U.S. primary insurer Allstate has fallen to a net loss for the third quarter and first nine months of 2023, although the underwriting performance did improve in parts of the business during the quarter despite higher catastrophe losses year-on-year.
Allstate has reported a net loss of $41 million for Q3 2023 and a loss of $1.8 billion for 9M 2023, compared with a loss of $685 million and $1.1 billion, respectively, in 2022.
For both periods, catastrophe losses rose. In Q3 2023, cat losses of $1.2 billion increased 55% from the $763 million seen in Q3 2022, and the roughly $5.6 billion of 9M 2023 cat losses reported represents an increase of 139% from the $2.3 billion reported in 9M 2022.
Across the business, premiums written rose 9.6% to $14.4 billion in Q3 2023 and jumped 8.9% to $41 billion in 9M 2023.
Allstate attributes the narrower third quarter loss to an improved property-liability underwriting result. The segment still recorded an underwriting loss of $414 million for the quarter, but this does represent a big improvement from the $1.3 billion underwriting loss seen a year earlier. The segment’s combined ratio improved from 111.6% to 103.4%.
However, for 9M 2023, the property-liability underwriting loss hit $3.5 billion, which is larger than the $1.9 billion loss in 9M 2022, as the combined ratio weakened from 105.8% to 109.8%.
Premiums written in this part of the business increased 10.5% year-on-year to $13.3 billion for the quarter, driven by both the Allstate brand and National General. For 9M 2023, premiums written increased 9.9% to $37.7 billion.
Within the Allstate Protection auto business, premiums written rose 11.6% in the quarter to $8.8 billion, and 10.9% to $25.4 billion for 9M 2023.
The combined ratio strengthened in both periods, by 15.3 pts to 102.1% in Q3 2023 and by 4.4 pts to 104.9% in 9M 2023.
Allstate Protection homeowners experienced most of the firm’s catastrophe losses in the quarter and for the first nine months of the year. Quarterly cat losses increased 148% to $878 million, and 9M 2023 cat losses rose 174% to more than $4.5 billion.
As a result of the elevated cat load, the segment’s combined ratio deteriorated from 89.9% to 104.4% in the quarter, and from 93.8% to 122.8% in 9M 2023.
Tom Wilson, Chair, President and CEO of Allstate, commented: “Allstate’s focus on improving profitability while implementing our growth strategy made excellent progress this quarter. Improved underwriting performance, strong investment income and profits from Protection Services and Health and Benefits generated adjusted net income* of $214 million, or $0.81 per diluted common share in the quarter. Property-Liability earned premium growth of 10.0% and execution of other components of the profit improvement plan improved the underlying combined ratio compared to the prior year quarter. Property-Liability had an underwriting loss in the quarter of $414 million, however, reflecting continued increases in auto insurance loss costs, elevated catastrophe losses and adverse prior year loss development. In response, we continue to raise auto and homeowners insurance prices, improve expense efficiencies, restrict growth in profit challenged states and enhance claims practices. The execution of these comprehensive actions will restore margins to target levels.
“We are pursuing the sale of Allstate’s Health and Benefits businesses since substantial value can be realized when aligned with a broader set of complementary businesses and product offerings. Allstate’s voluntary workplace benefits business was combined with National General’s group and individual health business, creating a broad-based benefits platform that serves 4.3 million policyholders and generated $240 million of adjusted net income over the last twelve months. This value creation was integral to the National General acquisition plan and now positions the business for additional growth and value enhancement. A sale would likely be completed in 2024.”
“Significant progress has also been made in executing the strategy to increase property-liability market share and broaden protection provided to customers. Providing lowest cost protection requires continued cost reductions which is reflected in a lower expense ratio. Allstate exclusive agent productivity increased, excluding three states where profit improvement actions have reduced new business, and National General is growing through independent agents. Plans to increase growth in states that are achieving target auto insurance margins are now being initiated with further expansion planned for 2024. Allstate Protection Plans continues to grow its embedded protection offerings with U.S. retailers and internationally. Shareholder value will continue to grow with higher profitability, strategic capital allocation and organic long-term growth,” he added.
