ALL- Allstate

[twacowfca]

Allstate omitted their usual comparison of their book value to the previous quarter's book value in their press release when they reported their Q2 results today.  Digging a little deeper shows why.  They had a whopping mark to market loss of $2.73 billion on their unrealized portfolio gains impacting their statutory surplus of $17 billion as now reported.  Adding back their reported net income for Q2 of $435 million, that still leaves a hit to their portfolio assets amounting to 13% of their surplus.

 

In mid July, they executed a mark to model change in their estimated liability for retirement obligations that makes the reported hit to their book value seem less severe.  That change reflected the estimated present value of a future life insurance benefit for retirees that they eliminated.  However, that change in their estimated retirement benefits should be inconsequential for calculation of their statutory surplus that depends on the value of the assets available for payment of claims.

 

Will these mark to market losses have an impact on their ratings?

[twacowfca]

Allstate omitted their usual comparison of their book value to the previous quarter's book value in their press release when they reported their Q2 results today.  Digging a little deeper shows why.  They had a whopping mark to market loss of $2.73 billion on their unrealized portfolio gains impacting their statutory surplus of $17 billion as now reported.  Adding back their reported net income for Q2 of $435 million, that still leaves a hit to their portfolio assets amounting to 13% of their surplus.

 

In mid July, they executed a mark to model change in their estimated liability for retirement obligations that makes the reported hit to their book value seem less severe.  That change reflected the estimated present value of a future life insurance benefit for retirees that they eliminated.  However, that change in their estimated retirement benefits should be inconsequential for calculation of their statutory surplus that depends on the value of the assets available for payment of claims.

 

Will these mark to market losses have an impact on their ratings?

 

Here's an update of the post.

[jay21]

Barrons article:  http://online.barrons.com/article/SB50001424052748704329604578641981855032640.html?mod=BOL_da_wt

 

"There are very few companies in this industry with consistent, greater-than-10% return-on-equity," says Gabriel Solomon, an analyst at T. Rowe Price, which owns the stock. "Allstate has levers to improve returns, including more share buybacks, potentially more divestitures of life insurance assets, improving homeowners results, and lowering bloated expenses."

[twacowfca]

Barrons article:  http://online.barrons.com/article/SB50001424052748704329604578641981855032640.html?mod=BOL_da_wt

 

"There are very few companies in this industry with consistent, greater-than-10% return-on-equity," says Gabriel Solomon, an analyst at T. Rowe Price, which owns the stock. "Allstate has levers to improve returns, including more share buybacks, potentially more divestitures of life insurance assets, improving homeowners results, and lowering bloated expenses."

 

More BS from the sell side, swallowed hook line and sinker by funds locked into a large position as Geico and others leave them in their wake.  What levers? Selling more preferred stock? 

 

Please note that Alstate's CFO sold $2M worth of Allstate's stock soon after they reported Q2.

[Guest longinvestor]

Allstate has a very large presence (HQ incl) in the same county that I live in, in Chicagoland;  They have a great reputation but as Twacowfca notes "Geico et al leaving them in their wake" is true. As an example, I recently "bundled" up my Geico auto policy with a home, liability, ID theft  etc. and the savings were so ridiculous! Even know folks who work there/with them and they are understandably nervous about Geico.