Running finanacial ratios for Allstate company from 2006 to 2011

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>Income Statement

Balance Sheet

Ratios

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2,6

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$ 367

Year 2011 2010 2009 2008 2007 2006
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										Year		20 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	1		2010		2009		2008		2007		200	6	**Numbers is $000,000’s except for ratios***
Total Revenue	$	3	5	$ 31,400	$ 32,013	$ 29,394	$ 36,769	$ 35,796
Net Income	$ 788	$ 928	$ 854	$ (1,679)	$ 4,636	$ 4,993
Inerest Expense		$ 367	$ 392	$ 351	$ 333	$ 357
Total Assets	$ 125,563	$ 130,874	$ 132,652	$ 134,798	$ 156,408	$ 157,554
Total Equity	$ 18,702	$ 19,044	$ 16,721	$ 12,673	$ 21,851	$ 21,846
Operating Income	$ 960	$ 1,126	$ 1,248	$ (3,025)	$ 6,653	$ 7,178
Return on Assets	0.63%	0.71%	0.64%	-1.25%	2.96%	3.17%
Return on Equity	4.21%	4.87%	5.11%	-13.25%	21.22%	22.86%
Debt to Equity Ratio	5.71	5.87	6.93	9.64	6.16	6.21
Equity Multiplier	6.71	6.87	7.93	10.64	7.16	7.21
Times Interest Earned	2.62	3.07	3.18	(8.62)	19.98	20.11
Allstate Insurance company was also adversely affected by the banking crisis of 2008. We can see that from 2006 to 2008, their profits went from small to negative. The company had enjoyed of aan attractive return on equiry of 22.86% in 2006. Yet, the financial crisis made 2008 the only year in the 6-year period evaluated where its return on equity fell to a negative 13.25%. This is consistent with the phenomenon that most financial institutions experienced at the time. Allstate, ha slowly come back to a level of profitability; but it strugls to reach the level of earnings that it once enjoyed.

AllState Insurance

AllState Insurance deals with private auto and homeowners insurance mainly offered through different agencies such as Allstate, Encompass, and Esurance. They provide life insurance, retirement and investment products, and voluntary accident and health insurance products. Its principal products are interest-sensitive, traditional and variable life insurance; fixed annuities including deferred and immediate; and voluntary accident and health insurance. As an industry leader, they have won many corporate, diversity, and public social responsibility awards.

Financial Ratios Analysis

Return on Assets (ROA)- ROA indicates how profitable a company is relative to its total assets. This determines how their management is doing in using their assets to generate earnings. By looking at the numbers, you can determine that from 2006-2009, AllState’s ROA has dropped but then rises again in 2010 and drops in 2011. In 2008, AllState has received a negative ROA which is due to the financial crisis. In 2008, AllState was not generating much income but still were investing their capital into their production.

Return on Equity (ROE) – ROE measures a company’s profitability by determining how much profit a company has made with the money that their shareholder’s have invested. By looking at the financial ratios, you will determine that from 2006-2012, AllState’s ROE has been dropping. Again, in 2008, AllState has received a negative ROE. Having a negative ROE determines that’s the company has not been very profitable at all. The negative ROE fell during the time of the financial crisis (2008).

Debt-to-Equity Ratio- Debt to Equity Ratio measures how much of equity and debt a company is using in order to finance its assets. Looking at the financial ratios, 2006 and 2007, the debt to equity ratio has dropped but then rose during the financial crisis in 2008. After 2008, the debt to equity ratio has continued in its downward pattern. When many investors look into a company, they want to always see a low debt to equity ratio because when business starts to decline, their money will be protected. In 2008, during the financial crisis, the debt to equity rose quite a bit. This can also tell you that AllState was aggressively financing their growth with debt.

Equity Multiplier- Equity Multiplier is a measure of financial leverage. This ratio determines AllState’s total assets per dollar of stockholder’s equity. It shows how a company uses debt to finance their assets. While looking at the financial ratios, in 2006 and 2007, AllState’s equity multiplier has dropped but increased dramatically in 2008 during the financial crisis. From 2009 until 2012, the equity multiplier has dropped. Since AllState’s equity multiplier rose in 2008 during the financial crisis, this determines that the company had high financial leverage. To finance their assets, AllState were relying more on their debt.

Times Interest Earned- Times interest earned determines how a company is able to pay off their debts. When using times interest earned ratio, you can measure a company’s ability in order to meet their debt obligations. A company should never be below 2.5 times in their times interest earned ratio. That’s when a company has warning signs. Looking at the financial ratios, from 2006 all the way until 2012, the times interest earned ratio has decreased but from 2007 to 2008, it decreased very dramatically. From 2008 which they had a negative number to 2009, there was also another dramatic change in times interest earned and then continued steadily to decrease until 2012.

While viewing the financial ratios, there are a couple things to be said about AllState Insurance. Altogether, AllState is doing ok but suffered greatly during the financial crisis in 2008. They suffered many negative numbers which was not a good sign. Looking at their ROA and ROE, they are remaining at a steady growth. Within their ROA, you can determine that AllState is continuing to drop which means that their company is starting to lose profitability. Since their ROE has been dropping, this is not a good sign for their shareholder’s. Their company is not becoming profitable even when using their shareholder’s money. Looking along the lines of their Debt to Equity ratio, the numbers are basically continuing to decrease steadily. AllState was growing their company by financing with their debt. AllState has been mostly relying on their debts to run their company.

When looking at their financial statements, during the financial crisis in 2008, everything had dramatically dropped from their total revenue, net income, interest expense, total assets, total equity, and operating income. During this crisis, All State have been funding most of what they had to do with debt and had a hard time paying in back and becoming profitable at the same time. Looking at the financial ratios, from 2006 to 2008, their profits went from small to negative. The company had enjoyed of an attractive return on equity of 22.86% in 2006. Yet, the financial crisis made 2008 the only year in the 6-year period evaluated where its return on equity fell to a negative 13.25%. This is consistent with the phenomenon that most financial institutions experienced at the time. Allstate, has slowly come back to a level of profitability; but it struggles to reach the level of earnings that it once enjoyed.