What pandemic? Allstate’s doing just fine.
The giant personal lines insurer reported net income of $1.2 billion for the second quarter, an increase of 49% compared to the prior year quarter.
Underwriting income improved to $904 million – a rise of 146% or $537 million over the same period last year.
Allstate’s total revenues of $11.2 billion increased 0.5% from the prior year with growth in property-liability premiums more than offsetting a decline in investment income.
“Allstate’s strong results reflect a resilient strategy and rapid adaptation to the coronavirus pandemic,” said Tom Wilson, chair, president and CEO of Allstate Corp.
The results reflected a decline in auto losses from fewer accidents and increased premiums earned, partially offset by the insurer’s shelter-in-place paybacks for reduces miles driven and higher catastrophe losses.
In response to the coronavirus pandemic, Allstate extended its 15% payback to auto insurance customers through June 30. The payback totaled 8.3% of premiums across all lines of business, plus 0.5% of premiums from increased bad debt expense, due to billing flexibility related to the Allstate special payment plan. The coronavirus payback plan that was started in the first quarter cost $948 million overall, with $738 million of that coming in the second quarter.
No New Payback
The company said it has no plans to issue another customer payback at this time, preferring to allow “losses to flow into our rating as we always do, and to be more precise on a state-by-state and market-by-market basis versus a broad shelter-in-place payback,” Glenn Shapiro, president of Allstate Personal Property-Liability, said on a call with analysts. The company has made 180 rate filings in states over the past two months.
“While we don’t favor sort of a broad base [approach] like we’re just going to cut X amount everywhere. We do favor being very surgical, very detailed and very thoughtful about how we manage our competitive position and our margin in each market.”
Frequency in auto claims is “starting to normalize in some places” but there remains a lot of variation. “So we’re watching things on a very local level into how they’re moving,” Shapiro added.
Homeowners results have been a string suit for Allstate and have been for a while, with a 12 month combined ratio of 83 and a five year ratio of 87.
“We have a really profitable homeowners business, much more profitable than other people. We’re good at it. We’re precise at it,” Wilson said.
Shapiro noted that homeowners can be difficult because the weather changes almost every quarter. But the pandemic has been helping. “Recently, and this is probably an underreported part of the COVID impact, is that we’ve seen a shift in frequency severity on the home side because,” Shapiro said. He pointed to “fewer break-ins because everybody’s home” and about the same number of fire claims. “Overall frequency went down in the quarter but the severity average went up because the ones that went away were smaller claims,” he said.
During the second quarter Allstate entered into an agreement to acquire National General, which it plans to leverage to drive growth in its independent agent channel. The deal combines National General’s presence in higher risk, nonstandard auto insurance with Allstate’s standard auto and home insurance. National General will become Allstate’s independent agent platform.
“We will essentially do a reverse merger of our Encompass and Allstate independent agent businesses into National General, which has a good technology platform, broad distribution and a management team that has substantial acquisition integration experience,” the company said.
Other Allstate second quarter results:
- Property-liability written premium of $9.17 billion increased 1.4% in the second quarter compared to the prior year, driven by premium and policy growth in Allstate brand personal lines.
- The second quarter property-liability combined ratio of 89.8% was a 6-point improvement over the prior year quarter, which more than offset the negative pandemic impact.
- The total return on the $89.6 billion investment portfolio was $409 million or 5.0% in the quarter, a decrease of $533 million from the prior year quarter.
- The underlying loss ratio improved by 15.9 points on lower auto insurance losses from fewer accidents, due to significant reduction in miles driven. The underlying loss ratio on homeowners insurance also improved due to increased premiums and lower non-catastrophe losses.
- Allstate brand auto insurance net written premium grew 1.8%, and policies in force increased 0.8% in the second quarter of 2020 compared to the prior year quarter. The recorded combined ratio was 83.9 in the second quarter of 2020.
- Allstate brand homeowners insurance net written premium grew 3.3%. The recorded combined ratio of 106.1 in the second quarter of 2020 was 1.8 points above the second quarter of 2019, primarily driven by higher catastrophe losses.
- Service Businesses policies in force grew to 127.3 million, and revenues increased to $476 million in the second quarter of 2020, 17.5% higher than the prior year quarter.
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