Allstate Corp. said fourth-quarter 2021 net income plummeted 50 percent compared to results of the prior-year quarter as auto claim frequency and severity increased.

Adjusted net income for Q4 was $796 million compared to about $1.6 billion during the last three months of 2020. The combined ratio for the quarter increased 14.9 points compared to 2020, to 98.9. The auto business recorded an unprofitable combined ratio of 104.3 during the fourth quarter compared to 85.5 in 2020.

The insurer noted in a statement that fourth-quarter 2020 results “reflected low auto accident frequency related to the effects of the pandemic. The increase in the loss ratio in the auto business during 2021 was also due to higher claim severity from increased used car prices, higher parts and labor costs, medical inflation, and more attorney representation.”

The rise in car prices is to blame for “80-ish percent of the overall severity issue,” said Glenn Shapiro, president of Allstate Personal Insurance, during an earnings call.

Driving trends could normalize to pre-pandemic levels somewhat, Shapiro added, but less people might be going to the office as frequently as they once had. Since 40 percent of auto losses occur during rush hour, there could be changes in frequency and severity. However, he explained, “We also see some severity increase from that because the driving has shifted to more leisure times—to times where the roads are more open. People are driving faster. It creates harder hits with greater severity. That’s hitting us both on the physical damage and the casualty side.”

“We are adapting to higher auto claim costs by raising premiums with Allstate brand implemented rate increases in the quarter at 2.9 percent of countrywide premiums, reducing expenses and managing costs,” CEO Tom Wilson said.

Higher labor and material costs also affected fourth-quarter results for homeowners insurance, where the combined ratio increased 8.6 points to 87.1.

Though premiums written in Allstate’s property-liability business increase nearly 20 percent in the fourth quarter to $10.3 billion, underwriting income dropped 92.1 percent to $113 million, driven by higher non-catastrophe claims in auto and homeowners insurance and increased prior-year reserves.

Higher net investment income and revenues from Allstate’s National General acquisition increased fourth-quarter revenue 18.7 percent to about $13 billion.

For all of 2021, adjusted net income fell 10.6 percent compared to 2020 to about $4 billion. The full-year combined ratio was 95.9 compared to 87.6 in 2020.

Topics Trends Auto Profit Loss Claims