Revenues, catastrophe losses up at Allstate

The Allstate Corp. reported a 7.4% drop in net income year-over-year for the three months ending March 31.

Although consolidated revenues for the first quarter of 2013 were $8.463 billion – 1.2% higher than the same period in 2012 – first-quarter catastrophe losses also jumped 38.6% year-to-year, from $259 million in 2012 to $359 million this year. All figures are in U.S. currency.

Net income in the first quarter of this year was $709 million, down from $766 million in the same period in 2012. Net income from operations was $1.03 billion in the first quarter of this year, down from $1.112 billion in the first quarter of 2012.

“The decline from the first quarter of 2012 in both net and operating income was primarily due to higher catastrophe losses, partially offset by a lower property-liability underlying combined ratio,” Northbrook, Ill.-based Allstate stated in a release.

According to documents filed Wednesday with the U.S. Security and Exchange Commission, Allstate’s catastrophe losses for the three months ending March 31 included $381 million in losses from eight wind/hail events. First-quarter cat losses were offset by $32 million in “prior year reserve re-estimates.” By comparison, Allstate’s cat losses for the first quarter of 2012 included $207 million losses from three tornadoes and $202 million in losses from 10 wind/hail events. The Q1 2012 cat loss total was offset by $161 million in prior year reserve re-estimates.

Allstate also reported small increases in standard auto and homeowners’ premiums. Standard auto premiums were $4.363 billion in the first quarter of this year, up from 2.2% from $4.269 billion in the first quarter of 2012. First-quarter homeowners’ premiums edged up 2.7%, from $1.572 billion in 2012 to $1.616 billion this year.

Within its property-liability business, Allstate recorded premiums of $6.77 billion in the first quarter of 2013, compared to $6.63 billion in the same period in 2012. Net investment income dropped, from $1.011 billion in the first quarter of 2012 to $983 million in the latest quarter.

The company’s combined ratio was 92.1 in the first quarter of 2012 and 93.2 in the first quarter of this year.

Also included in its SEC filing were details on reserves for asbestos and environmental claims, which were $1 billion and $192 million respectively, net of reinsurance recoverables, as of March 31, 2013. Establishing such reserves, the firm noted, is subject to uncertainty.

“Among the complications are lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure and unresolved legal issues regarding policy coverage,” Allstate stated.

Other factors contributing to the uncertainty in setting asbestos reserves, Allstate suggested, included the effect of bankruptcy protection sought by asbestos producers and other defendants, as well as interpreting policy provisions.

“Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage,” Allstate wrote in its May 1 SEC filing of asbestos and environmental claims.