August 4, 2015 by Canadian Underwriter
The Allstate Corporation has reported US$8.98 billion in revenues for the second quarter of 2015, reflecting a 4.7% increase in insurance premiums from the prior year quarter, while net income was US$326 million for the quarter and US$974 million for the first six months of the year.
Allstate, which is headquartered in Northbrook, Ill. and provides auto, home, life and retirement products and services to customers in the United States and Canada, released its Q2 results on Monday. The corporation reported an operating income of US$262 million for the three months ending June 30 – from US$445 million in Q2 2014 – reflecting increased frequency and severity of auto accidents, Allstate said in a press release. [click image below to enlarge]
“The increase in auto accidents is broad-based by state, risk class, rating plans and the maturity of the business, and consequently appears to be driven by external factors,” explained Allstate chairman and CEO Thomas J. Wilson in the release. “While recent growth in Allstate brand auto policies in force did increase in frequency, since new business typically has higher relative frequency, this was not the primary driver of a higher combined ratio. We have responded aggressively to improve profitability with rate increases, tighter underwriting standards and expense reductions.”
Wilson said that the corporation continues to focus on achieving its 2015 operating priorities and “have not changed the priority to deliver an underlying combined ratio of 89 or below for the full year.” The Property-Liability underlying combined ratio was 89.1 for the second quarter and the first six months of 2015, while the recorded combined ratio for Q2 2015 was 100.1%, from 97.4% in Q2 2014.
The financial results also showed that Property-Liability net written premium grew by 4.4% to US$7.9 billion in the second quarter of 2015 compared to the prior year quarter, largely due to an increase in Allstate brand premium. Allstate brand auto net written premium rose 4.9% due to a 3.3% increase in policies in force and higher average premium.
Allstate brand homeowners net written premium increased 3.1% in the second quarter of 2015 over the prior year, as average premium increased 1.3% and policy in force growth increased to 1.2%, the release said. Esurance net written premium rose 9.1% in the second quarter of 2015 over the prior year quarter, due to higher average auto premium and a reduction in policy growth to 6.4%, reflecting profit improvement actions. Encompass net written premium decreased by 0.9% in the second quarter of 2015 from the prior year as a “decline in policies in force due to profit improvement initiatives offset higher average premium.” [click image below to enlarge]
Allstate Protection had an underwriting loss of US$8 million and a combined ratio of 100.1 in the second quarter of 2015, as underwriting income of US$86 million from the Allstate brand was more than offset by investments in Esurance’s growth strategy and higher non-catastrophe losses in the Encompass brand, the release noted. Allstate brand underwriting income declined from US$299 million in the second quarter of 2014 as the auto combined ratio deteriorated by 6 points from the favourable results in the prior year to 101.4 due to higher auto claims frequency and severity. Homeowners underwriting income improved by US$103 million to US$91 million in the second quarter due to a consistently strong underlying combined ratio and lower catastrophe losses.
The corporation reported that the Allstate brand auto loss ratio was negatively impacted by property damage and bodily injury claim frequency and severity. Property damage frequency and paid claim severities increased 6.9% and 3.7%, respectively, compared to the prior year quarter. Bodily injury frequency and claim paid severities increased 6.8% and 0.6%, respectively, compared to the prior year quarter.
Allstate Financial generated US$139 million of operating income in the second quarter of 2015, US$26 million lower than the prior year quarter, primarily due to lower investment spreads and higher mortality losses.
“Allstate Financial had US$139 million in operating income in the second quarter and had excellent growth and returns from Allstate Benefits,” Wilson said. “Investment income reflected continued strong limited partnership results and stable income from our interest-bearing investments. Our decision to reduce fixed income duration in the property-liability portfolio in prior periods reduced second quarter income, but also mitigated the negative impact on bond values as interest rates increased.”