Allstate’s Strategy Drives Growth and Attractive Returns

NORTHBROOK, Ill.–(BUSINESS WIRE)–The Allstate Corporation (NYSE: ALL) today reported financial results
for the first quarter of 2019.

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

“Allstate’s strategy to profitably grow market share in protection
products continues to gain momentum,” said Tom Wilson, Chair, President
and Chief Executive Officer of The Allstate Corporation. “Using an
innovative approach to better serve customers enabled us to grow while
maintaining attractive returns. The Allstate and Esurance brands grew
personal insurance policies in force 2.3% and 10.9% over the prior year
quarter. SquareTrade protection contracts increased 86.3% over the prior
year quarter to 77.9 million, reflecting the expansion of retail
distribution. Revenues increased to $11 billion for the quarter, and net
income rose to $1.26 billion, reflecting growth, progress on all five
Operating Priorities and gains on equity investments.

“Adjusted net income* was $776 million, $2.30 per share, as the
Property-Liability underlying combined ratio was better than expected,
reflecting a decrease in the frequency of auto claims. Higher
catastrophe losses and lower income from performance-based investments
reduced income from the prior year quarter. Income from the Service
Businesses, Life and Benefits all increased. Our proactive investment
approach resulted in a total return of 4.7% over the latest 12 months,
although reported investment income was down in the quarter due to lower
limited partnership valuations. We remain highly focused on adjusted net
income return on common shareholders’ equity*, which was 13.5% for the
latest 12 months. Allstate’s broader success is discussed in the
recently released Prosperity
Report,” concluded Wilson.

First Quarter 2019 Results

• Total revenue of $10.99 billion in the first quarter of 2019 increased
  12.5% compared to the prior year quarter.

• Property-Liability insurance premiums earned increased 6.1%.
• Service Businesses revenue increased 25.2%.
• Life premiums and contract charges increased 1.9%.
• Net investment income decreased 17.6%.
• Realized capital gains increased revenues by $662 million.

• Net income applicable to common shareholders was $1.26 billion, or
  $3.74 per diluted share, in the first quarter of 2019, compared to net
  income of $977 million, or $2.71 per diluted share, in the first
  quarter of 2018. Adjusted net income* of $776 million for the first
  quarter was below the prior year quarter due to higher catastrophe
  losses and lower net investment income.

• The company changed its accounting for pension and other
  postretirement plans to a fair value basis. Under the new principle,
  remeasurement of plan assets and projected liabilities are immediately
  recognized through earnings. This change has been applied to all prior
  periods. Note 1 of our March 31, 2019, Form 10-Q provides more detail.

• Property-Liability underwriting income of $700 million in the
  first quarter of 2019 was $305 million below the prior year quarter,
  primarily due to higher catastrophe losses. The underlying combined
  ratio* was 84.2 for the first quarter of 2019.

• Allstate brand auto insurance net written premium grew 4.7% in
  the first quarter of 2019 compared to the prior year quarter,
  reflecting a 2.7% increase in policies in force and higher average
  premium. The recorded combined ratio of 90.4 in the first quarter of
  2019 was 2.5 points higher than the prior year quarter. The underlying
  combined ratio* of 90.2 in the quarter was 0.8 points higher than the
  first quarter of 2018 due to higher physical damage claim severity,
  partially offset by higher premiums earned and lower accident
  frequency.
• Allstate brand homeowners insurance net written premium grew
  6.8% in the first quarter of 2019 compared to the prior year quarter
  and generated attractive returns. The recorded combined ratio of 92.2
  in the first quarter was 11.7 points higher than the first quarter of
  2018, primarily driven by elevated catastrophe losses. The underlying
  combined ratio* of 63.7 was 0.6 points higher than the prior year
  quarter.
• Esurance brand policies in force increased 10.9% in the first
  quarter of 2019 compared to the prior year quarter, resulting in net
  written premium growth of 13.4%. The recorded combined ratio of 99.4
  in the first quarter of 2019 was in line with the prior year quarter,
  and the underlying combined ratio* of 97.4 was 1.0 point lower than
  the first quarter of 2018, driven by higher earned premium.
• Encompass brand net written premium in the first quarter of
  2019 was in line with the prior year quarter. The recorded combined
  ratio of 100.8 in the first quarter of 2019 was 3.1 points higher than
  the prior year quarter, as increased losses were partially offset by
  lower operating expenses. The underlying combined ratio* of 88.5 in
  the first quarter was 1.3 points higher than the first quarter of 2018.

NA = not applicable

• Service Businesses policies in force grew to 83.6 million, and
  revenues increased 25.2% compared to the first quarter of 2018.
  Adjusted net income was $11 million, an increase of $14 million
  compared to the prior year quarter.

• SquareTrade revenue was $164 million in the first quarter of
  2019, reflecting policy growth of 36.1 million compared to the first
  quarter of 2018. Adjusted net income was $14 million in the first
  quarter of 2019, due to higher premiums and improved loss experience.
• Allstate Roadside Services revenue was $73 million in the first
  quarter of 2019. The adjusted net loss of $6 million in the first
  quarter was comparable to the prior year quarter, primarily due to
  adverse loss experience.
• Allstate Dealer Services revenue grew 11.5% compared to the
  first quarter of 2018, and adjusted net income was $6 million,
  reflecting higher premiums and improved loss experience.
• Arity revenue was $24 million in the first quarter of 2019,
  primarily from contracts with affiliates. The adjusted net loss of $2
  million in the quarter includes investments in research and
  development.
• InfoArmor, acquired in October 2018, had revenues of $24
  million and an adjusted net loss of $1 million in the first quarter of
  2019 due to costs associated with scaling its platform and integration
  into Allstate.

NM = not meaningful

• Allstate Life adjusted net income was $73 million in the first
  quarter of 2019, $2 million higher than the prior year quarter, as
  increased premiums, contract charges and net investment income were
  partially offset by higher contract benefits and expenses.
• Allstate Benefits adjusted net income was $31 million in the
  first quarter of 2019, $2 million higher than the prior year quarter,
  primarily due to lower contract benefits.
• Allstate Annuities had an adjusted net loss of $25 million in
  the first quarter of 2019, due to lower performance-based investment
  income. The utilization of performance-based equity investments
  improves longer-term economic returns but increases income volatility.

^{(1) Investment expenses are not allocated between
market-based and performance-based portfolios with the exception of
investee level expenses.}

NM = not meaningful

• Allstate Investments $84 billion portfolio generated a strong
  total return of 3.3% in the first quarter of 2019, and net investment
  income was $648 million, a decline of $138 million from the prior year
  quarter due to lower performance-based income.

• Total return on the investment portfolio of 4.7% for the latest
  12 months included a stable contribution from market-based investment
  income and increased fixed income valuations.
• Market-based investments contributed $693 million of income in
  the first quarter of 2019, an increase of 6.3% compared to the prior
  year quarter. The market-based portfolio benefited from investment at
  higher market yields, which included a modest duration extension of
  the fixed income portfolio.
• Performance-based investments generated income of $6 million
  and capital gains of $57 million in the first quarter of 2019, a
  decrease in income of $175 million and an increase in capital gains of
  $65 million compared to the prior year quarter. Performance-based
  income in the first quarter of 2019 reflects lower asset appreciation
  related to private equity investments. The trailing 12-month
  performance-based return is 8.4%.
• Net realized capital gains were $662 million in the first
  quarter of 2019, compared to losses of $134 million in the prior year
  quarter. Net realized gains for the quarter were primarily related to
  higher valuation of equity investments and gains related to the sale
  of performance-based investments.
• Unrealized net capital gains increased $1.3 billion from the
  fourth quarter of 2018, as lower market yields resulted in higher
  fixed income valuations.

Proactive Capital Management

“In addition to producing excellent operating results, Allstate
continues to proactively manage shareholders’ capital,” said Mario
Rizzo, Chief Financial Officer. “We returned $158 million to common
shareholders during the first quarter through common stock dividends.
Common shares are being purchased through a $1 billion accelerated share
repurchase (ASR) program, which began in December 2018. Upon completion
of the ASR in the second quarter, about $1.9 billion will remain on the
$3 billion common share repurchase program. Book value per diluted
common share of $63.59 was 8.5% higher than March 31, 2018, reflecting
strong income generation and appreciation of the investment portfolio.”

Visit www.allstateinvestors.com
to view additional information about Allstate’s results, including a
webcast of its quarterly conference call and the call presentation. The
conference call will be held at 9:00 a.m. ET on Thursday, May 2.

Forward-Looking Statements

This news release contains “forward-looking statements” that anticipate
results based on our estimates, assumptions and plans that are subject
to uncertainty. These statements are made subject to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements do not relate strictly to historical or
current facts and may be identified by their use of words like “plans,”
“seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,”
“intends,” “believes,” “likely,” “targets” and other words with similar
meanings. We believe these statements are based on reasonable estimates,
assumptions and plans. However, if the estimates, assumptions or plans
underlying the forward-looking statements prove inaccurate or if other
risks or uncertainties arise, actual results could differ materially
from those communicated in these forward-looking statements. Factors
that could cause actual results to differ materially from those
expressed in, or implied by, the forward-looking statements may be found
in our filings with the U.S. Securities and Exchange Commission,
including the “Risk Factors” section in our most recent annual report on
Form 10-K. Forward-looking statements are as of the date on which they
are made, and we assume no obligation to update or revise any
forward-looking statement.

Definitions of Non-GAAP Measures

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.

Adjusted net 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
  adjusted net income,
• Pension and other postretirement remeasurement gains and losses,
  after-tax,
• valuation changes on embedded derivatives 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 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 applicable to common shareholders is the GAAP measure that is
most directly comparable to adjusted net income.

We use adjusted net 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,
pension and other postretirement remeasurement gains and losses,
valuation changes on embedded derivatives 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, pension and other postretirement remeasurement
gains and losses, valuation changes on embedded derivatives 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,
adjusted net 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 adjusted net 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. 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
business results or trends. Non-recurring items are excluded because, by
their nature, they are not indicative of our business or economic
trends. Accordingly, adjusted net 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 adjusted net
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.

Contacts

Greg Burns
Media Relations
(847) 402-5600

John Griek
Investor
Relations
(847) 402-2800

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