Allstate has reported a net loss of $694 million for the third quarter of 2022, compared to a net income of $508 million in the same quarter last year, owing primarily to an underwriting loss and equity valuation declines.
The company’s adjusted net loss for the quarter was $420 million, compared to a prior-year quarter adjusted net income of $217 million. According to Allstate, the decrease is due to increased claims severity, higher unfavorable prior year reserve re-estimations, and lower net investment income.
At the same time, total revenues of $13.2 billion in Q322 increased 5.8% year on year, reflecting a 9.8% increase in Property-Liability earned premium, partially offset by net losses on investments and derivatives in 2022 compared to net gains in 2021 and lower net investment income.
Furthermore, the Property-Liability earned premium of $11.2 billion increased 9.8% year on year in the third quarter. According to Allstate, this was primarily due to higher average premiums and policy in force growth.
The recorded combined ratio of 111.6% was 6.3 points higher than the prior year quarter, resulting in a $1.3 billion underwriting loss.
Furthermore, Allstate Protection homeowners insurance earned premiums increased 10.1% in the third quarter of 2021, while policies in force increased 1.4%.
“Allstate’s operational excellence and financial strength enabled us to navigate a difficult economic environment while serving customers, adapting to significant cost increases, and executing profitable growth strategies,” said Tom Wilson, The Allstate Corporation’s Chair, President, and CEO.
“Revenues increased to $13.2 billion for the quarter, owing to a 9.8% increase in Property-Liability earned premiums, primarily due to higher average auto and home insurance premiums, and a 7.2% increase in Protection Services revenue.” Prices for auto and home insurance continue to rise in response to cost inflation, with Allstate brand increases of 10.4% and 13.3%, respectively, taking effect in 2022. Personal lines insurance plans are being expanded in states with unacceptable auto and home insurance margins.
“In addition, we are exiting the commercial and shared economy insurance markets, which account for 55% of commercial premiums.” The net loss of $694 million reflected a small underlying underwriting margin that was more than offset in the quarter by prior year reserve increases and a $199 million valuation decline in public equity related investments. Prior-year reserves were increased by $875 million, primarily due to higher expected settlements with non-customer claimants reflecting more severe accidents and higher medical and litigation costs. For the quarter, adjusted net income was a loss of $420 million.”
Wilson also stated that excellent progress has been made in carrying out the strategy to increase Property-Liability market share and expand customer protection offerings.
“Further cost reductions and sophisticated pricing will increase customer value for auto and homeowners insurance.” Increased customer access is being achieved through the growth of independent agents.
“While Allstate branded direct sales and marketing investment was reduced in light of current auto insurance profitability, execution capabilities were enhanced.” Growth plans for Health and Benefits, Protection Plans, and Identity Protection were also developed. “Allstate’s capital position is strong, allowing us to provide $2.8 billion in cash returns to shareholders year to date through dividends and share repurchases,” Wilson concluded.