Allstate reports Q1 net loss driven by catastrophe hit of $1.69 billion

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U.S. primary insurer Allstate Corporation has reported a net loss of $346 million in Q1 of this year, compared to a net income of $634 million in the same quarter of 2022.

Allstate logoAllstates Q1 2023 results were cuffed by overall catastrophe losses of $1.69 billion.

According to the firm, catastrophe losses for March events alone stood at $1.17 billion or $927 million, after tax. This related to 10 events, with approximately 75% of the losses related to three wind events.

Elsewhere, Allstate saw total revenues of $13.8 billion in Q1 of 2023, an 11.8% increase compared to the prior-year quarter.

The firm states that this was driven by a 10.8% increase in Property-Liability earned premium ($11.6 billion) and net gains on investments and derivatives in Q1 of 2023 compared to a net loss in 2022.

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Allstate suggests that its reported $1.0 billion underwriting loss reflects higher catastrophe losses across lines and higher non-catastrophe losses primarily for auto insurance.

“This was partially offset by higher earned premiums, less adverse non-catastrophe prior year reserve reestimates and lower expenses compared to the prior-year quarter,” the firm explains.

Allstate’s Q1 premiums written amounted to $11.8 billion, an increase of 9.5% compared to Q1 2022, driven by both the Allstate brand and National General.

Auto insurance written premiums increased 10.4%, which the firm attributes to higher average premiums from rate increases in both the Allstate and National General brands, partially offset by policies in force declines.

Homeowners insurance written premiums increased 11.1%, primarily reflecting inflation in insured home replacement costs, rate increases and policies in force growth.

Allstate’s reported underlying combined ratio of 93.3% in Q1 of 2023 was 2.4 points above the prior-year quarter. The firm notes that this reflects higher earned premiums and lower expenses, which were offset by increased claim severity and frequency.

Meanwhile, the expense ratio of 21.1% in Q1 2023 decreased by 2.9 points compared to Q1 of 2022, driven by lower advertising and operating expenses and higher earned premium growth relative to fixed costs.

Allstate writes that prior year reserve reestimates, excluding catastrophes, were unfavorable $27 million in Q1 2023, with $23 million attributed to commercial insurance, primarily related to business that is being exited.

Tom Wilson, Chair, CEO and President of The Allstate Corporation commented, “Allstate’s operating strength enabled us to continue implementing the auto insurance profit improvement plan and help over 100,000 customers recover from catastrophe losses in the first quarter, while executing the Transformative Growth initiative.

“Property-Liability earned premiums increased by $1.1 billion or 10.8% over the prior year due to rate increases on auto and home insurance.

“The profit improvement plan also includes expense reductions and reduced new business volume, both of which are being successfully implemented.

“Auto loss costs, however, continued to increase rapidly and essentially offset higher premiums, which combined with exceptionally high first quarter catastrophe losses resulted in an underwriting loss of $1.0 billion.

“The investment portfolio total return was 2.4% for the quarter as extending duration into higher rates and a shift from equity risk into fixed income maintained investment income despite a decline in performance-based returns. Profits from Health and Benefits and Protection Services reduced the net loss to $346 million or $1.31 per share for the quarter.”

He continued, “Transformative Growth is critical to navigating the current operating environment and capturing future growth. The new auto insurance product is designed to be affordable, simple and connected and will be available to about one-third of the U.S. market in 2023.

“Expense reductions are partially offsetting current increases in claims severity and will support increased competitiveness when targeted profitability is restored. Distribution transformation is working, with higher Allstate exclusive agent productivity, expanded product offerings through independent agents and enhanced direct capabilities.

“Protection Plans continues to expand product coverage and grow internationally. Health and Benefits is rebuilding its operating systems to lower costs and support growth.

“The combination of an aggressive strategy and Allstate’s brand, customer base and financial strength will lead to long-term growth.”

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