U.S. primary insurer Allstate has estimated that its gross losses from the Los Angeles, California wildfires will be $2 billion, and after reinsurance recoveries of $900 million under its per-occurrence tower, the firm is projecting a net loss of $1.1 billion from the event.
The insurer’s LA wildfire loss estimate comes alongside a solid set of results for Q4 and full year 2024, with the firm announcing a 30.1% increase in net income to $1.9 billion for the quarter, compared to $1.5 billion in the same quarter in the prior year, and net income of $4.6 billion for the full year, compared to a loss of $316 million in 2023.
Regarding the LA wildfires, Allstate’s Chair, President and Chief Executive Officer (CEO), Tom Wilson, said: “We rapidly supported customers impacted by the January California wildfires and related losses are expected to be about $1.1 billion, pre-tax, net of reinsurance, reflecting a decision to reduce market share beginning in 2007 and a comprehensive reinsurance program.”
Allstate completed the placement of its 2024-2025 Nationwide Excess Catastrophe Reinsurance Program at the July 2024 renewals. The per-occurrence tower is comprised of traditional reinsurance from the private market and also capital markets-backed protection in the form of catastrophe bonds.
All in all, the reinsurance program provides coverage up to $7.9 billion for a single event net of reinstatement
provision.
The $2 billion goss loss estimate from the wildfires announced by the firm today includes losses, claims expenses and an estimated California FAIR Plan assessment. But after reinsurance recoveries the net impact for Allstate is expected to fall to $1.1 billion, which will be reflected in the company’s Q1 2025 results.
The insurer explains that due to its comprehensive reinsurance coverage, each additional $100 million in gross losses results in $10 million in net losses.
Turning to Allstate’s 2024 financial results, and the US primary insurer attributed the improved net income to stronger Property-Liability underwriting results.
For the quarter, Allstate’s catastrophe losses increased to $410 million from $68 million in Q4’23, although catastrophe losses for full year 2024 were down by 11.9% in comparison to 2023, totalling $5 billion compared to $5.6 billion in 2023.
The insurer’s Property-Liability combined ratio for the quarter strengthened by 2.6 points to 86.9%, and for the full year 2024 improved by 10.2 points to 94.3%. Allstate attributes this to higher average earned premiums and improved loss experience more than offsetting increased advertising investment and higher catastrophe losses.
Total revenues for Q4’24 were $16.5 billion, an 11.3% increase from $14.8 billion in Q4’23. Full-year revenues reached $64.1 billion, up 12.3% from the prior year.
Finally, in Q4’24, consolidated premiums written amounted to $15.1 billion, an 8.8% increase from $13.8 billion in Q4’23. For the full year, premiums rose by 10.6%, from $54.9 billion to $60.6 billion.
“Allstate finished 2024 with another excellent quarter both financially and strategically,” said Wilson. “Fourth quarter revenue reached $16.5 billion and net income was $1.9 billion, 11.3% and 30.1% above the prior year quarter, respectively. Operational excellence resulted in solid profitability in auto and homeowners insurance and Protection Services. Adjusted net income for the full year was $4.9 billion which represents an adjusted net income return on equity of 26.8%.
“This performance reflects successful risk and return management. Investment income increased to $3.1 billion in 2024, 24.8% above the prior year due to repositioning into higher yielding fixed income securities, portfolio growth and stronger performance-based results. Homeowners insurance generated $1.3 billion of underwriting income for the year while covering $3.7 billion of customers’ catastrophe losses, reflecting an industry-leading business model.”
“Progress was also made in executing the strategy to grow personal Property-Liability market share, expand Protection Services and sell the Health and Benefits businesses. Allstate has a stronger competitive position, broader distribution and significantly larger customer base since undertaking Transformative Growth five years ago,” continued Wilson. “In the Property-Liability business, the underwriting expense ratio has been reduced, new Affordable, Simple and Connected products brought to market and distribution significantly expanded in the direct and independent agent channels. Total Property-Liability policies in force are expected to grow in 2025 as auto insurance policy renewal rates improve and new business continues to increase.
“Protection Plans revenues reached nearly $2.0 billion for the year, increasing policies in force by 60% since 2019 to 160 million with adjusted net income of $157 million. The decision to maximize shareholder value by combining the Health and Benefits businesses with companies that have greater strategic alignment also was successful with two of the three businesses now under contract to be sold for $3.25 billion,” added the CEO.
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