Allstate, Esurance Take Hit from Losses in Q3

By | November 4, 2016

Catastrophe losses climbed 78 percent for Allstate in its 2016 third quarter, a trend that led to a double-digit drop in net income and higher losses for Esurance, its online auto and home insurance provider.

The property/casualty insurance giant reported $491 million in net income, or $1.31 per diluted common share. This reflects a nearly 21 percent drop from the $621 million in net income from the 2015 third quarter, or $1.54 per diluted common share.

Allstate said its catastrophe losses hit the $481 million mark, 78.1 percent higher than the $270 million in catastrophe losses over the same period a year ago.

Meanwhile, Allstate’s property-liability combined ratio came in at 95.5, up from 93.6 in third-quarter 2015.

Net investment income reached $748 million during the quarter, but that was down $59 million versus the previous year. Allstate blamed this on lower limited partnership income and reduced interest income “from portfolio tweaks in its annuity business.

Allstate Chairman and CEO Tom Wilson framed the results as reflecting a solid strategy.

“Allstate proactively balances near-term operating results with long-term strategy to meet the needs of its stakeholders,” Wilson said in prepared remarks. He called said Allstate’s $491 million in net income reflects “strong profitability from homeowners insurance and an improvement in underlying auto insurance margins,” the latter of which stems, in part, from auto price increases.

Esurance Cat Losses Spike Higher

Esurance amounted to one of Allstate’s bigger trouble spots. On the one hand, it experienced premium growth of 5.4 percent versus the previous year, reflecting some decline in policies in force more than offset by a 6.4 percent average increase in auto insurance premium.

But Esurance’s already-high combined ratio, which had been declining in recent months, ticked up in the third quarter. That number hit 109.8, 4.4 points higher than the same period a year ago, and Allstate blamed higher catastrophe losses for this.

Allstate’s Encompass arm, meanwhile, saw its net written premium dip by 9.7 percent, and policies in force decline 12.6 percent versus the 2015 third quarter.

Allstate’s division-specific combined ratios from third-quarter 2016 versus the prior year third quarter were, respectively:

  • Property-Liability – 95.5 vs. 93.6
  • Allstate Protection Auto Insurance – 99.6 vs. 99.6
  • Allstate Protection Homeowners Insurance – 78.2 vs. 74.1
  • Allstate Brand – Auto Insurance – 99 vs. 98.8
  • Allstate Brand – Homeowners Insurance – 75.9 vs. 72.5
  • Allstate Brand – Other Personal Lines – 87.5 vs. 88.4
  • Encompass – 98.3 vs 101.3
  • Esurance – 109.8 vs. 106.5.

Source: Allstate

Sclafane is senior editor for Carrier Management, the publication for property/casualty insurance carrier C-suite executives. This article originally appeared on Carrier Management’s website.

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