Allstate Q1 Profit Drops on Weather Losses

May 7, 2014

Allstate Corp. reported that higher losses from catastrophes due to severe winter weather cut into profits in the first quarter while higher premiums helped offset the effect. The company reported net income of $587 million, which was down 17 percent from the first quarter of 2013.

Allstate said that insurance premiums grew in all of its brands compared to the prior year quarter. In the Allstate Protection segment, which sells personal auto and home insurance, net written premium increased 5.2 percent for the first quarter of 2014 compared to the first quarter a year ago. This premium growth was driven by a 4.3 percent increase in Allstate brand premiums, 18.7 percent in Esurance and 7.1 percent in Encompass.

Consolidated revenue rose about 3 percent to $8.68 billion while property/casualty earned premiums rose 4 percent to $7.1 billion.

Operating earnings came in at $588 million, compared with $647 million in the first quarter last year.

Losses from natural disasters including floods, tornados, icing conditions and snowstorms in the Midwest and East were up 24 percent to $445 million in the first quarter compared to $35 million in the first quarter of last year, when such losses were unusually low. The company said it had more freeze claims in January than it has in the previous 24 months combined but that the loss ratio actually improved in states not hit by severe weather in the quarter.

The property/casualty combined ratio was 94.7 for the first quarter of 2014, 1.5 points worse than the prior year quarter due to higher weather-related losses. The underlying combined ratio of 88.4 for the first quarter was 0.7 points higher than the same period of last year, the company reported.

The Allstate brand combined ratio was 92.6 in the first quarter, with an underlying combined ratio of 86.4 that was 0.2 points worse than in the prior year quarter. Allstate brand auto recorded a first quarter 2014 combined ratio of 93.4 and an underlying combined ratio of 93.8. The 0.6 point increase in the underlying auto combined ratio from the prior year quarter was driven by elevated physical damage frequency, primarily caused by adverse winter weather, the company said. Allstate brand homeowners recorded a combined ratio of 87.3 in the first quarter of 2014 and an underlying combined ratio of 65.8, which was comparable to the first quarter of 2013. Higher average premiums in 2014 were offset by freeze and fire-related losses driven by winter weather.

Esurance recorded a first quarter 2014 combined ratio of 127.1 and an underlying combined ratio of 124.2, reflecting significantly higher investment in advertising and the adverse impact of severe winter weather. according to the insurer.

In the Encompass brand, the first quarter recorded combined ratio was 102.6, with an underlying combined ratio of 91.8 that was 6.1 points better than the first quarter of 2013.

The Allstate brand sold by local Allstate agencies grew insurance policies in force by 1.1 percent in the first quarter compared to the prior year quarter. Auto policies were up 2.1 percent for the quarter while homeowners policies were down 1.2 percent.

Online seller Esurance grew insurance policies in force by 21.1 percent in the first quarter of 2014, while Encompass, sold by independent agencies, grew policies by 5.9 percent over the same period last year.

The company said Esurance continues to expand, offering auto insurance in 42 states, renters insurance in 17 states and motorcycle insurance in seven states and homeowners insurance in four states as of the end of March 2014.

During a conference call Wednesday morning, the company said its new advertising campaign for Esurance touting quotes within seven-and-one-half minutes is paying off in improved awareness and trust levels for the brand and that after the severe winter, Esurance is seeing improvement in its loss ratio as well.

Matthew Winter, president of Allstate Personal Lines, said the company is pushing its agency owners to become “trusted advisors” to personal lines customers, selling multiple products including auto, home, life and retirement products. He said 80 percent of new homeowners business is bundled with auto.

The company also said it is sticking with its strategy of stressing package policy sales with its Encompass independent agents, as opposed to pushing standalone auto insurance, for now.

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Latest Comments

  • May 7, 2014 at 2:54 pm
    Agent says:
    I don't know that I would push Esurance with a 127.1 Combined. Hmm!
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