Allstate expects to report a bottom-line third quarter net loss in the range of $675-$725 million and a combined ratio of 111.6, including 7.8 points from reestimates of prior year auto loss reserves, the carrier reported Wednesday.

Catastrophe losses will also be pushing up the third-quarter combined ratio, Allstate said, estimating that 6.9 of the 11.6 points above breakeven will come from natural disasters, including Hurricane Ian.

In third-quarter 2021, Allstate reported net income of more than $0.5 billion and a combined ratio of 105.3, with 12.5 points attributable to catastrophe losses and only 1.6 points from prior-year non-cat reserve additions.

According to a media statement yesterday, Allstate’s gross losses from Hurricane Ian are estimated at $671 million. The carrier expects to cede just less than half the amount to reinsurers, resulting in a net loss figure of $366 million. Other catastrophes in the quarter will bring total net catastrophe losses up to $763 million.

Prior-year loss reserve adjustments were higher, coming in at $875 million, with $643 million of the total attributable to personal auto. This was primarily from bodily injury coverages, reflecting the carrier’s updated assumptions related to medical inflation, increased accident severity, more complex medical treatment and greater attorney representation. Adverse prior-year development on property/casualty business in runoff amounting to $120 million, along with non-catastrophe loss development for commercial auto and homeowners coming in at $112 million, made up the other portions of the reserve hit. (The runoff reestimates include results from Allstate’s annual reserve review related to environmental and asbestos exposures.)

The combined ratio for Allstate’s auto segment is expected to be 117.4 for the third quarter compared to 102.3 for third-quarter 2021. The company continues to implement rate hikes, which helped boost auto premiums 9.6 percent to $7.9 billion, but it also continues to deal with increased auto loss costs stemming from higher claims severity for injury and physical damage coverages.

Commenting on the Hurricane Ian losses, Allstate highlighted the impacts of enterprise risk and return management actions and comprehensive reinsurance programs, which significantly mitigated net losses from the storm.

Reporting its hurricane loss estimates last week, another personal lines giant, Progressive, saw a greater gross loss impact—nearly $2.0 billion. Like Allstate, Progressive ceded much of that amount to reinsurers. For Progressive, reinsurance cessions were more than 60 percent of the total, bringing Progressive’s net Ian loss total down to $785 million.

Both carriers said that roughly three-quarters of their Ian losses relate to vehicle claims.

Topics Catastrophe Auto Profit Loss Reinsurance Hurricane