Allstate Corp., the largest publicly traded U.S. auto and home insurer, said second-quarter profit plunged 45 percent on a surge in claims from automobile coverage.
Net income declined to $355 million, or 79 cents a share, from $645 million, or $1.39, a year earlier, the Northbrook, Illinois-based company said Monday in a statement. Operating income, which excludes some investment results, was 63 cents a share, missing the 96-cent average estimate of 22 analysts surveyed by Bloomberg.
The insurer’s property-liability net written premium grew to $7.9 billion, a 4.4 percent hike spurred by an increase in Allstate brand premium. Allstate’s brand auto net written premium jumped close to 5 percent, due to higher average premium but also a 3.3 percent hike in policies in force. Along those same lines, Allstate homeowners net written premium grew 3.1 percent in the 2014 second quarter, thanks in part to a 1.3 percent growth in average premium and 1.2 percent growth in policy in force.
Esurance net written premium jumped more than 9 percent in the 2015 second quarter, due to higher average auto premium and a reduction in policy growth to 6.4 percent, reflecting results from profit improvement actions. Encompass, on the other hand, saw a slight decrease in net written premium during the quarter, with a decline in policies in force because of profit improvement actions, which countered higher average premium.
Allstate said its property-liability combined ratio hit 100.1, up from 97.4 in the 2014 second quarter.
Chief Executive Officer Tom Wilson announced in May that Allstate would start raising rates for drivers, following competitor Geico’s announcement of rate increases. Auto insurers have faced pressure from mounting claims as more drivers take to the road amid an improving economy.
“It’s all about auto frequency versus pricing,” Robert Glasspiegel, an analyst at Janney Montgomery Scott, said in an interview before results were announced. “They indicated that frequency’s elevated and they need to reprice. I’ve got a lot of conviction they know how to do that, it’s a question of when does pricing get ahead of auto frequency. Pricing isn’t something you can adjust instantaneously.”
The insurer gained less than 1 percent to $69.38 in New York and has declined 1.2 percent this year. Results were released after the close of regular trading.
Distance traveled on U.S. roads in May was up 2.7 percent, or 7.3 billion vehicle miles, compared with a year earlier, according to the most recent monthly report from the Federal Highway Administration.
Catastrophes cost the company $797 million before taxes in the period, the firm said in a July 16 statement. That’s down from $936 million a year earlier.
Progressive Corp. said in July that second-quarter profit rose 24 percent after the acquisition of ARX Holding Corp. helped the company push into home insurance.
*Carrier Management added additional material concerning Allstate’s 2015 second-quarter financial results.