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Allstate’s Net Income Grew 52 Percent Higher; Auto Underwriting Improved
Insurer Allstate reported improved auto underwriting results and strong investment returns for the 2020 fourth quarter.
Net income was up 52 percent to $2.6 billion for the quarter compared to net income of $1.7 billion in the same quarter in 2019.
Net investment income rose 73 percent to $1.19 billion.
The results reflected fewer auto accidents and higher home insurance premiums along with increased catastrophe losses. The 79.1 combined ratio for the quarter compared to 84.9 in the fourth quarter if 2019, indicating lower non-catastrophe losses, higher premiums earned and lower underwriting expenses.
Property/casualty insurance earned premiums of $8.8 billion were about the same as the prior year’s fourth quarter.
Catastrophe losses were not about the same. Allstate had $424 million in catastrophe claims in 2020’s last quarter, compared to $295 million in the fourth quarter the year before.
“Amidst the 2020 pandemic, Allstate served customers well, made progress in building higher growth business models and generated excellent returns for shareholders,” said Tom Wilson, chair, president and CEO.
Wilson said “total growth and return prospects also improve” with the pending acquisition of National General, which was announced in July.
The company is currently transitioning and streamlining its distribution. Esurance is being integrated into the Allstate brand. In October, the insurer announced it would be laying off 3,800 employees as part of its efficiency moves. It is also selling most of its life insurance business to Blackstone Group as part of its strategy to grow market share in personal lines property/casualty lines.
Additional Q4 2020 Results:
- Consolidated revenue was up 4.8 percent for the quarter to $12 billion.
- Policies in force increased 21 percent to 176 million and personal property/liability policies in force remained at 34 million.
- Property-Liability written premium of $8.61 billion decreased 1.5 percent in the fourth quarter of 2020 compared to the prior year quarter, including the negative impact of premium refunds.
- Allstate brand auto insurance net written premium declined 2.8 percent compared to the prior year quarter due to premium refunds and a drop in retention concurrent with the ending of special pandemic-related payment plans. Allstate brand new business increased in the fourth quarter, but policies decreased due to the decline in retention. The recorded combined ratio of 85.2 in the fourth quarter of 2020 was 8.9 points below the prior year quarter, primarily due to lower loss costs from reduced miles driven partially offset by higher claim severity.
- Allstate brand homeowners insurance net written premium grew 3.5 percent, and policies in force increased 1.1 percent in the fourth quarter of 2020 compared to the prior year quarter. The recorded combined ratio of 77.8 in the fourth quarter of 2020 was 3.5 points above the fourth quarter of 2019, driven by increased catastrophe losses. Underwriting income for the year was $798 million, reflecting a recorded combined ratio of 89.8, and an underlying combined ratio of 61.8.
- Encompass brand net written premium decreased 5.4 percent in the fourth quarter of 2020 compared to the prior year quarter, driven by a decline in policies in force, partially offset by higher average premiums. The recorded combined ratio of 95.0 in the fourth quarter of 2020 was 1.7 points higher than the prior year quarter, primarily driven by higher catastrophe losses.
- Protection Services (formerly Service Businesses) revenues increased to $518 million in the fourth quarter of 2020, 19.4 percent higher than the prior year quarter.
*This story appeared previously in our sister publication Insurance Journal.