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Allstate Has Lower 2Q Cat Losses and Raises Rates

Source: A.M. Best


Posted on 02 Aug 2012 by Neilson

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AllstateAllstate companies took rate action on homeowners insurance products in seven states during the second quarter and in 19 states on automobile insurance products, which will help to bolster returns on those lines, company officials said during a conference call.

The company also benefitted in the quarter from catastrophe losses that were lower than in the second quarter of 2011, but still significant. The company posted cat losses of $819 million in the most recent quarter, compared with $2.34 billion a year ago. The second quarter was laden with catastrophic weather, which included wildfires, windstorms and hailstorms.

The lower cats helped the company to post a second-quarter net income of $423 million, compared with a net loss of $624 million in the prior-year quarter. The combined ratio was 98, which is a 25.3 point drop from a year ago. Total revenues were up slightly.

"Premiums written, though, were flat for the Allstate brand as our efforts to raise returns in homeowners negatively impacted retention of homeowners and we had lower new business sales of auto insurance," said Allstate Chief Executive Officer Thomas J. Wilson.

Allstate homeowners net written premium in the quarter was $1.64 billion, which is an increase of 2.1% over the prior year. Rate actions the company is taking on homeowners to improve returns more than offset any decline in business, said Robert Block, Allstate's head of investor relations. The company took homeowners rate in seven states in the quarter, averaging 10.2%. The company got approval for auto rate increases in 19 states in the quarter, at an average of 4.4%.

Allstate's policy count decreased on both U.S. homeowners and standard auto, while there were gains in emerging and Canadian businesses.

One of Allstate's newest products, dubbed House & Home, was rolled out in seven additional states in the second quarter, bringing the total to nine. House & Home was introduced earlier this year in Oklahoma and Kansas to help the company deal with rising roof replacement costs.

Gross frequency in bodily injury and physical damage for Allstate standard auto increased in the quarter, after seeing the levels reduce over the past four quarters. Paid severity for bodily injury and physical damage also increased.

Overall net premiums written increased in the quarter by 3.8% over the prior-year quarter, in part due to the acquisition of Esurance. The company purchased Esurance in late 2011. Company officials during the call said Esurance has been performing as expected.

Esurance had a combined ratio of 106 in the quarter, which includes 16.2 points of advertising expense, Block said.

The company spent more money on Esurance and Allstate advertising in the quarter, which pushed the expense ratio up. Response to Esurance advertising has been strong to the company will continue to spend on it, company officials said. Wilson said the company is expecting to spend more money next year on technology to keep pace with changes in the industry. Allstate's expense ratio in the quarter, 25.8, was slightly higher than in the second quarter of 2011, which was 24.9.


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