Carriers continue to see financial losses, hike rates – Repairer Driven News
Allstate has been carrying out its pledge to investors to aggressively pursue rate increases to bring its auto insurance business back to profitability, yet continues to see huge losses, similar to those felt by Progressive and GEICO.
Allstate previously reported implementation of rate increases that totaled $258 million in July and $601 million in the quarter after implementing $862 million and $702 million of rate increases in the first quarter of 2022 and fourth quarter of 2021, respectively.
“Allstate has a long history of successfully navigating challenging environments, and we are confident in our ability to restore profitability to target levels while continuing to innovate and transform our company,” said Tom Wilson, Allstate chair, president, and CEO, in a statement. “The impact of rising claim repair costs and upward prior year loss reserve development led to a recorded combined ratio of 107.9 in the second quarter. The underwriting loss combined with equity valuation declines and losses on fixed income sales resulted in a net loss of $1.04 billion and an adjusted net loss of $209 million in the quarter.”
Total revenues of $12.2 billion in Q2 2022 decreased 3.4% compared to Q2 2021. Net loss to common shareholders was nearly the same during Q2 as 2021 Q2’s income, which was $1.60 billion.
Adjusted net loss dropping to $209 million compared to adjusted net income of $1.15 billion generated in Q2 2021 reflects increased claims severity and unfavorable prior year reserve reestimates, lower net investment income, and higher catastrophe losses, according to Allstate.
“…[W]e are further accelerating insurance price increases, implementing underwriting restrictions in underperforming states and reducing advertising spend, which is expected to improve profitability and slow policy growth,” Wilson said. “Insurance premiums earned of $10.9 billion increased 8.6% primarily due to higher average premiums in auto and homeowners insurance. While the current operating environment necessitates [a] focus on improving insurance margins, progress was made on the Transformative Growth strategy including launching beta versions of a new auto insurance product and technology ecosystem. Shareholders also benefited from strong capital management with cash returns of $919 million through common shareholder dividends and share repurchases.”
Allstate Protection auto insurance earned premium increased 6.8% during Q2 2022 “driven by higher average premiums from rate increases and policies in force growth of 2.3% compared to the prior-year quarter.”
Allstate implemented auto rate increases in 30 locations during the second quarter at an average of 8.7%, or 2.5% on total premiums, bringing the year-to-date impact to 6.1% on total premiums.
“Rising auto claim severity levels compared to the prior year reflect higher costs for used cars, parts and labor and are geographically widespread across the United States,” Allstate said. “Injury claim cost increases reflect more severe auto accidents, increased medical inflation, higher consumption of medical treatment and more claims with attorney involvement.”
Chief Financial Officer Mario Rizzo noted that Allstate “continued to provide meaningful cash returns to shareholders” during Q2.
“We returned $919 million to common shareholders through a combination of $683 million in share repurchases and $236 million in common shareholder dividends,” he said. “Shares outstanding have been reduced by 8.7% over the last twelve months and $1.8 billion remains on the current $5 billion share repurchase authorization, which is expected to be completed early next year,” concluded Rizzo.
Progressive’s Q2 net income loss was $542.9 million, or a 169% decrease over Q2 2021. The carrier saw an 8% increase in net premiums written at $12.42 billion compared to $11.48 billion in Q2 2021. Premiums earned also increased, at 11%, over last year’s Q2 to $12.14 billion from $10.98 billion. The carrier says the growth in premiums was driven primarily by rate increases taken during 2021 and the first half of 2022.
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