Allstate turns Q2 cat losses into eye-popping $1.4bn net loss

Allstate suffered a 2.4 times increase in its second quarter P&C underwriting loss to an eye-opening $2.1 billion as another quarter of major cat losses show the retail insurer well behind the curve on the push against regulators for homeowner and auto insurance rates.

The combined ratio across property and liability lines rose 9.7 points to a hefty 117.6% following $2.7 billion in pre-announced net cat losses for the period.

Management prefers its own underlying accounting methodology which excludes catastrophes, prior year reserve re-estimates as well as amortization and impairment on purchased intangibles. Here management brags of a 0.5 point improvement to 92.9% for the second quarter.

CEO Tom Wilson blamed cat events, then talked up efforts to become the lowest cost / most efficient carrier on the market.

“Allstate will improve results while building an enhanced business model to better serve customers, generate attractive returns for shareholders and create opportunity for the Allstate team,” he said.

Homeowners suffered big, largely the result of the pre-announced 70% increase in catastrophe losses to $2.2 billion for the segment. The combined ratio surged nearly 38 points to 145.3%. A 1.9 point improvement in the underlying combined ratio hinted at rate gain capable of edging out garden variety frequency and severity.

Amid continued roll-out of rate increases across regulated jurisdictions, homeowner premiums grew 12.4% as added rate trumps a 1% gain in the policy count.

Automotive suffered a 0.4 point increase in its combined ratio to 108.3% as higher cat losses were partially offset by lower unfavourable prior year reserve adjustment.

Premium growth in auto remains double digit on plodding roll-out of regulatory rate increases, partially offset by a decline in policies in force. Restated to management’s preferred underlying measure and rate gain still fell slightly behind the rise in severity and frequency.

After modest changes in earnings in the group’s smaller segments and a rise in investment income, Allstate left its shareholders with a $1.4 billion Q2 attributable net loss, kicking the YTD loss to $1.7 billion.

Allstate had already signalled the pending doom to shareholders with word in July that they were suspending a share repurchase program.

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