Allstate Q2 Profit Hurt by Catastrophes, Auto Loss Costs

August 4, 2016

Allstate Corp. reported that consolidated total revenue increased by 2.0 percent to $9.2 billion in the second quarter of 2016 compared to the prior year quarter, as higher insurance premiums outweighed declines in net investment income and realized capital gains.

But net income fell to $242 million compared to $326 million in the second quarter of 2015. For the first six months of 2016, net income was $459 million, compared to $974 million for the same period in 2015. The decline in net income in both periods was due primarily to higher catastrophe losses.

Operating income was $235 million in the second quarter of 2016, compared to $262 million in the second quarter of 2015.

The company announced it is building on its success with its telematics insurance programs by combining them into a new company, Arity, which will serve its own Allstate and Esurance brands and other businesses in the connected car market.

In other second quarter results:

  • Property-liability earned premium increased 3.5 percent in the second quarter of 2016 compared to the prior year quarter, driven by 3.9 percent growth in the Allstate brand. Property-liability net income was $198 million, a decline of $24 million compared to the prior year quarter. The combined ratio was 100.8 for the second quarter of 2016, which included $961 million, or 12.3 points, of catastrophe losses. Property-liability operating income of $186 million was $12 million lower than in the second quarter of 2015. The property-liability underwriting loss of $66 million in the second quarter of 2016 was $56 million worse than in the prior year quarter, driven by an increase in catastrophe losses and higher auto loss costs, partially offset by higher earned premium.
  • Allstate brand earned premium growth of 3.9 percent in the second quarter of 2016 compared to the prior year quarter reflects a 5.7 percent increase in Allstate brand auto average premium, the result of increased rates that were driven by higher loss costs. The Allstate brand recorded combined ratio of 100.1 was 1.4 points higher than in the second quarter of 2015, driven by higher catastrophe losses. Allstate brand auto insurance had a second quarter 2016 recorded combined ratio of 101.2, which included 4.1 points of catastrophe losses. The homeowners insurance recorded combined ratio of 97.0 for the second quarter of 2016 included $644 million of catastrophe losses.
  • Esurance net written premium growth of 5.7 percent compared to the prior year quarter reflects a 1.4 percent decline in policies in force, which was more than offset by a 6.3 percent increase in auto average premium. The Esurance recorded combined ratio of 108.9 in the second quarter of 2016 was 1.3 points better than the same quarter a year ago. The loss ratio was 76.9 in the second quarter of 2016 compared to 75.6 in the prior year quarter.
  • Encompass net written premium declined by 6.8 percent and policies in force were 11.4 percent lower in the second quarter of 2016 compared to the prior year quarter, given our continued focus on improving returns in this business. The recorded combined ratio of 104.9 in the second quarter of 2016 was adversely impacted by $34 million, or 11.2 points, of catastrophe losses.

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