ALLSTATE CORP | 2013 | FY | 3

20. Reporting Segments

       Allstate management is organized around products and services, and this structure is considered in the identification of its four reportable segments. These segments and their respective operations are as follows:

       Allstate Protection principally sells private passenger auto and homeowners insurance in the United States and Canada. Revenues from external customers generated outside the United States were $1.06 billion, $992 million and $892 million in 2013, 2012 and 2011, respectively. The Company evaluates the results of this segment based upon underwriting results.

       Discontinued Lines and Coverages consists of business no longer written by Allstate, including results from asbestos, environmental and other discontinued lines claims, and certain commercial and other businesses in run-off. This segment also includes the historical results of the commercial and reinsurance businesses sold in 1996. The Company evaluates the results of this segment based upon underwriting results.

       Allstate Financial sells life insurance and voluntary accident and health insurance products. The principal products are interest-sensitive, traditional and variable life insurance; and voluntary accident and health insurance. Effective January 1, 2014, the Company no longer offers fixed annuities such as deferred and immediate annuities. Allstate Financial had no revenues from external customers generated outside the United States in 2013, 2012 or 2011. The Company evaluates the results of this segment based upon operating income.

       Corporate and Other comprises holding company activities and certain non-insurance operations.

       Allstate Protection and Discontinued Lines and Coverages comprise Property-Liability. The Company does not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability, Allstate Financial, and Corporate and Other levels for decision-making purposes.

       The accounting policies of the reportable segments are the same as those described in Note 2. The effects of certain inter-segment transactions are excluded from segment performance evaluation and therefore are eliminated in the segment results.

Measuring segment profit or loss

       The measure of segment profit or loss used by Allstate's management in evaluating performance is underwriting income for the Allstate Protection and Discontinued Lines and Coverages segments and operating income for the Allstate Financial and Corporate and Other segments. A reconciliation of these measures to net income is provided below.

       Underwriting income is calculated as premiums earned, less claims and claims expenses ("losses"), amortization of DAC, operating costs and expenses, and restructuring and related charges as determined using GAAP.

       Operating income is net income 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 DAC and 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.

       Summarized revenue data for each of the Company's reportable segments for the years ended December 31 are as follows:

($ in millions)
   2013   2012   2011  

Revenues

                    

Property-Liability

                    

Property-liability insurance premiums

                    

Auto

   $ 18,449   $ 17,928   $ 17,299  

Homeowners

     6,613     6,359     6,200  

Other personal lines

     1,629     1,594     1,566  

Commercial lines

     456     462     495  

Other business lines

     471     394     382  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Allstate Protection

     27,618     26,737     25,942  

Discontinued Lines and Coverages

     —     —     —  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total property-liability insurance premiums

     27,618     26,737     25,942  

Net investment income

     1,375     1,326     1,201  

Realized capital gains and losses

     519     335     85  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Property-Liability

     29,512     28,398     27,228  

Allstate Financial

                    

Life and annuity premiums and contract charges

                    

Traditional life insurance

     491     470     441  

Immediate annuities with life contingencies

     37     45     106  

Accident and health insurance

     720     653     643  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total life and annuity premiums

     1,248     1,168     1,190  

Interest-sensitive life insurance

     1,086     1,055     1,015  

Fixed annuities

     18     18     33  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total contract charges

     1,104     1,073     1,048  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total life and annuity premiums and contract charges

     2,352     2,241     2,238  

Net investment income

     2,538     2,647     2,716  

Realized capital gains and losses

     74     (13 )   388  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Allstate Financial

     4,964     4,875     5,342  

Corporate and Other

                    

Service fees

     9     4     7  

Net investment income

     30     37     54  

Realized capital gains and losses

     1     5     30  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Corporate and Other before reclassification of service fees

     40     46     91  

Reclassification of service fees (1)

     (9 )   (4 )   (7 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Corporate and Other

     31     42     84  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated revenues

   $ 34,507   $ 33,315   $ 32,654  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               
(1)
For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to operating costs and expenses.

       Summarized financial performance data for each of the Company's reportable segments for the years ended December 31 are as follows:

($ in millions)
   2013   2012   2011  

Net income

                    

Property-Liability

                    

Underwriting income (loss)

                    

Allstate Protection

   $ 2,361   $ 1,253   $ (857 )

Discontinued Lines and Coverages

     (143 )   (53 )   (25 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total underwriting income (loss)

     2,218     1,200     (882 )

Net investment income

     1,375     1,326     1,201  

Income tax (expense) benefit on operations

     (1,177 )   (779 )   30  

Realized capital gains and losses, after-tax

     339     221     54  

Loss on disposition of operations, after-tax

     (1 )   —     —  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Property-Liability net income available to common shareholders

     2,754     1,968     403  

Allstate Financial

                    

Life and annuity premiums and contract charges

     2,352     2,241     2,238  

Net investment income

     2,538     2,647     2,716  

Periodic settlements and accruals on non-hedge derivative instruments

     17     55     70  

Contract benefits and interest credited to contractholder funds

     (3,171 )   (3,252 )   (3,378 )

Operating costs and expenses and amortization of deferred policy acquisition costs

     (895 )   (926 )   (898 )

Restructuring and related charges

     (7 )   —     (1 )

Income tax expense on operations

     (246 )   (236 )   (240 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating income

     588     529     507  

Realized capital gains and losses, after-tax

     46     (8 )   250  

Valuation changes on embedded derivatives that are not hedged, after-tax

     (16 )   82     (12 )

DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax

     (5 )   (42 )   (108 )

DAC and DSI unlocking related to realized capital gains and losses, after-tax

     7     4     3  

Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax

     (11 )   (36 )   (45 )

(Loss) gain on disposition of operations, after-tax

     (514 )   12     (5 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Allstate Financial net income available to common shareholders

     95     541     590  

Corporate and Other

                    

Service fees (1)

     9     4     7  

Net investment income

     30     37     54  

Operating costs and expenses (1)

     (627 )   (383 )   (403 )

Income tax benefit on operations

     220     136     126  

Preferred stock dividends

     (17 )   —     —  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating loss

     (385 )   (206 )   (216 )

Realized capital gains and losses, after-tax

     —     3     20  

Loss on extinguishment of debt, after-tax

     (319 )   —     —  

Postretirement benefits curtailment gain, after-tax

     118     —     —  

Business combination expenses, after-tax

     —     —     (10 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate and Other net loss available to common shareholders

     (586 )   (203 )   (206 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated net income available to common shareholders

   $ 2,263   $ 2,306   $ 787  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               
(1)
For presentation in the Consolidated Statements of Operations, service fees of the Corporate and Other segment are reclassified to operating costs and expenses.

       Additional significant financial performance data for each of the Company's reportable segments for the years ended December 31 are as follows:

($ in millions)
   2013   2012   2011  

Amortization of DAC

                    

Property-Liability

   $ 3,674   $ 3,483   $ 3,477  

Allstate Financial

     328     401     494  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated

   $ 4,002   $ 3,884   $ 3,971  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               

Income tax expense

                    

Property-Liability

   $ 1,357   $ 893   $ 1  

Allstate Financial

     87     241     289  

Corporate and Other

     (328 )   (134 )   (118 )
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated

   $ 1,116   $ 1,000   $ 172  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               

       Interest expense is primarily incurred in the Corporate and Other segment. Capital expenditures for long-lived assets are generally made in the Property-Liability segment. A portion of these long-lived assets are used by entities included in the Allstate Financial and Corporate and Other segments and, accordingly, are charged expenses in proportion to their use.

       Summarized data for total assets and investments for each of the Company's reportable segments as of December 31 are as follows:

($ in millions)
   2013   2012   2011  

Assets

                    

Property-Liability

   $ 54,726   $ 52,201   $ 49,791  

Allstate Financial

     65,707     72,368     72,526  

Corporate and Other

     3,087     2,378     2,876  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated

   $ 123,520   $ 126,947   $ 125,193  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               

Investments

                    

Property-Liability

   $ 39,638   $ 38,215   $ 35,998  

Allstate Financial

     39,105     56,999     57,373  

Corporate and Other

     2,412     2,064     2,247  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated

   $ 81,155   $ 97,278   $ 95,618  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               

       The balances above reflect the elimination of related party investments between segments.

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