Allstate warns on Q2 as nat cat & inflation drive claims spike
US P&C insurer Allstate warned on its Q2 earnings after elevated cat losses and rising inflation pushed combined ratios well into the triple digits.
Another ten cat events in June, primarily wind and hail in the Midwest, brought $315 million in losses. Together with upwards revisions on prior period events, Allstate looked ready to book $1.1 billion in Q2 pre-tax cat losses.
That played a part in pushing homeowners to a 106.9% combined ratio, well ahead of what Allstate called an underlying rate of 70.3%.
Inflation likewise did its worst, especially in automotive. “Inflationary trends continue to adversely impact current and prior report year claim severity and loss reserve estimates,” management said in its profit warning.
Allstate wrote $408 million in fresh reserves against prior period non-cat losses. Of that sum, nearly 90% went to automotive including $275 million in personal auto. Another $91 million in commercial auto was attributed to shared economy business written in states where coverage has been terminated.
Inflation likewise hit current claims costs and Allstate bemoans “persistent increases in loss costs” on parts, labour and lengthened claim rotation on physical damage plus rising costs and litigation on injury.
That helped push the Q2 combined ratio in personal auto to 107.9%, above what management would have considered an underlying ratio of 102.1%.
“ Allstate continues to implement significant insurance rate increases given ongoing inflationary impacts on claim severities,” management said of what it admits is a game of catch-up.
Allstate claimed an average 10.7% rate hike in auto in June across 8 notifying jurisdictions, rendering total Allstate brand insurance premium impact of just 1.1%.
Cumulative rate increases implemented since the beginning of Q4 2021 across varied jurisdiction are expected to raise annualized written premium by approximately 9.0%, or $2.17 billion, management added.
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