January Cat Losses and Keeps the Auto Rate Hikes Coming


Original article can be found here.

Allstate Corp. said it estimated catastrophe losses for the month of January of $307 million, or $243 million after-tax from nine events primarily in Texas and California.

Catastrophe losses for the January events were estimated at $309 million, partially offset by favorable reserve reestimates for prior events.

In the same announcement, Allstate updated its initiative to accelerate auto insurance rate increases.

“Allstate continued to implement significant auto insurance rate actions in response to inflationary increases to loss costs,” said Jess Merten, chief financial officer Allstate Corp. “During the month of January, the Allstate brand implemented auto rate increases of 9.9% across 13 locations, resulting in total brand premium impact of 0.7% which are expected to raise annualized written premiums by approximately $182 million.”

Allstate implemented $1.48 billion and $1.14 billion of rate increases in the fourth and third quarters of 2022, respectively.

The update comes about two weeks after Allstate reported a loss of $310 million in the fourth quarter, mostly related to unprofitability in the auto insurance segment where Allstate recorded an underwriting loss of $974 million (a loss of $3 billion for all of 2022).

“The comprehensive plan to return auto insurance margins to target levels continues to be implemented in 2023 and is expected to further increase average premiums, reduce expenses and lower policy growth,” said CEO Tom Wilson.

In a call with analysts to discuss earnings, Allstate’s Mario Rizzo, president of Allstate Property-Liability, detailed the insurer’s plan to restore profit in its auto insurance business. Other than raising rates, Rizzo said advertising expenditures have been cut to manage new business, and underwriting guidelines have been tightened.

But despite catastrophe losses, Wilson recently said he sees homeowners insurance as a “growth business.” Allstate booked fourth quarter catastrophe losses of $779 million – driven by losses from Winter Storm Elliot. The Q4 combined ratio for the segment increased 5.5 points but remained at 92.6. Wilson said Allstate’s homeowners combined ratio between 2017 and 2021 averaged 12 points better than the industry.


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