Allstate falls to Q4 loss as Storm Elliott drives $779m cat bill

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US primary insurer Allstate has reported a preliminary net loss for the fourth quarter of 2022, as costs from Winter Storm Elliott contributed to an overall catastrophe loss of $779 million for the Q4 period, pre-tax.

Allstate logoThe company estimates its overall Q4 loss at between $285 million and $335 million, or between $335 million and $385 million on an adjusted basis.

Catastrophe losses for the month of December alone amount to $593 million, Allstate reports, with Elliott accounting for approximately 80% or $478 million of losses in this period.

The company’s fourth quarter combined ratio therefore came to 109.1%, having also been adversely impacted by increases in claim reserves over the year.

Unfavourable prior year reserve re-estimates totalled $282 million during Q4, excluding catastrophes, as Allstate continued to account for increased severity in commercial auto insurance and an increase in claims frequency.

Allstate’s property liability premiums written in Q4 increased 11.4% year-over-year to $11.5 billion driven primarily by higher average auto and home insurance premiums.

For auto lines specifically, premiums written increased 13.3% to $7.8 billion and premiums earned increased 10.3% to $7.7 billion, reflecting a 14.4% increase in Allstate brand average premiums.

Homeowners premiums similarly increased 9.3% to $2.9 billion and premiums earned increased 9.4% to $2.8 billion reflecting a 12.0% increase in Allstate brand average premiums due to increases in insured home valuations and rate increases.

Allstate further reported that net investment income in the fourth quarter of $557 million, including performance-based investment income estimated at $147 million.

Net gains on investments and derivatives for the fourth quarter of 2022 are estimated to be $95 million, primarily due to increased valuation on equity investments, which is partially offset by losses on sales of fixed income securities.

The company took a number of proactive portfolio actions to reduce inflation and economic risk last year by shortening fixed income duration and reducing equity exposure mitigated portfolio losses by approximately $2 billion.

Total return on the $61.8 billion portfolio was 2.5% in the fourth quarter of 2022 and -4.0% for the full year.

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