 Denominator: Beginning attributed equity (2) $ 7,920 $ 7,672 $ 7,356 $ 7,262 $ 7,812 Unrealized net capital gains and losses 1,499 1,420 1,305 1,285 1,280 Adjusted beginning attributed equity 6,421 6,252 6,051 5,977 6,532 Ending attributed equity 7,680 7,350 7,475 7,621 7,920 Unrealized net capital gains and losses 824 556 722 1,030 1,499 Adjusted ending attributed equity 6,856 6,794 6,753 6,591 6,421 Average adjusted attributed equity (3) $ 6,639 $ 6,523 $ 6,402 $ 6,284 $ 6,477 Operating income return on attributed equity 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
38 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 PREMIUMS AND CONTRACT CHARGES - BY PRODUCT Underwritten Products Traditional life insurance premiums $ 138 $ 144 $ 135 $ 131 $ 132 Accident and health insurance premiums 216 195 194 195 196 Interest-sensitive life insurance contract charges 209 204 205 207 206 563 543 534 533 534 Annuities Immediate annuities with life contingencies premiums - - - - - Other fixed annuity contract charges 3 4 4 3 3 3 4 4 3 3 Total $ 566 $ 547 $ 538 $ 536 $ 537 PREMIUMS AND CONTRACT CHARGES - BY DISTRIBUTION CHANNEL Allstate agencies $ 305 $ 304 $ 300 $ 297 $ 297 Workplace enrolling agents 233 215 212 209 210 Other (1) 28 28 26 30 30 Total $ 566 $ 547 $ 538 $ 536 $ 537 PROPRIETARY LIFE INSURANCE POLICIES SOLD BY ALLSTATE AGENCIES (2) (3) 25,458 39,701 16,402 34,494 30,091 ALLSTATE BENEFITS NEW BUSINESS WRITTEN PREMIUMS (4) $ 82 $ 179 $ 69 $ 64 $ 65 (1) Primarily represents independent master brokerage agencies. (2) Policies sold reduced by lapses within twelve months of sale. (3) (4) 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. 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. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL PREMIUMS AND CONTRACT CHARGES ($ in millions) Three months ended
39 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Contractholders funds, beginning balance $ 21,295 $ 21,559 $ 21,968 $ 22,267 $ 22,529 Deposits Interest-sensitive life insurance 252 251 251 253 249 Fixed annuities 44 39 56 53 51 Total deposits 296 290 307 306 300 Interest credited 189 183 193 185 199 Benefits, withdrawals, maturities and other adjustments Benefits (252) (247) (272) (285) (273) Surrenders and partial withdrawals (245) (295) (375) (303) (305) Maturities of and interest payments on institutional products - - - (1) - Contract charges (206) (207) (205) (203) (203) Net transfers from separate accounts 1 2 2 2 1 Other adjustments 14 10 (59) - 19 Total benefits, withdrawals, maturities and other adjustments (688) (737) (909) (790) (761) Contractholder funds, ending balance $ 21,092 $ 21,295 $ 21,559 $ 21,968 $ 22,267 THE ALLSTATE CORPORATION ALLSTATE FINANCIAL CHANGE IN CONTRACTHOLDER FUNDS ($ in millions) Three months ended
40 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Benefit spread Premiums $ 354 $ 339 $ 329 $ 326 $ 328 Cost of insurance contract charges (1) 141 137 137 138 138 Contract benefits excluding the implied interest on immediate annuities with life contingencies (2) (327) (328) (333) (319) (312) Total benefit spread 168 148 133 145 154 Investment spread Net investment income 419 420 491 489 484 Implied interest on immediate annuities with life contingencies (2) (128) (128) (127) (127) (129) Interest credited to contractholder funds (190) (183) (194) (185) (199) Total investment spread 101 109 170 177 156 Surrender charges and contract maintenance expense fees (1) 71 71 72 72 71 Realized capital gains and losses (49) (97) 194 59 111 Amortization of deferred policy acquisition costs (73) (64) (63) (65) (70) Operating costs and expenses (123) (119) (112) (118) (123) Restructuring and related charges - 3 (1) (2) - Gain (loss) on disposition of operations 2 1 3 1 (2) Income tax expense (29) (13) (134) (90) (114) Net income applicable to common shareholders $ 68 $ 39 $ 262 $ 179 $ 183 Benefit spread by product group Life insurance $ 80 $ 75 $ 66 $ 65 $ 68 Accident and health insurance 105 92 90 97 107 Annuities (17) (19) (23) (17) (21) Total benefit spread $ 168 $ 148 $ 133 $ 145 $ 154 Investment spread by product group Annuities and institutional products $ 17 $ 10 $ 82 $ 77 $ 69 Life insurance 34 41 33 33 33 Accident and health insurance 4 4 4 4 4 Net investment income on investments supporting capital 52 52 54 57 57 Investment spread before valuation changes on embedded derivatives that are not hedged 107 107 173 171 163 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged (6) 2 (3) 6 (7) Total investment spread $ 101 $ 109 $ 170 $ 177 $ 156 (1) Reconciliation of contract charges Cost of insurance contract charges $ 141 $ 137 $ 137 $ 138 $ 138 Surrender charges and contract maintenance expense fees 71 71 72 72 71 Total contract charges $ 212 $ 208 $ 209 $ 210 $ 209 (2) Reconciliation of contract benefits Contract benefits excluding the implied interest on immediate annuities with life contingencies $ (327) $ (328) $ (333) $ (319) $ (312) Implied interest on immediate annuities with life contingencies (128) (128) (127) (127) (129) Total contract benefits $ (455) $ (456) $ (460) $ (446) $ (441) THE ALLSTATE CORPORATION ALLSTATE FINANCIAL ANALYSIS OF NET INCOME ($ in millions) Three months ended
41 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 5.0 % 3.9 % 1.1 % 5.1 % 3.9 % 1.2 % Deferred fixed annuities and institutional products 4.0 2.8 1.2 4.3 2.8 1.5 Immediate fixed annuities with and without life contingencies 6.0 5.9 0.1 7.3 5.9 1.4 Investments supporting capital, traditional life and other products 3.8 n/a n/a 4.2 n/a n/a THE ALLSTATE CORPORATION ALLSTATE FINANCIAL WEIGHTED AVERAGE INVESTMENT SPREADS Three months ended March 31, 2016 Three months ended March 31, 2015
42 Twelve months ended March 31, 2016 Attributed equity Reserves and excluding unrealized March Dec. Sept. June March Contractholder funds capital gains/losses (3)(4) Operating income (5) 2016 2015 2015 2015 2015 Underwritten products Life insurance $ 10,700 $ 2,467 $ 266 11.1 % 10.6 % 10.0 % 9.3 % 9.8 % Accident and health insurance 852 660 80 12.2 12.7 13.7 14.9 15.9 Subtotal 11,552 3,127 346 11.3 11.1 10.8 10.5 11.1 Immediate Annuities: Sub-standard structured settlements and group pension terminations (1) 5,029 1,800 (3) (0.2) 0.5 1.6 0.5 0.6 Standard structured settlements and SPIA (2) 6,841 1,278 59 4.9 6.8 9.4 8.8 8.4 Subtotal 11,870 3,078 56 2.0 3.1 4.7 3.8 3.7 Deferred Annuities 9,809 650 76 10.4 10.1 10.1 10.6 10.3 Institutional products 85 1 1 Subtotal 21,764 3,729 133 3.7 4.8 6.2 6.1 6.0 Total Allstate Financial $ 33,316 $ 6,856 $ 479 7.2 7.8 8.4 8.4 8.5 Life Accident and Annuities and Allstate insurance health insurance institutional products Financial Operating income $ 69 $ 20 $ 15 $ 104 Realized capital gains and losses, after-tax (9) (2) (21) (32) Valuation changes on embedded derivatives that are not hedged, after-tax - - (4) (4) 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) Gain on disposition of operations, after-tax - - 1 1 Net income (loss) applicable to common shareholders $ 59 $ 18 $ (9) $ 68 (1) (2) (3) (4) (5) 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. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL SUPPLEMENTAL PRODUCT INFORMATION ($ in millions) As of March 31, 2016 Three months ended March 31, 2016 Annuities and institutional products: Twelve months ended Operating income return on attributed equity (%) 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.
43 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 ALLSTATE FINANCIAL INSURANCE POLICIES AND ANNUITIES IN FORCE BY PRODUCT Underwritten products Life insurance 2,467 2,463 2,459 2,456 2,448 Accident and health insurance 3,278 2,873 2,848 2,843 2,777 5,745 5,336 5,307 5,299 5,225 Annuities Deferred annuities 168 172 176 181 186 Immediate annuities 101 102 104 105 106 269 274 280 286 292 Total 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) 1,922 1,924 1,917 1,911 1,904 Allstate Benefits 3,729 3,315 3,292 3,287 3,218 Other (3) 363 371 378 387 395 Total 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.
44 Allstate Allstate Allstate Allstate Allstate Financial Allstate Allstate Allstate Financial Life Annuities Benefits Segment Life Annuities Benefits Segment $ 130 $ - $ 224 $ 354 $ 125 $ - $ 203 $ 328 182 3 27 212 180 3 26 209 120 281 18 419 121 345 18 484 (180) (147) (128) (455) (184) (153) (104) (441) (70) (105) (9) (184) (69) (113) (10) (192) Amortization of deferred policy acquisition costs (31) (2) (38) (71) (32) (1) (36) (69) (56) (8) (59) (123) (58) (10) (55) (123) (29) (7) (12) (48) (24) (23) (15) (62) 66 15 23 104 59 48 27 134 (8) (21) (3) (32) 2 70 - 72 - (4) - (4) - (5) - (5) (1) - - (1) (1) 1 - - Gain on disposition of operations, after-tax - 1 - 1 (1) - - (1) Change in accounting for investments in qualified affordable housing projects, after-tax - - - - (6) (11) - (17) $ 57 $ (9) $ 20 $ 68 $ 53 $ 103 $ 27 $ 183 Premiums and Contract Charges - by Product Underwritten Products $ 130 $ - $ 8 $ 138 $ 124 $ - $ 8 $ 132 - - 216 216 1 - 195 196 182 - 27 209 180 - 26 206 312 - 251 563 305 - 229 534 - - - - - - - - - 3 - 3 - 3 - 3 - 3 - 3 - 3 - 3 $ 312 $ 3 $ 251 $ 566 $ 305 $ 3 $ 229 $ 537 Life Insurance $ 75 $ - $ 5 $ 80 $ 63 $ - $ 5 $ 68 Accident and health insurance - - 105 105 (1) - 108 107 Annuities - (17) - (17) - (21) - (21) $ 75 $ (17) $ 110 $ 168 $ 62 $ (21) $ 113 $ 154 Annuities and institutional products $ - $ 17 $ - $ 17 $ - $ 69 $ - $ 69 Life insurance 32 - 2 34 31 - 2 33 Accident and health insurance 1 - 3 4 2 - 2 4 Net investment income on investments supporting capital 17 31 4 52 20 33 4 57 derivatives that are not hedged 50 48 9 107 53 102 8 163 Valuation changes on derivatives embedded in equity- indexed annuity contracts that are not hedged - (6) - (6) - (7) - (7) Total investment spread $ 50 $ 42 $ 9 $ 101 $ 53 $ 95 $ 8 $ 156 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 (loss) 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 Premiums THE ALLSTATE CORPORATION ALLSTATE LIFE, ALLSTATE ANNUITIES AND ALLSTATE BENEFITS RESULTS AND PRODUCT INFORMATION ($ in millions) For the three months ended March 31, 2016 For the three months ended March 31, 2015
45 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Net investment income $ 10 $ 10 $ 9 $ 8 $ 8 Operating costs and expenses (6) (7) (13) (9) (5) Interest expense (73) (73) (73) (73) (73) Income tax benefit on operations 25 27 28 28 26 Preferred stock dividends (29) (29) (29) (29) (29) Operating loss (73) (72) (78) (75) (73) Realized capital gains and losses, after-tax - - - - - Net loss applicable to common shareholders $ (73) $ (72) $ (78) $ (75) $ (73) THE ALLSTATE CORPORATION CORPORATE AND OTHER RESULTS ($ in millions) Three months ended
46 March 31, Dec. 31, Sept. 30, June 30, March 31, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 2016 2015 2015 2015 2015 Fixed income securities, at fair value: Tax-exempt $ 4,466 $ 4,285 $ 4,289 $ 4,418 $ 4,362 $ 2 $ 4 $ 17 $ 23 $ 28 Taxable 24,615 25,447 24,868 25,192 25,674 25,858 26,034 26,583 27,768 28,798 Equity securities, at fair value 3,709 3,480 2,808 3,018 3,074 1,405 1,599 1,425 979 1,089 Mortgage loans 294 296 339 343 333 4,008 4,042 4,063 4,000 3,943 Limited partnership interests 2,688 2,575 2,558 2,466 2,571 2,399 2,295 2,261 2,066 2,124 Short-term, at fair value 1,452 959 1,692 1,108 932 1,626 861 991 1,053 948 Other 1,512 1,437 1,659 1,602 1,536 2,038 1,957 1,929 1,909 1,860 Total $ 38,736 $ 38,479 $ 38,213 $ 38,147 $ 38,482 $ 37,336 $ 36,792 $ 37,269 $ 37,798 $ 38,790 Fixed income securities, amortized cost: Tax-exempt $ 4,384 $ 4,218 $ 4,214 $ 4,362 $ 4,276 $ 2 $ 4 $ 17 $ 24 $ 28 Taxable 24,454 25,672 24,883 24,990 25,181 24,481 25,145 25,335 26,091 26,245 Ratio of fair value to amortized cost 100.8% 99.5% 100.2% 100.9% 102.0% 105.6% 103.5% 104.9% 106.4% 109.7% Equity securities, cost $ 3,417 $ 3,236 $ 2,656 $ 2,699 $ 2,706 $ 1,372 $ 1,567 $ 1,464 $ 947 $ 1,043 Short-term, amortized cost 1,452 959 1,692 1,108 932 1,626 861 991 1,053 948 March 31, Dec. 31, Sept. 30, June 30, March 31, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 2016 2015 2015 2015 2015 Fixed income securities, at fair value: Tax-exempt $ 591 $ 585 $ 589 $ 569 $ 568 $ 5,059 $ 4,874 $ 4,895 $ 5,010 $ 4,958 Taxable 1,759 1,593 1,911 1,960 1,973 52,232 53,074 53,362 54,920 56,445 Equity securities, at fair value 3 3 3 3 3 5,117 5,082 4,236 4,000 4,166 Mortgage loans - - - - - 4,302 4,338 4,402 4,343 4,276 Limited partnership interests 4 4 4 4 4 5,091 4,874 4,823 4,536 4,699 Short-term, at fair value 448 302 353 660 617 3,526 2,122 3,036 2,821 2,497 Other - - - - - 3,550 3,394 3,588 3,511 3,396 Total $ 2,805 $ 2,487 $ 2,860 $ 3,196 $ 3,165 $ 78,877 $ 77,758 $ 78,342 $ 79,141 $ 80,437 Fixed income securities, amortized cost: Tax-exempt $ 569 $ 566 $ 569 $ 551 $ 547 $ 4,955 $ 4,788 $ 4,800 $ 4,937 $ 4,851 Taxable 1,737 1,596 1,900 1,953 1,958 50,672 52,413 52,118 53,034 53,384 Ratio of fair value to amortized cost 101.9% 100.7% 101.3% 101.0% 101.4% 103.0% 101.3% 102.4% 103.4% 105.4% Equity securities, cost $ 3 $ 3 $ 3 $ 3 $ 3 $ 4,792 $ 4,806 $ 4,123 $ 3,649 $ 3,752 Short-term, amortized cost 448 302 353 660 617 3,526 2,122 3,036 2,821 2,497 CORPORATE AND OTHER CONSOLIDATED THE ALLSTATE CORPORATION INVESTMENTS ($ in millions) PROPERTY-LIABILITY ALLSTATE FINANCIAL
47 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Investment position Accounting basis Cost method $ 1,193 $ 1,154 $ 1,148 $ 1,130 $ 1,137 Equity method ("EMA") (1) 3,898 3,720 3,675 3,406 3,562 Total $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Cost method-fair value (2) $ 1,466 $ 1,450 $ 1,506 $ 1,482 $ 1,494 Underlying investment Private equity $ 3,494 $ 3,344 $ 3,282 $ 3,012 $ 2,969 Real estate 1,229 1,166 1,160 1,164 1,366 Other 368 364 381 360 364 Total $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Segment Property-Liability $ 2,688 $ 2,575 $ 2,558 $ 2,466 $ 2,571 Allstate Financial 2,399 2,295 2,261 2,066 2,124 Corporate and Other 4 4 4 4 4 Total $ 5,091 $ 4,874 $ 4,823 $ 4,536 $ 4,699 Total Income Accounting basis Cost method $ 39 $ 42 $ 63 $ 75 $ 42 Equity method 82 24 104 43 156 Total $ 121 $ 66 $ 167 $ 118 $ 198 Underlying investment Private equity $ 88 $ 46 $ 162 $ 113 $ 80 Real estate 33 20 5 10 123 Other - - - (5) (5) Total $ 121 $ 66 $ 167 $ 118 $ 198 Segment Property-Liability $ 58 $ 29 $ 62 $ 45 $ 126 Allstate Financial 63 37 105 73 72 Corporate and Other - - - - - Total $ 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 March 31, 2016, valuations of EMA limited partnerships include approximately $408 million of cumulative pre-tax appreciation that has been recognized in earnings but has not been distributed to investors. As of or for the three months ended
48 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 $ 114 $ 3,504 103.4 $ 86 $ 3,922 102.2 $ 118 $ 3,760 103.2 Municipal 442 7,616 106.2 369 7,401 105.2 412 7,494 105.8 Corporate 989 41,272 102.5 153 41,827 100.4 632 41,629 101.5 Foreign government 55 1,054 105.5 50 1,033 105.1 59 1,085 105.8 Asset-backed securities ("ABS") (27) 2,499 98.9 (32) 2,327 98.6 (16) 2,711 99.4 Residential mortgage-backed securities ("RMBS") 68 875 108.4 90 947 110.5 98 1,011 110.7 Commercial mortgage-backed securities ("CMBS") 20 447 104.7 28 466 106.4 32 542 106.3 Redeemable preferred stock 3 24 114.3 3 25 113.6 4 25 119.0 Total fixed income securities 1,664 57,291 103.0 747 57,948 101.3 1,339 58,257 102.4 Equity securities 325 5,117 106.8 276 5,082 105.7 113 4,236 102.7 Short-term investments - 3,526 100.0 - 2,122 100.0 - 3,036 100.0 Derivatives 4 58 n/a 6 53 n/a 7 29 n/a EMA limited partnership interests (2) (5) n/a n/a (4) n/a n/a (5) n/a n/a Unrealized net capital gains and losses, pre-tax 1,988 1,025 1,454 Amounts recognized for: Insurance reserves (3) - - - DAC and DSI (4) (138) (67) (98) Amounts recognized (138) (67) (98) Deferred income taxes (650) (338) (477) Unrealized net capital gains and losses, after-tax $ 1,200 $ 620 $ 879 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 $ 109 $ 3,936 102.8 $ 134 $ 4,106 103.4 $ 136 $ 4,328 103.2 Municipal 483 8,594 106.0 670 8,713 108.3 620 8,497 107.9 Corporate 1,164 42,317 102.8 2,120 42,375 105.3 1,758 42,144 104.4 Foreign government 66 1,324 105.2 85 1,375 106.6 102 1,645 106.6 ABS (5) 2,076 99.8 8 3,055 100.3 7 3,978 100.2 RMBS 101 1,083 110.3 105 1,154 110.0 99 1,207 108.9 CMBS 37 575 106.9 42 600 107.5 42 615 107.3 Redeemable preferred stock 4 25 119.0 4 25 119.0 4 26 118.2 Total fixed income securities 1,959 59,930 103.4 3,168 61,403 105.4 2,768 62,440 104.6 Equity securities 351 4,000 109.6 414 4,166 111.0 412 4,104 111.2 Short-term investments - 2,821 100.0 - 2,497 100.0 - 2,540 100.0 Derivatives 3 60 n/a 3 79 n/a (2) 92 n/a EMA limited partnership interests (2) (5) n/a n/a (4) n/a n/a (5) n/a n/a Unrealized net capital gains and losses, pre-tax 2,308 3,581 3,173 Amounts recognized for: Insurance reserves (3) - (79) (28) DAC and DSI (4) (121) (212) (179) Amounts recognized (121) (291) (207) Deferred income taxes (768) (1,153) (1,040) Unrealized net capital gains and losses, after-tax $ 1,419 $ 2,137 $ 1,926 (1) (2) (3) (4) THE ALLSTATE CORPORATION UNREALIZED NET CAPITAL GAINS AND LOSSES ON SECURITY PORTFOLIO BY TYPE ($ in millions) March 31, 2016 December 31, 2015 September 30, 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. June 30, 2015 March 31, 2015 December 31, 2014
49 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 NET INVESTMENT INCOME Fixed income securities $ 518 $ 537 $ 546 $ 567 $ 568 Equity securities 28 33 23 31 23 Mortgage loans 53 63 53 57 55 Limited partnership interests 121 66 167 118 198 Short-term 4 1 4 3 1 Other 51 49 49 49 45 Subtotal 775 749 842 825 890 Less: Investment expense (44) (39) (35) (36) (40) Net investment income $ 731 $ 710 $ 807 $ 789 $ 850 PRE-TAX YIELDS (1) Fixed income securities 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % Equity securities 2.3 2.9 2.4 3.4 2.5 Mortgage loans 4.9 5.8 4.8 5.3 5.2 Limited partnership interests 9.7 5.4 14.4 10.1 17.2 Total portfolio 4.0 3.9 4.4 4.3 4.6 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (59) $ (118) $ (47) $ (11) $ (19) Change in intent write-downs (22) (32) (127) (32) (30) Net other-than-temporary impairment losses recognized in earnings (81) (150) (174) (43) (49) Sales and other (59) (75) 183 146 216 Valuation and settlements of derivative instruments (9) (25) 24 5 (28) Total $ (149) $ (250) $ 33 $ 108 $ 139 TOTAL RETURN ON INVESTMENT PORTFOLIO (2) 2.0 % (0.2) % - % (0.6) % 1.7 % AVERAGE INVESTMENT BALANCES (in billions) (3) $ 76.8 $ 76.8 $ 76.9 $ 76.8 $ 77.4 (1) (2) (3) Pre-tax yield is calculated as annualized investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at 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) Three months ended
50 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 NET INVESTMENT INCOME Fixed income securities: Tax-exempt $ 23 $ 27 $ 24 $ 26 $ 25 Taxable 200 201 197 195 190 Equity securities 20 24 16 23 18 Mortgage loans 3 4 4 3 4 Limited partnership interests (1) 58 29 62 45 126 Short-term 2 - 3 1 1 Other 20 18 20 20 17 Subtotal 326 303 326 313 381 Less: Investment expense (24) (23) (19) (21) (23) Net investment income $ 302 $ 280 $ 307 $ 292 $ 358 Net investment income, after-tax $ 206 $ 192 $ 209 $ 199 $ 242 PRE-TAX YIELDS (2) Fixed income securities: Tax-exempt 2.1 % 2.6 % 2.3 % 2.3 % 2.4 % Equivalent yield for tax-exempt 3.1 3.8 3.4 3.4 3.5 Taxable 3.2 3.2 3.2 3.1 2.9 Equity securities 2.4 3.1 2.5 3.4 2.6 Mortgage loans 4.0 5.4 4.0 4.1 4.5 Limited partnership interests 8.9 4.5 10.1 7.0 19.9 Total portfolio 3.3 3.1 3.5 3.3 4.0 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities: Tax-exempt $ 3 $ (10) $ 2 $ 1 $ 2 Taxable (47) (75) (42) 13 10 Equity securities (60) (13) (92) 32 46 Limited partnership interests 13 (27) (35) (1) 2 Derivatives and other (8) (28) 6 4 (32) Total $ (99) $ (153) $ (161) $ 49 $ 28 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (35) $ (84) $ (30) $ (6) $ (12) Change in intent write-downs (19) (24) (77) (28) (27) Net other-than-temporary impairment losses recognized in earnings (54) (108) (107) (34) (39) Sales and other (41) (28) (63) 77 99 Valuation and settlements of derivative instruments (4) (17) 9 6 (32) Total $ (99) $ (153) $ (161) $ 49 $ 28 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 38.3 $ 38.2 $ 37.8 $ 37.6 $ 37.9 (1) (2) (3) As of March 31, 2016, Property-Liability has commitments to invest in additional limited partnership interests totaling $1.39 billion. Pre-tax yield is calculated as annualized investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. THE ALLSTATE CORPORATION PROPERTY-LIABILITY NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Three months ended
51 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 NET INVESTMENT INCOME Fixed income securities $ 284 $ 300 $ 314 $ 338 $ 344 Equity securities 8 9 7 8 5 Mortgage loans 50 59 49 54 51 Limited partnership interests (1) 63 37 105 73 72 Short-term 2 1 1 1 - Other 30 30 29 28 27 Subtotal 437 436 505 502 499 Less: Investment expense (18) (16) (14) (13) (15) Net investment income $ 419 $ 420 $ 491 $ 489 $ 484 Net investment income, after-tax $ 273 $ 273 $ 319 $ 318 $ 315 PRE-TAX YIELDS (2) Fixed income securities 4.6 % 4.8 % 4.9 % 5.1 % 5.2 % Equity securities 2.1 2.4 2.1 3.4 2.1 Mortgage loans 4.9 5.8 4.9 5.5 5.2 Limited partnership interests 10.7 6.5 19.4 14.0 13.8 Total portfolio 4.8 4.8 5.6 5.6 5.5 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY ASSET TYPE Fixed income securities $ (26) $ (64) $ 261 $ 46 $ 68 Equity securities (30) (13) (58) 16 32 Mortgage loans - 4 1 1 - Limited partnership interests 13 (14) (20) (2) 4 Derivatives and other (6) (10) 10 (2) 7 Total $ (49) $ (97) $ 194 $ 59 $ 111 REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) BY TRANSACTION TYPE Impairment write-downs $ (24) $ (34) $ (17) $ (5) $ (7) Change in intent write-downs (3) (8) (50) (4) (3) Net other-than-temporary impairment losses recognized in earnings (27) (42) (67) (9) (10) Sales and other (17) (47) 246 69 117 Valuation and settlements of derivative instruments (5) (8) 15 (1) 4 Total $ (49) $ (97) $ 194 $ 59 $ 111 AVERAGE INVESTMENT BALANCES (in billions) (3) $ 35.9 $ 36.0 $ 36.1 $ 36.1 $ 36.3 (1) (2) (3) As of March 31, 2016, Allstate Financial has commitments to invest in additional limited partnership interests totaling $1.32 billion. Pre-tax yield is calculated as annualized investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and other consolidated investments is net of asset level operating expenses (direct expenses of the assets reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses. Average investment balances for the quarter are calculated as the average of the current and prior quarter investment balances. Year-to-date average investment balances are calculated as the average of investment balances at the beginning of the year and the end of each quarter during the year. For purposes of the average investment balances calculation, unrealized capital gains and losses are excluded. THE ALLSTATE CORPORATION ALLSTATE FINANCIAL NET INVESTMENT INCOME, YIELDS AND REALIZED CAPITAL GAINS AND LOSSES (PRE-TAX) ($ in millions) Three months ended
52 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Consolidated investment portfolio Interest-bearing (1) $ 68,163 $ 67,390 $ 68,913 $ 70,243 $ 71,287 Equity/owned (2) 10,714 10,368 9,429 8,898 9,150 Total $ 78,877 $ 77,758 $ 78,342 $ 79,141 $ 80,437 Consolidated portfolio total return (3) Interest-bearing 1.9 % (0.3) % 0.4 % (0.8) % 1.4 % Equity/owned 0.2 0.2 (0.3) 0.2 0.4 Investment expenses (0.1) (0.1) (0.1) - (0.1) Total 2.0 (0.2) - (0.6) 1.7 Consolidated portfolio total return (3) Income 0.9 % 0.9 % 1.0 % 1.0 % 1.0 % Valuation 1.1 (1.1) (1.0) (1.6) 0.7 Total 2.0 (0.2) - (0.6) 1.7 Consolidated net investment income Interest-bearing $ 618 $ 643 $ 646 $ 670 $ 664 Equity/owned 157 106 196 155 226 Investment expenses (44) (39) (35) (36) (40) Total $ 731 $ 710 $ 807 $ 789 $ 850 Consolidated Interest-bearing pre-tax yield (4) 3.7 % 3.8 % 3.8 % 3.9 % 3.9 % Property-Liability net investment income Interest-bearing excluding prepayment premiums $ 241 $ 240 $ 240 $ 233 $ 226 Prepayment premiums 2 5 4 7 7 Total Interest-bearing 243 245 244 240 233 Equity/owned 83 58 82 73 148 Less: Investment expenses (24) (23) (19) (21) (23) Total 302 280 307 292 358 Less: prepayment premiums (2) (5) (4) (7) (7) Total excluding prepayment premiums $ 300 $ 275 $ 303 $ 285 $ 351 Property-Liability interest-bearing pre-tax yield 3.0 % 3.0 % 3.0 % 3.0 % 2.9 % Property-Liability interest-bearing pre-tax yield excluding prepayment premiums 3.0 % 3.0 % 2.9 % 2.9 % 2.8 % Allstate Financial net investment income Interest-bearing excluding prepayment premiums $ 361 $ 371 $ 386 $ 408 $ 413 Prepayment premiums 2 17 5 12 8 Total interest-bearing 363 388 391 420 421 Equity/owned 74 48 114 82 78 Less: Investment expenses (18) (16) (14) (13) (15) Total 419 420 491 489 484 Less: prepayment premiums (2) (17) (5) (12) (8) Total excluding prepayment premiums $ 417 $ 403 $ 486 $ 477 $ 476 Allstate Financial interest-bearing pre-tax yield 4.6 % 4.8 % 4.8 % 5.1 % 5.1 % Allstate Financial interest-bearing pre-tax yield excluding prepayment premiums 4.5 % 4.6 % 4.7 % 4.9 % 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. Pre-tax yield is calculated as annualized investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at 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. THE ALLSTATE CORPORATION INVESTMENT RESULTS ($ in millions) Three months ended
53 Market- Market- Performance- Performance- Based Based Based Based March 31, 2016 Total Core (1) Active (2) Long-Term (3) Opportunistic (4) Fixed income securities $ 57,291 $ 50,363 $ 6,816 $ 65 $ 47 Equity securities 5,117 4,044 988 61 24 Mortgage loans 4,302 4,302 - - - Limited partnership interests 5,091 368 - 4,723 - Short-term investments 3,526 2,766 760 - - Other 3,550 2,879 150 505 16 Total $ 78,877 $ 64,722 $ 8,714 $ 5,354 $ 87 % of total 82% 11% 7% - Property-Liability $ 38,736 $ 28,121 $ 7,668 $ 2,889 $ 58 % of Property-Liability 73% 20% 7% - Allstate Financial $ 37,336 $ 33,796 $ 1,046 $ 2,465 $ 29 % of Allstate Financial 90% 3% 7% - Corporate & Other $ 2,805 $ 2,805 $ - $ - $ - % of Corporate & Other 100% - - - Market- Market- Performance- Performance- Based Based Based Based December 31, 2015 Total Core (1) Active (2) Long-Term (3) 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)
54 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Investment income Market-Based Core $ 581 $ 614 $ 612 $ 640 $ 629 Market-Based Active 61 59 52 52 50 Performance-Based Long-Term 131 74 176 130 209 Performance-Based Opportunistic 2 2 2 3 2 Investment income, before expense 775 749 842 825 890 Investment expense (44) (39) (35) (36) (40) Net investment income $ 731 $ 710 $ 807 $ 789 $ 850 PBLT Asset level operating expense (1) $ (8) $ (4) $ (4) $ (5) $ (6) Realized Capital Gains and Losses (Pre-Tax) Market-Based Core $ (91) $ (153) $ 102 $ 63 $ 58 Market-Based Active (47) (49) (63) 48 73 Performance-Based Long-Term (11) (49) - (5) 8 Performance-Based Opportunistic - 1 (6) 2 - Total $ (149) $ (250) $ 33 $ 108 $ 139 (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) Three months ended
55 March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2015 2015 2015 2015 Investment position Limited partnerships Private equity (1) $ 3,324 $ 3,181 $ 3,131 $ 3,012 $ 2,969 Real estate (2) 1,229 1,166 1,160 1,164 1,366 Timber & agriculture-related (3) 170 163 151 - - PBLT - limited partnerships 4,723 4,510 4,442 4,176 4,335 Other (4) Private equity 103 71 93 70 67 Real estate 361 301 288 242 201 Timber & agriculture-related 167 167 167 167 168 PBLT - other 631 539 548 479 436 Total Private equity 3,427 3,252 3,224 3,082 3,036 Real estate 1,590 1,467 1,448 1,406 1,567 Timber & agriculture-related 337 330 318 167 168 Total PBLT $ 5,354 $ 5,049 $ 4,990 $ 4,655 $ 4,771 Investment income, before expense Limited partnerships Private equity $ 85 $ 47 $ 162 $ 113 $ 80 Real estate 33 20 5 10 123 Timber & agriculture-related 3 (1) - - - PBLT - limited partnerships 121 66 167 123 203 Other Private equity - - 1 - - Real estate 8 6 7 5 4 Timber & agriculture-related 2 2 1 2 2 PBLT - other 10 8 9 7 6 Total Private equity 85 47 163 113 80 Real estate 41 26 12 15 127 Timber & agriculture-related 5 1 1 2 2 Total PBLT $ 131 $ 74 $ 176 $ 130 $ 209 Asset level operating expense (5) Total $ (8) $ (4) $ (4) $ (5) $ (6) Realized Capital Gains and Losses Limited Partnerships Private equity $ 12 $ (49) $ (3) $ (3) $ 9 Real estate 1 - (2) - (2) Timber & agriculture-related - - - - - PBLT - limited partnerships 13 (49) (5) (3) 7 Other Private equity (25) 1 6 (1) - Real estate 1 (1) (1) (1) - Timber & agriculture-related - - - - 1 PBLT - other (24) - 5 (2) 1 Total Private equity (13) (48) 3 (4) 9 Real estate 2 (1) (3) (1) (2) Timber & agriculture-related - - - - 1 Total PBLT $ (11) $ (49) $ - $ (5) $ 8 Pre-Tax Yield (6) (7) 9.4 % 5.6 % 14.3 % 10.6 % 17.5 % 10 Year Internal Rate of Return ("IRR") (8) (9) 10.5 % 10.8 % 11.3 % 11.3 % 11.4 % (1) (2) (3) (4) (5) (6) (7) (8) (9) We calculate the internal rate of return (“IRR”) for our performance-based long-term investments as an input to assess their performance. The IRR represents the rate of return on the investments considering the amount and timing of the associated cash flows. Our IRR calculation method may differ from those used by other investors. Until an investment is liquidated, the IRR is an interim estimated return based on the inception to date cash flows. Our PBLT portfolio is diversified by asset type and vintage year. We believe the 10 year IRR is the most comprehensive metric to evaluate the overall strategy’s performance relative to our long-term return expectations. The 10 year IRR for PBLT was 11.7%, 12.0%, 11.8%, 11.7%, 11.5%, 11.0%, 11.1%, 11.1%, 10.4%, 10.7%, 11.0% and 10.7% for the fourth quarter 2014 through first quarter 2012 periods, respectively. The Pre-tax yield for PBLT was 10.9%, 14.5%, 16.3%, 12.8%, 18.3%, 11.1%, 12.9%, 9.9%, 12.0%, 3.8%, 13.2% and 12.7% for the fourth quarter 2014 through first quarter 2012 periods, respectively. Pre-tax yield is calculated as annualized investment income, generally before investment expense (including dividend income in the case of equity securities) divided by the average of investment balances at 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. 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 PERFORMANCE-BASED LONG-TERM INVESTMENTS ("PBLT") ($ in millions) Includes PBLT - fixed income securities, equity securities and other investments on page 53. Includes Timber and agriculture-related reflected in Private equity on page 47. Includes Real estate on page 47. Includes Private equity on page 47, excluding Timber and agriculture-related. As of or for the three months ended
56 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".
