Allstate announced preliminary estimates of its fourth-quarter and full-year 2022 results last night, revealing a 2022 combined ratio of 110 for personal auto insurance, with reserve boosts for prior periods and rising frequencies contributing to underwriting losses.
Allstate is estimating a 106.6 combined ratio for 2022 for property-liability lines overall.
For just the final quarter, the estimated combined ratios are 112.6 for personal auto and 109.1 across all property-liability lines, with homeowners posting an estimated 92.6.
Tallying underwriting and investment results, Allstate estimates a bottom-line net loss for the fourth quarter between $285 million and $335 million. In contrast, in fourth-quarter 2021, the company posted $790 million in net income.
Breaking down the factors that contributed to the personal auto loss ratio rising 8.3 points from 104.3 for fourth-quarter 2021 to the estimated 112.6 for fourth-quarter 2022, Allstate said:
- Reserve additions taken in the fourth quarter of 2022 for the first three quarters of 2022 amounted to $410 million, contributing 5.3 points to the combined ratio. In fourth-quarter 2021, the comparable figure was only 1.6 points in prior quarter reserve additions.
- On top of that, Allstate increased personal auto loss reserves for prior years by $180 million, contributing 2.3 points to the combined ratio. That addition is in line with the figure provided last year when Allstate said that prior-year reserve additions added 2.1 points to the combined ratio.
Expanding the analysis to other lines of business, Allstate said prior-year reserve boosts across all lines amounted to $282 million in the fourth quarter, with roughly $100 million for commercial auto added on top of the $180 million for personal auto.
Allstate said the personal auto charge arose from an increase in personal auto insurance claim frequency attributable to prior accident years, while explaining that increased severity fueled the commercial auto boost primarily from shared economy business and states that are being exited.
“Personal auto insurance claim frequency has continued to increase, but remains below 2019 levels,” Allstate said in a statement.
An estimated $779 million of catastrophe losses also pushed up the carrier’s overall combined ratio for fourth-quarter 2022, Allstate reported. In fourth-quarter 2021, catastrophe losses were $528 million.
Winter storm Elliott alone accounts for nearly half-a-billion dollars in catastrophe losses ($478 million).
On the top line, Allstate said personal auto written premiums grew 13.3 percent to $7.8 billion and property-liability premiums overall jumped 11.4 percent to $11.5 billion.
Significant auto rate actions have been driving premiums upward. Allstate estimates that total rate increases in 2022 for Allstate brand auto insurance will raise annualized written premiums by about 16.9 percent.
Investment results also contributed to the reversal of bottom-line net profit in fourth-quarter 2021 to a net loss in fourth-quarter 2022.
Allstate estimates net investment income of $557 million and net losses on investments of $95 million for fourth-quarter 2022, compared to $847 million of net income and $266 in net gains for fourth-quarter 2021.