The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from PR Newswire

Allstate Reports Strong First Quarter 2012 Earnings

Wednesday, May 02, 2012

Allstate Reports Strong First Quarter 2012 Earnings16:05 EDT Wednesday, May 02, 2012NORTHBROOK, Ill., May 2, 2012 /PRNewswire/ -- The Allstate Corporation (NYSE: ALL) today reported financial results for the first quarter of 2012:The Allstate Corporation Consolidated HighlightsThree months endedMarch 31,($ in millions, except per share amounts and ratios)20122011 (1)%Change(As Adjusted)Consolidated revenues$ 8,362$ 8,0953.3Net income 76652446.2Net income per diluted share1.530.9856.1Operating income*71049443.7Operating income per diluted share*1.420.9352.7Book value per share38.5735.728.0Book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities*35.3134.462.5Catastrophe losses259333(22.2)Property-Liability combined ratio92.194.9(2.8) pts Property-Liability combined ratio excluding the effect of catastrophes, prior year reserve reestimates, business combination expenses and the amortization of purchased intangible assets ("underlying combined ratio")*88.189.9(1.8) pts* Measures used in this release that are not based on accounting principles generally accepted in the United States of America ("non-GAAP") are defined and reconciled to the most directly comparable GAAP measure and operating measures are defined in the "Definitions of Non-GAAP and Operating Measures" section of this document.(1)Allstate adopted new deferred acquisition costs "DAC" accounting guidance on a retrospective basis as of January 1, 2012.  Accordingly, all prior period balances have been adjusted.  The DAC and shareholders' equity balances were reduced by $572 million and $376 million, respectively, when compared to the previously reported December 31, 2011 balances."Our focus on improving returns while executing a strategy to offer unique products to different customer segments generated strong results in the first quarter," said Thomas J. Wilson, chairman, president and chief executive officer of The Allstate Corporation.  "Maintaining margins in auto insurance and continued implementation of our homeowner profit improvement program resulted in solid returns in our property-casualty business.  Allstate Financial had increased operating and net income reflecting its return improvement program and increased partnership income.  Overall premiums increased reflecting the acquisition of Esurance, higher average homeowners premiums, and growth in emerging businesses.  Partially offsetting was an expected reduction in auto policies in the Allstate Agency channel reflecting profit improvement plans in New York and Florida and the secondary impact of raising homeowner pricing.  Investment returns were also good as higher earnings from limited partnerships and proactive management of the portfolio offset the continuing impact of low interest rates.  As a result, this quarter book value per share increased 6.6%, the dividend was increased by 5% to $.22 per share, and $300 million of common stock was repurchased."Consolidated Financial ResultsNet income for the quarter was $766 million, or $1.53 per diluted share, compared to $524 million, or $0.98 per diluted share in the first quarter 2011.  The increase was due to improvement in operating income and to a lesser extent, realized capital gains.  Operating income was $710 million, or $1.42 per diluted share, compared to $494 million, or $0.93 per diluted share in 2011.  The increase in operating income was primarily due to an improvement in the underlying margin for Allstate brand homeowners and other personal lines, lower catastrophe losses, as well as a benefit from the reclassification of limited partnership income on investments accounted for using the equity method of accounting from realized capital gains to operating income beginning in 2012.Property-Liability Profitability Increased as Underlying Margin ImprovedIn the first quarter 2012, Allstate made continued progress on its strategy to improve homeowners returns while maintaining auto margins.  The Property-Liability combined ratio for the quarter was 92.1, a 2.8 point improvement from the prior year quarter.  The underlying Property-Liability combined ratio was 88.1, 1.8 points better than the prior year and within the outlook range of 88 to 91 for the year.Allstate brand homeowners combined ratio was 80.2 for the first quarter 2012 versus 91.4 for the prior year quarter.  The underlying homeowners combined ratio improved to 67.0 from 74.0 in the first quarter of 2011 due to approved rate increases and a decline in loss costs.  The combined ratio for Allstate brand standard auto was 95.2, 0.2 points higher than the prior year, as the impact of approved rate changes essentially offset the change in loss costs.  The underlying combined ratio for Allstate brand standard auto was comparable to the prior year quarter.  Improvements in emerging businesses also contributed positively to the results in the quarter.Total Property-Liability premiums written* increased 4% from the first quarter of 2011 to $6.46 billion reflecting the acquisition of Esurance which experienced favorable results for net premiums written and units as expected.  Allstate brand standard auto premiums written declined 1.2% from the prior year, a result anticipated due to actions taken to improve auto profitability in New York and Florida and homeowners returns.  Allstate brand homeowners and other personal lines as well as Encompass contributed to premiums written growth in the quarter.  Allstate Financial Continues to Successfully Execute StrategyAllstate Financial results reflect continued progress to improve overall business returns while shifting the focus to underwritten products from spread-based products.  For the first quarter, Allstate Financial generated net income of $112 million, an increase of 9.8% from the prior year.  The improvement reflected an increase in operating income and absence of the loss on wind-down of its banking business in 2011, partially offset by current year realized capital losses compared to prior year realized capital gains.  Operating income was $150 million versus $113 million in the first quarter 2011.  The increase in operating income included a $60 million ($39 million after-tax) benefit from the classification of equity method limited partnership income as net investment income in 2012.  Our annual study of deferred acquisition cost assumptions ("annual unlock study") has been moved to the third quarter of 2012.  The 2011 annual unlock study resulted in an unfavorable impact to operating income of $7 million (after-tax) in the first quarter of 2011.Growth in premiums and contract charges on underwritten products for the first quarter 2012 of $18 million was more than offset by a decline in annuities of $34 million.   Consistent with the shift to focus on underwritten products, contractholder funds were reduced by $729 million in the first quarter and $5.2 billion from March 31, 2011.  Allstate Agencies continued to generate strong year-over-year sales growth with a 16% increase in issued life insurance policies compared to the prior year quarter.  Investment Results Reflect Proactive ManagementAllstate continued its proactive management of investment risk and return, delivering solid total returns while focusing on managing yields during this period of historically low interest rates.  Portfolio actions in the first quarter 2012 included optimizing our yield curve position by shifting out of longer-term municipal bonds and shorter-term lower-yielding Treasuries into intermediate investment grade corporate bonds and shifting public equity holdings into high-yield corporate bonds.Allstate's consolidated investment portfolio totaled $97.0 billion at March 31, 2012 compared to $95.6 billion at December 31, 2011, as solid investment returns and operating cash flow more than offset the expected reduction in Allstate Financial's liabilities.  The pre-tax net unrealized capital gain totaled $3.6 billion at March 31, 2012, compared to $2.9 billion at December 31, 2011, as the impact of tightening credit spreads and strong equity markets was partially offset by rising interest rates and realized gains. For the first quarter of 2012, net investment income was $1.0 billion and total portfolio yield was 4.6%, both representing increases over the first quarter of 2011 and the prior quarter.  To more closely align the results of our expanding strategies in alternative investments and private asset ownership with the liabilities they support, equity method limited partnership results are being classified as net investment income beginning in 2012.   Excluding the results of these limited partnerships, first quarter 2012 total portfolio yield of 4.3% was comparable to prior year while net investment income was lower, consistent with the expected reduction in Allstate Financial's liabilities.  Pre-tax net realized capital gains for the first quarter of 2012 were $168 million, compared to $96 million in first quarter 2011.  Realized capital gains in the first quarter of 2012 reflect sales of equity securities and an improving trend in impairment write-downs.Book Value per Diluted Share Increased 8%; Repurchased $300 Million in Shares"Managing capital remains a key priority for Allstate.  During the quarter, Allstate repurchased shares worth $300 million, bringing total repurchases to $406 million under the current $1 billion authorization.  Book value per diluted share reached a record $38.57 on strong operating results, improved portfolio values, and an active share repurchase program," said Steve Shebik, Chief Financial Officer.  Book value per diluted share increased 8% from the first quarter 2011 and 6.6% from year-end 2011.Statutory surplus at March 31, 2012 was an estimated $16.1 billion for our combined insurance operating companies.  Property-Liability surplus was $12.6 billion and Allstate Financial companies accounted for the remainder.  This compares to statutory surplus at December 31, 2011 of $15.6 billion.  During the first quarter, Allstate Insurance Company paid a $450 million cash dividend to the holding company.  Deployable assets at the holding company level totaled $2.7 billion at March 31, 2012.                      Visit www.allstateinvestors.com to view additional information about Allstate's results, including a webcast of its quarterly conference call and the presentation discussed on the call.  The conference call will be held at 9 a.m. ET on Thursday, May 3.  The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate®" slogan, Allstate is reinventing protection and retirement to help 16 million households insure what they have today and better prepare for tomorrow. Consumers access Allstate insurance products (auto, home, life and retirement) and services through Allstate agencies, independent agencies, and Allstate exclusive financial representatives in the U.S. and Canada, as well as via www.allstate.com and 1-800 Allstate®. THE ALLSTATE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS($ in millions, except per share data)Three months endedMarch 31,20122011(unaudited)(As Adjusted)Revenues   Property-liability insurance premiums$6,630$6,448   Life and annuity premiums and contract charges553569   Net investment income1,011982   Realized capital gains and losses:Total other-than-temporary impairment losses(87)(156)Portion of loss recognized in other comprehensive income4(27)Net other-than-temporary impairment losses recognized      in earnings(83)(183)Sales and other realized capital gains and losses251279Total realized capital gains and losses168968,3628,095Costs and expenses   Property-liability insurance claims and claims expense4,3394,476   Life and annuity contract benefits439454   Interest credited to contractholder funds378418   Amortization of deferred policy acquisition costs979984   Operating costs and expenses1,017900   Restructuring and related charges69   Interest expense95927,2537,333Gain (loss) on disposition of operations3(20)Income from operations before income tax expense 1,112742Income tax expense 346218Net income$766$524Earnings per share:Net income per share - Basic$1.54$0.99Weighted average shares - Basic498.7531.0Net income per share - Diluted$1.53$0.98Weighted average shares - Diluted501.5533.6Cash dividends declared per share$0.22$0.21THE ALLSTATE CORPORATIONSEGMENT RESULTS($ in millions, except ratios)Three months endedMarch 31,20122011Property-Liability  Premiums written $6,463$6,215  Premiums earned$6,630$6,448  Claims and claims expense (4,339)(4,476)  Amortization of deferred policy acquisition costs(878)(864)  Operating costs and expenses(884)(769)  Restructuring and related charges (6)(11)     Underwriting income523328  Net investment income313284  Periodic settlements and accruals on non-hedge derivative instruments(1)(4)Business combination expenses and the amortization of purchased  intangible assets 47--  Income tax expense on operations(281)(181)     Operating income 601427  Realized capital gains and losses, after-tax12438  Reclassification of periodic settlements and accruals on non-hedge       derivative instruments, after-tax13Business combination expenses and the amortization of purchased    intangible assets, after-tax(31)--     Net income $695$468  Catastrophe losses$259$333  Operating ratios:     Claims and claims expense ratio65.469.4     Expense ratio26.725.5     Combined ratio 92.194.9     Effect of catastrophe losses on combined ratio3.95.2     Effect of prior year reserve reestimates on combined ratio(3.1)(0.7)     Effect of catastrophe losses included in prior year reserve reestimates        on combined ratio(2.5)(0.5)     Effect of business combination expenses and the amortization of         purchased intangible assets on combined ratio0.7--     Effect of Discontinued Lines and Coverages on combined ratio --0.1Allstate Financial  Investments$57,620$60,484  Premiums and contract charges$553$569  Net investment income 687684  Periodic settlements and accruals on non-hedge derivative instruments1517  Contract benefits(439)(454)  Interest credited to contractholder funds(368)(425)  Amortization of deferred policy acquisition costs(86)(95)  Operating costs and expenses(142)(132)  Restructuring and related charges--2  Income tax expense on operations(70)(53)     Operating income150113  Realized capital gains and losses, after-tax (14)25  Valuation changes on embedded derivatives that are not hedged, after-tax(6)8  DAC and DSI amortization relating to realized capital gains and      losses and valuation changes on embedded derivatives that are not     hedged, after-tax (10)(22)  DAC and DSI unlocking relating to realized capital gains and losses, after-tax--3  Reclassification of periodic settlements and accruals on non-hedge       derivative instruments, after-tax(10)(12)  Gain (loss) on disposition of operations, after-tax2(13)     Net income $112$102Corporate and Other  Net investment income$11$14  Operating costs and expenses(86)(91)  Income tax benefit on operations3431     Operating loss(41)(46)  Realized capital gains and losses, after-tax ----     Net loss $(41)$(46)Consolidated net income$766$524THE ALLSTATE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION($ in millions, except par value data) March 31,December 31,20122011Assets(unaudited)(As Adjusted)Investments:     Fixed income securities, at fair value (amortized cost $74,060 and $73,379)$77,223$76,113     Equity securities, at fair value (cost $3,430 and $4,203)3,8474,363     Mortgage loans7,1677,139     Limited partnership interests4,6374,697Short?term, at fair value (amortized cost $1,886 and $1,291)1,8861,291     Other2,2492,015          Total investments97,00995,618Cash577776Premium installment receivables, net4,9084,920Deferred policy acquisition costs3,7163,871Reinsurance recoverables, net7,1187,251Accrued investment income846826Deferred income taxes201722Property and equipment, net912914Goodwill1,2421,242Other assets2,0492,069Separate Accounts7,3556,984              Total assets$125,933$125,193LiabilitiesReserve for property-liability insurance claims and claims expense$20,283$20,375Reserve for life?contingent contract benefits14,29614,406Contractholder funds41,60342,332Unearned premiums9,88810,057Claim payments outstanding750827Other liabilities and accrued expenses6,4905,978Long-term debt6,0585,908Separate Accounts7,3556,984              Total liabilities106,723106,867EquityPreferred stock, $1 par value, 25 million shares authorized, none issued----Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 493 million and 501 million shares outstanding99Additional capital paid?in3,1513,189Retained income32,56531,909Deferred ESOP expense(41)(43)Treasury stock, at cost (407 million and 399 million shares)(17,034)(16,795)Accumulated other comprehensive income:Unrealized net capital gains and losses:Unrealized net capital losses on fixed income securities with OTTI (100)(174)Other unrealized net capital gains and losses 2,4122,041Unrealized adjustment to DAC, DSI and insurance reserves(438)(467)      Total unrealized net capital gains and losses1,8741,400     Unrealized foreign currency translation adjustments6556     Unrecognized pension and other postretirement benefit cost(1,407)(1,427)              Total accumulated other comprehensive income53229              Total shareholders' equity19,18218,298Noncontrolling interest2828              Total equity19,21018,326              Total liabilities and equity$125,933$125,193THE ALLSTATE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS($ in millions)Three months endedMarch 31,20122011Cash flows from operating activities(unaudited)(As Adjusted)Net income  $766$524Adjustments to reconcile net income to net cash provided by operating activities:Depreciation, amortization and other non-cash items9631Realized capital gains and losses(168)(96)(Gain) loss on disposition of operations(3)20Interest credited to contractholder funds378418Changes in:Policy benefits and other insurance reserves(346)(58)Unearned premiums(180)(248)Deferred policy acquisition costs5267Premium installment receivables, net193Reinsurance recoverables, net57(117)Income taxes  333203Other operating assets and liabilities (197)(21)Net cash provided by operating activities 807726Cash flows from investing activitiesProceeds from sales     Fixed income securities5,6898,363     Equity securities1,059642     Limited partnership interests403113     Mortgage loans626     Other investments3663Investment collections Fixed income securities 9661,201Mortgage loans17088Other investments 2377Investment purchasesFixed income securities(7,008)(10,207)Equity securities(128)(144)Limited partnership interests(318)(334)Mortgage loans(216)(26)Other investments(163)(58)Change in short-term investments, net(379)1,649Change in other investments, net(9)(119)Purchases of property and equipment, net (51)(48)Disposition of operations(1)(1)Net cash provided by investing activities 791,285Cash flows from financing activitiesProceeds from issuance of long-term debt493--Repayment of long-term debt(350)--Contractholder fund deposits485596Contractholder fund withdrawals(1,299)(2,122)Dividends paid(106)(107)Treasury stock purchases(309)(305)Shares reissued under equity incentive plans, net159Excess tax benefits on share-based payment arrangements(1)(3)Other(13)--Net cash used in financing activities(1,085)(1,932)Net (decrease) increase in cash(199)79Cash at beginning of period776562Cash at end of period$577$641Definitions of Non-GAAP and Operating MeasuresWe believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following non-GAAP and operating financial measures.  Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.Operating income (loss) is net income (loss), 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 (loss), valuation changes on embedded derivatives that are not hedged, after-tax, amortization of 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 business combination expenses and the 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.  Net income (loss) is the GAAP measure that is most directly comparable to operating income (loss).We use operating income (loss) 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, business combination expenses and the 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 (loss) 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 (loss), 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.  Business combination expenses are excluded because they are non-recurring in nature and the 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 (loss) 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 (loss) 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 (loss) is used by management along with the other components of net income (loss) to assess our performance.  We use adjusted measures of operating income (loss) and operating income (loss) per diluted share in incentive compensation.  Therefore, we believe it is useful for investors to evaluate net income (loss), operating income (loss) 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 (loss) 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 (loss) as the denominator.  Operating income (loss) should not be considered as a substitute for net income (loss) and does not reflect the overall profitability of our business. The following table reconciles operating income and net income.($ in millions, except per share data)For the three months ended March 31,Property-LiabilityAllstate FinancialConsolidatedPer diluted share20122011201220112012201120122011Operating income $601$427$150$113$710$494$1.42$0.93Realized capital gains and losses18957(21)3916896Income tax (expense) benefit(65)(19)7(14)(58)(33)Realized capital gains and losses,   after-tax 12438(14)25110630.220.12Valuation changes on embedded   derivatives that are not hedged,   after-tax----(6)8(6)8(0.01)0.02DAC and DSI amortization relating to   realized capital gains and losses and   valuation changes on embedded   derivatives that are not hedged,   after-tax----(10)(22)(10)(22)(0.02)(0.04)DAC and DSI unlocking relating to   realized capital gains and losses,    after-tax------3--3----Reclassification of periodic settlements   and accruals on non-hedge derivative   instruments, after-tax13(10)(12)(9)(9)(0.02)(0.02)Business combination expenses and the   amortization of purchased intangible   assets, after-tax(31)------(31)--(0.06)--Gain (loss) on disposition of operations,  after-tax----2(13)2(13)--(0.03)Net income$695$468$112$102$766$524$1.53$0.98Underwriting income (loss) 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 (loss) is the most directly comparable GAAP measure.  Underwriting income (loss) should not be considered as a substitute for net income (loss) and does not reflect the overall profitability of our business.  A reconciliation of Property-Liability underwriting income (loss) to net income (loss) is provided in the "Segment Results" page.Combined ratio excluding the effect of catastrophes, prior year reserve reestimates, business combination expenses and the 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, the effect of business combination expenses and the 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, business combination expenses and the 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.  Business combination expenses and the amortization of purchased intangible assets primarily relate to the acquisition purchase price and are 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 Property-Liability underlying combined ratio to the Property-Liability combined ratio is provided in the following table.Three months endedMarch 31,20122011Combined ratio excluding the effect of catastrophes, prior year   reserve reestimates, business combination expenses and   the amortization of purchased intangible assets ("underlying   combined ratio")88.189.9Effect of catastrophe losses3.95.2Effect of prior year non-catastrophe reserve reestimates(0.6)(0.2)Effect of business combination expense and the amortization of   purchased intangible assets0.7--Combined ratio 92.194.9Effect of prior year catastrophe reserve reestimates (2.5)(0.5)Underwriting margin is calculated as 100% minus the combined ratio.The Property-Liability underlying combined ratio by brand is provided in the following table.Three months endedMarch 31,20122011Allstate brand87.089.7Encompass brand96.693.1Esurance brand109.1--In this news release, we provide our outlook range on the Property-Liability 2012 underlying combined ratio.  A reconciliation of this measure to the combined ratio is not possible on a forward-looking basis because it is not possible to provide a reliable forecast of catastrophes.  Future prior year reserve reestimates are expected to be zero because reserves are determined based on our best estimate of ultimate loss reserves as of the reporting date.A reconciliation of the Allstate brand standard auto underlying combined ratio to the Allstate brand standard auto combined ratio is provided in the following table.Three months endedMarch 31,20122011Underlying combined ratio 94.994.8Effect of catastrophe losses1.20.5Effect of prior year non-catastrophe reserve reestimates(0.9)(0.3)Combined ratio 95.295.0Effect of prior year catastrophe reserve reestimates (0.3)(0.1)A reconciliation of the Allstate brand homeowners underlying combined ratio to the Allstate brand homeowners combined ratio is provided in the following table.Three months endedMarch 31,20122011Underlying combined ratio 67.074.0Effect of catastrophe losses12.617.7Effect of prior year non-catastrophe reserve reestimates0.6(0.3)Combined ratio 80.291.4Effect of prior year catastrophe reserve reestimates (8.5)(2.4)Book value per 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 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 shares outstanding plus dilutive potential shares outstanding.  We use the trend in book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities, in conjunction with book value per 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 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 share is the most directly comparable GAAP measure.  Book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities, should not be considered as a substitute for book value per share, and does not reflect the recorded net worth of our business.  The following table shows the reconciliation.($ in millions, except per share data)As of March 31,20122011Book value per shareNumerator:  Shareholders' equity $19,182$18,898Denominator: Shares outstanding and dilutive potential shares        outstanding497.3529.0Book value per share $38.57$35.72Book value per share, excluding the impact of   unrealized net capital gains and losses on fixed   income securitiesNumerator:  Shareholders' equity$19,182$18,898  Unrealized net capital gains and losses on fixed income        securities1,620671Adjusted shareholders' equity$17,562$18,227Denominator:Shares outstanding and dilutive potential shares      outstanding497.3529.0Book value per share, excluding the impact of unrealized   net capital gains and losses on fixed income securities$35.31$34.46Premiums written is the amount of premiums charged for policies issued during a fiscal period.  Premiums earned is a GAAP measure.  Premiums are considered earned and are included in financial results on a pro-rata basis over the policy period.  The portion of premiums written applicable to the unexpired terms of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position.  A reconciliation of premiums written to premiums earned is presented in the following table.($ in millions)Three months endedMarch 31,20122011Property-Liability premiums written$6,463$6,215Decrease in unearned premiums167234Other --(1)Property-Liability premiums earned$6,630$6,448Forward-Looking Statements and Risk FactorsThis news release contains forward-looking statements about our outlook for the Property-Liability combined ratio excluding the effect of catastrophes, prior year reserve reestimates, business combination expenses, and the amortization of purchased intangible assets for 2012 and returns on equity.  These statements are subject to the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections.  Actual results may differ materially from those projected based on the risk factors described below. Premiums written and premiums earned, the denominator of the underlying combined ratio, may be materially less than projected.  Policyholder attrition may be greater than anticipated resulting in a lower amount of insurance in force. Returns on equity may be materially less than projected and adversely affected by our inability to obtain regulatory approval for rate changes that may be required to achieve targeted levels of profitability. Unanticipated increases in the severity or frequency of standard auto insurance claims may adversely affect our underwriting results.  Changes in the severity or frequency of claims may affect the profitability of our Allstate Protection segment.  Changes in bodily injury claim severity are driven primarily by inflation in the medical sector of the economy and litigation.  Changes in auto physical damage claim severity are driven primarily by inflation in auto repair costs, auto parts prices and used car prices.  The short-term level of claim frequency we experience may vary from period to period and may not be sustainable over the longer term.  A decline in gas prices, increase in miles driven, and higher unemployment are examples of factors leading to a short-term frequency change.  A significant long-term increase in claim frequency could have an adverse effect on our underwriting results.We undertake no obligation to publicly correct or update any forward-looking statements.  This news release contains unaudited financial information.SOURCE The Allstate CorporationFor further information: Media Relations, Maryellen Thielen, +1-847-402-5600, or Investor Relations, Robert Block, +1-847-402-2800