Allstate Absorbed Higher Catastrophe Losses, Lower Investments in Q1

May 9, 2016

Catastrophe losses including those from two severe hailstorms left their mark on the Allstate Corp. in the first quarter, with net income during the period plunging more than 65 percent. Echoing trends from other property/casualty insurers, net investment income also took a dive.

The insurer booked $827 million in catastrophe losses in Q1, versus $294 million over the same period in 2015. Those catastrophe contributed to a drop in net income to $217 million, down from $648 million in Q1 2015.

With catastrophes factored in, Allstate’s property-liability combined ratio jumped to 98.4, compared to 93.7 in the 2015 first quarter.

Net investment income came in at $731 million during the quarter, a 14 percent drop from the prior year quarter.

Allstate Chairman and CEO Thomas Wilson noted in prepared remarks that the insurer’s “broad-based business model” allowed it to cover the costs of two severe hailstorms and still produce $322 million in operating income during the quarter.

The company said it had $335 million in rate increases approved for its various brands in the first quarter. That was on top of $401 million in the fourth quarter of last year.

In speaking with analysts, Wilson said the company is not sure if the rise in auto claims frequency is coming to an end. He said the company had intentionally slowed writing some new business, particularly at Esurance.

The company plans on launching new marketing campaigns for both Allstate and Esurance soon.

Additional notes from the Allstate results:

  • Property-liability earned premium increased 4.0% in the first quarter of 2016 compared to the prior year quarter, driven by 4.3% growth in the Allstate brand. The recorded combined ratio was 98.4 for first quarter 2016, which included $827 million, or 10.7 points, of catastrophe losses.
  • Allstate brand earned premium growth of 4.3% in the first quarter of 2016 compared to the prior year quarter reflects a 3.8% increase in Allstate brand auto average earned premium, the result of continued efforts to increase rates to match higher costs. The Allstate brand recorded combined ratio of 97.6 was 5.4 points higher than in the first quarter of 2015, driven by higher catastrophe losses which were partially offset by a 1.4 point decline in the expense ratio. Allstate brand auto insurance had a first quarter 2016 recorded combined ratio of 99.0, which included 2.9 points of catastrophe losses. The homeowners insurance recorded combined ratio of 93.4 for the first quarter of 2016 included $574 million of catastrophe losses.
  • Allstate brand auto policy growth slowed in the first quarter of 2016 to 0.5%, as the company continued to execute its auto profit improvement plan, which reduced new business and retention in the first quarter of 2016 from the prior year. Allstate brand auto approved rate increases for the first quarter of 2016 were 1.7%, bringing the trailing 12- month total increase to 6.7%. Price increases over the past 12 months have helped to increase net written premium by 4.7% in the first quarter of 2016 compared to the first quarter of 2015.
  • Allstate brand homeowners net written premium grew by 0.9% in the first quarter of 2016 compared to the first quarter of 2015, as average premium increased by 2.3% and policies in force grew by 0.6%. The underlying combined ratio of 59.4 was 5.1 points better than the first quarter of 2015 and 3.4 points higher than the fourth quarter of 2015.
  • Esurance’s net written premium growth of 2.5% compared to the prior year quarter reflects a 1.0% decline in policies in force, which was more than offset by a 5.2% increase in auto average premium. The Esurance recorded combined ratio of 106.2 in the first quarter of 2016 was 11.6 points better than the quarter a year ago.
  • Encompass is focused on improving returns through enhanced pricing and underwriting sophistication. Net written premium declined by 6.7% and policies in force were 9.6% lower in the first quarter of 2016 compared to the prior year quarter. The recorded combined ratio of 105.8 in the first quarter of 2016 was adversely impacted by $41 million, or 13.3 points, of catastrophe losses.
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Latest Comments

  • May 13, 2016 at 4:42 pm
    MrBlues says:
    Confused, You can't have a 90% loss ratio and a 90% combined ratio. That would mean you have an expense ratio of 0%. We all know carriers are cutting costs expenses to the bon... read more
  • May 11, 2016 at 7:56 am
    confused says:
    nope - i think obamacare is (let me make sure i say this correctly) a super-duper-duper failure. cool? now that I answered your question, answer mine! what’s better agent: (... read more
  • May 10, 2016 at 5:15 pm
    Agent says:
    Are you one of those guys who think Obamacare is a good deal for the folks? I thought so. Ask a typical Allstate agent how his captive contract is doing for him these days. ... read more

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