Allstate Corp. said it is accelerating its plan to increase auto insurance rates as it reported unprofitable second-quarter results.
Allstate posted a net loss of $1.04 billion in the second quarter, compared to a net profit of about $1.6 billion in the same three months a year ago. The Northbrook, Illinois-based insurer posted an unprofitable combined ratio of nearly 108 in the second quarter.
CEO Tom Wilson said that “rising refinish costs and upward loss reserves in the prior year” led to the combined ratio result.
“We are further accelerating insurance price increases, implementing underwriting restrictions in underperforming states and reducing ad spend, which is expected to improve profitability and slow policy growth,” he said in a statement.
Wilson, speaking with analysts on Aug. 4, said that “generalizing increases in auto and home insurance rates” is part of a strategy to improve profitability.
“In the second half of 2022, we plan to request rate increases that exceed the increases made in the first half of this year, which is 6.1% of Allstate brand premiums nationwide,” said he. “The underwriting guidelines have been and will be changed to reduce the volume of new business where we are not achieving sufficient returns.”
Earlier this year, Allstate said it has “raised the magnitude” of auto rate hikes as it reported positive first-quarter net income thanks to profitability in homeowners’ insurance. For the second quarter, however, Allstate’s homeowners’ business generated a $186 million underwriting loss on higher catastrophe and non-cat losses plus unfavorable reserve revaluations from last year, the company said. The second quarter combined ratio for homeowners was 106.9.
Meanwhile, higher auto claim frequency and severity led to a combined ratio of 107.9. The severity of the claims was driven by higher costs for used cars, parts and labor, as well as higher injury claims from medical inflation, increased medical treatment and attorney intervention.
Allstate bolstered its property liability reserves by $411 million in the second quarter, of which $275 million was related to personal cars and $91 million was attributable to commercial cars — primarily from shared economy operations that exited Allstate.
Wilson said Allstate has implemented “broad rate hikes” across the country, with 9 states seeing automatic rate hikes of more than 10%. However, the insurer has not been able to get an adequate rate in New York, which accounts for 9% of Allstate’s auto premium, or any increase in California, Wilson added.
While inflationary factors affect the homeowner’s line and need for rate, Allstate said it has done well in the long run. Glen Shapiro, president of property liability, said Allstate knows “how to insure this company to make money over time and protect a good balance of clients in such a way that the portfolio works.”
“Despite inflation, we are not currently in a position of equal footing in homeowners as cars,” he added. “We are in a very good position to continue writing and growing homeowners.”
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