Allstate ‘Further Accelerating’ Rate Hikes Following Q2 Loss
Allstate ‘Further Accelerating’ Rate Hikes Following Q2 Loss
The Allstate Corp. announced that it is speeding up its plan to raise auto insurance prices as a result of its second quarter’s loss-making performance.
In contrast to a net income result of roughly $1.6 billion in the same three months a year prior, Allstate experienced a net loss of $1.04 billion in the second quarter. The Northbrook, Illinois-based insurer reported a combined ratio that was approximately 108 for the second quarter.
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CEO Tom Wilson said “rising claim repair costs and upward prior year loss reserve development,” led to the combined ratio result.
“We are further accelerating insurance price increases, implementing underwriting restrictions in underperforming states and reducing advertising spend, which is expected to improve profitability and slow policy growth,” he said in a statement.
Wilson, during a call with analysts August 4, added, said that “broadly raising auto and home insurance rates” is part of a strategy to improve profitability.
Allstate ‘Further Accelerating’ Rate Hikes Following Q2 Loss
“In the second half of 2022, we plan to file for rate increases in excess of the increases implemented in the first half of this year, which were 6.1% of Allstate brand countrywide premiums,” he said. “Underwriting guidelines have been and will be changed to reduce new business volume, where we’re not earning adequate returns.”
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Earlier this year, Allstate said it “increased the magnitude” of auto rate hikes as it reported positive net income for the first quarter thanks to profitability in homeowners insurance. However, for the second quarter, Allstate’s homeowners line of business generated an underwriting loss of $186 million on higher catastrophe and non-cat losses plus unfavorable prior year reserve re-estimates, the company said. The Q2 combined ratio for homeowners was 106.9.
A combined ratio of 107.9 was produced by the severity and frequency of auto claims, which increased. The cost of used cars, parts, and labor increased, while injury claims increased due to medical inflation, increased medical care, and attorney participation.
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Allstate strengthened property liability reserves in Q2 by $411 million of which $275 million was related to personal auto and $91 million was attributable to commercial auto – mostly from shared-economy business that Allstate has exited.
Allstate ‘Further Accelerating’ Rate Hikes Following Q2 Loss
Wilson said Allstate has implemented “broad rate increases” countrywide, with 9 states seeing auto rate increases over 10%. However, the insurer has not been able to get adequate rate in New York, which accounts for 9% of Allstate’s auto premium, or any increase in California, Wilson added.
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While inflationary factors affect the homeowners line and the need for rate, Allstate said it has done well over the long term. Glen Shapiro, president of property liability, said Allstate knows “how to underwrite this business to make money over time and protect a good balance set of customers in such a way that the portfolio works.”
“We are not in an equal position in homeowners as auto right now in spite of the inflation,” he added. “We’re in a very good position to continue to write and grow homeowners.”
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