The Allstate Corporation (NYSE:ALL.PRF) Q2 2016 Earnings Conference Call - Final Transcript

Aug 04, 2016 • 09:00 am ET

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The Allstate Corporation (NYSE:ALL.PRF) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to the Allstate Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Pat Macellaro. Please go ahead.

Executive
Pat Macellaro

Thank you, Jonathan. Good morning and thanks, everyone, for joining us today for Allstate's second quarter 2016 earnings conference call. After prepared remarks by our Chairman and CEO, Tom Wilson, CFO, Steve Shebik, and myself, we will have a question-and-answer session.

Yesterday following the close of the market, we issued our news release and investor supplement, filed our 10-Q for the second quarter, and posted the results presentation we'll use this morning along with an update to our 2016 countrywide reinsurance program to reflect the replacement of our Florida program. These documents are all available on our website at allstateinvestors.com.

(Forward-Looking Cautionary Statements)

Also, this discussion will contain some non-GAAP measures for which there are reconciliations in our news release and our investor supplement.

As many of you know, this will be my final earnings call as the leader of our IR team, as I have transitioned to leading our Encompass team, leaving IR in the capable hands of John Greig (ph), who will be a great partner for all of you going forward. John and other members of our senior leadership team will be available to answer any follow-up questions you may have after the call.

Now I'll turn it over to Tom.

Executive
Tom Wilson

Good morning. Thank you for investing your time to keep up with Allstate. I'll provide an overview of results and then you will hear from Pat and Steve. We also have Matt Winter, our President, here with us; Don Civgin, the President of Emerging Businesses; Mary Jane Fortin, who is President of our Allstate Life and Retirement; and Sam Pilch, our corporate controller.

Let's begin on slide two. The second quarter results highlight really how our proactive approach to external conditions helps us achieve our objectives and create long-term shareholder value. We earned $242 million, despite seasonally high second-quarter catastrophe losses, a record hailstorm in Texas, continued increases in the frequency of auto accidents, and the impact of Brexit on the investment markets. And while we did not predict all of these would happen, we considered the possibilities when we executed our business plan.

Operating income was $0.62 per share for the quarter, reflecting a recorded combined ratio of 100.8. And then underlying combined ratio of 88.6 for the quarter and 87.9 for the first 6 months, which is in comparison to our full-year forecast of 88 to 90. Allstate Financial's strategic repositioning is working, with operating income up slightly to $120 million. Investment returns were strong, at 1.9% for the quarter, about half of which is from current income and the other half is from appreciation of the bond