Allstate Corp (NYSE: ALL) stock fell over 0.62% as a financial book loss of approximately $3.1 billion will be recorded in the first quarter of 2021 given the lower returns on equity for the annuity businesses.
The company’s profit totaled $2.60 billion compared to $1.71 billion in last year’s fourth quarter. Property-Liability written premium of $8.61 billion declined by 1.5% in the fourth quarter of 2020 compared to the prior year quarter, including the negative impact of premium refunds. Allstate Investments $94.2 billion portfolio generated net investment income of $1.2 billion in the fourth quarter of 2020, which is an increase of $502 million from the prior year quarter, driven by higher performance-based income. Market-based investments contributed $672 million of investment income in the fourth quarter of 2020, a decrease of 8.6%, compared to the prior year quarter, due to lower interest-bearing reinvestment yields, partially offset by higher average invested assets. Performance-based investment income was of $557 million in the fourth quarter of 2020 represented an increase of $557 million compared to the prior year quarter.
ALL in the fourth quarter of FY 20 has reported the adjusted earnings per share of $5.87, while reported the adjusted revenue growth of 4.8 percent to $12.02 billion in the fourth quarter of FY 20.
Meanwhile, the company has agreed to sell Allstate Life Insurance Company (ALIC) to entities managed by Blackstone for $2.8 billion. ALIC holds approximately 80% (or $23 billion) of Allstate’s life and annuity reserves and generated net income of $467 million in 2019 and a net loss of $23 million in the first nine months of 2020. The transaction is subject to regulatory approval with a projected closing in the second half of 2021. All statutory earnings from March 31, 2020, to closing, will be retained by Allstate. The transaction will reduce Allstate’s GAAP reserves by $23 billion. Blackstone will enter into an asset management agreement for ALIC’s $28 billion of investments.
After the closing of this transaction, Allstate has been surgically deploying capital out of spread-based products with life and annuity liabilities declining to $5 billion. The investment portfolio is expected to decline by approximately $28 billion to $63 billion. 0Adjusted Net Income Return on Equity will increase by approximately 1 percentage point.