US primary insurer Allstate has posted a net loss of $310 million for Q4 of 2022, primarily driven by auto insurance underwriting losses.
This compares to a net income of $790 million in the same quarter of 2021.
Adjusted net loss was $359 million, or $1.36 per diluted share, compared to adjusted net income of $796 million generated in Q4 of 2021.
Allstate suggests that this decline reflects increased claims severity, higher unfavourable prior year reserve re-estimates, increased catastrophe losses, and lower performance-based investment income.
Total revenues of $13.6 billion in the quarter increased by 4.9% compared to Q4 of 2021. Meanwhile, Property-Liability earned premiums in Q4 of $11.4 billion increased by 9.5% compared to the prior year, driven primarily by higher average premiums.
The recorded combined ratio of 109.1 was 10.2 points higher than Q4 2021 and generated an underwriting loss of $1.0 billion.
Meanwhile, premium written of $11.5 billion increased 11.4% compared to the prior year’s quarter.
Auto insurance written premiums increased 13.3% driven by significant rate increases in the Allstate brand and growth at National General.
Homeowners insurance written premiums increased by 9.3%, which Allstate notes primarily reflects inflation in insured home replacement costs, rate increases and policies in force growth.
The underwriting loss reflects increases to current report year auto claim severities, higher catastrophe losses and adverse prior year reserve re-estimates. This was partially offset by higher earned premiums and lower expenses, says Allstate.
Prior year reserves, excluding catastrophes, were strengthened by $282 million in the fourth quarter of 2022.
This included approximately $180 million primarily related to an increase in personal auto insurance late reported claim frequency attributable to prior accident years and approximately $100 million related to increased severity in commercial auto insurance principally from shared economy and states that are being exited.
The underlying combined ratio of 99.2 in the fourth quarter of 2022 was 7.9 points above the prior year’s quarter, primarily reflecting a higher auto insurance loss ratio.
Tom Wilson, Chair, President and CEO of The Allstate Corporation, commented, “While revenues increased to $13.6 billion, due to 9.5% growth in Property-Liability premiums, higher auto insurance prices were not sufficient to overcome increased loss costs and reserve increases.
“The comprehensive plan to return auto insurance margins to target levels continues to be implemented in 2023 and is expected to further increase average premiums, reduce expenses and lower policy growth.
“Homeowners insurance maintained attractive margins despite higher catastrophe losses from Winter Storm Elliott. The investment portfolio had a total return of 2.5% in the quarter. Allstate Protection Plans had excellent growth from U.S.-based retailers and expansion into furniture and international markets.”
“Total enterprise premiums written increased 9.8% to $50.3 billion for the year, largely due to implemented rate increases in auto and homeowners insurance, and adjusted net income was a loss of $262 million.”
Wilson continued, “In addition to actions to restore auto profitability, we continue to execute the Transformative Growth strategy to further increase shareholder value. The affordable, simple and connected auto insurance product launched in 2022 will be available in more states in 2023 using a differentiated direct-to-consumer experience that leverages our expertise in data and analytics.
“Proactive risk and return management of the investment portfolio resulted in a reduction in duration in late 2021, mitigating approximately $2 billion of losses in 2022.
“In late 2022, we began to extend duration as the risk and return profile of fixed income improved. Capital management actions also benefited shareholders who received $3.4 billion of cash in 2022 through dividends and share repurchases.”
Earlier this month Allstate 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.
The 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 December alone amount to $593 million, Allstate reports, with Elliott accounting for approximately 80% or $478 million of losses in this period.