Reinsurance News

Allstate falls to Q4 loss as Storm Elliott drives $779m cat bill

19th January 2023 - Author: Matt Sheehan

US primary insurer Allstate has reported a preliminary net loss for the fourth quarter of 2022, as costs from Winter Storm Elliott contributed to an overall catastrophe loss of $779 million for the Q4 period, pre-tax.

Allstate logoThe company estimates its overall Q4 loss at between $285 million and $335 million, or between $335 million and $385 million on an adjusted basis.

Catastrophe losses for the month of December alone amount to $593 million, Allstate reports, with Elliott accounting for approximately 80% or $478 million of losses in this period.

The company’s fourth quarter combined ratio therefore came to 109.1%, having also been adversely impacted by increases in claim reserves over the year.

Unfavourable prior year reserve re-estimates totalled $282 million during Q4, excluding catastrophes, as Allstate continued to account for increased severity in commercial auto insurance and an increase in claims frequency.

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Allstate’s property liability premiums written in Q4 increased 11.4% year-over-year to $11.5 billion driven primarily by higher average auto and home insurance premiums.

For auto lines specifically, premiums written increased 13.3% to $7.8 billion and premiums earned increased 10.3% to $7.7 billion, reflecting a 14.4% increase in Allstate brand average premiums.

Homeowners premiums similarly increased 9.3% to $2.9 billion and premiums earned increased 9.4% to $2.8 billion reflecting a 12.0% increase in Allstate brand average premiums due to increases in insured home valuations and rate increases.

Allstate further reported that net investment income in the fourth quarter of $557 million, including performance-based investment income estimated at $147 million.

Net gains on investments and derivatives for the fourth quarter of 2022 are estimated to be $95 million, primarily due to increased valuation on equity investments, which is partially offset by losses on sales of fixed income securities.

The company took a number of proactive portfolio actions to reduce inflation and economic risk last year by shortening fixed income duration and reducing equity exposure mitigated portfolio losses by approximately $2 billion.

Total return on the $61.8 billion portfolio was 2.5% in the fourth quarter of 2022 and -4.0% for the full year.

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