Allstate has seen a drop in income and a small 0.9% dip in its consolidated revenues for the first quarter of 2022, as the company attempts to meet the challenge of inflation by re-aligning its business practices.
Tom Wilson, Chair, President and CEO of The Allstate Corporation, explained that his company was addressing inflation by “raising prices, reducing expenses and changing investment allocations.”
Net income for the quarter was $630 million versus a loss of $1.4 billion last year, but this was primarily due to a loss from discontinued operations in 2021 associated with the sales of Allstate Life Insurance Company and Allstate Life Insurance Company of New York.
On an adjusted basis, net income was $726 million and well below the income of $1.9 billion reported in Q1 2022.
Allstate said the decrease owed to higher auto accident frequency and increased inflation, unfavorable prior year reserve re-estimates and lower net investment income, partially offset by higher earned premium and lower catastrophe losses.
Catastrophe losses amounted to $462 million for the quarter, down 21.7% on the $590 million incurred last year.
For property liability business, Allstate’s underwriting income plummeted from $1.7 billion to $280 million, mainly due to lower auto insurance margins, reflecting the impact from inflationary increases in claim severity and increased auto insurance accident frequency as miles driven increased with economic activity.
But earned premium of $10.5 billion in this segment increased 6.1% in the first quarter of 2022 compared to the prior year quarter, driven by higher average premiums and item growth in both the National General and Allstate brands.
This was helped by premium growth of 8.8% for Allstate Protection homeowners, which also grew underwriting profits to $410 million on a combined ratio of 84.2%, supported by lower catastrophe losses.
Allstate’s investment income for Q1 fell from $708 million to $594 million.
“Excellent profitability in homeowners insurance, strong investment income and earnings from Protection Services and Health and Benefits mitigated the negative impact of inflation on auto insurance margins,” Wilson explained. “Shareholder value also benefited from a shortening of the bond portfolio duration in late 2021 to reduce enterprise exposure to inflation and higher interest rates.”
“We made excellent progress on the Transformative Growth strategy by expanding customer access, improving pricing sophistication and advancing expense reduction programs. Customer access was expanded as Allstate agent new business sales were maintained while direct distribution grew to 38% of new business and National General expanded through independent agents,” he continued.
“Transformative Growth has positioned us to quickly adapt to this inflationary environment while improving our competitive position to grow market share.”
