Allstate Addresses Inflation With Multifaceted Plan – QNT Press Release


Transformative Growth Strategy Progresses

The Allstate Corporation (NYSE:ALL) today reported financial results for the first quarter of 2022.

The Allstate Corporation Consolidated Highlights

 

Three months ended March 31,

($ in millions, except per share data and ratios)

2022

2021

% / pts

Change

Consolidated revenues

$12,337

$12,451

(0.9) %

Net income (loss) applicable to common shareholders

630

(1,408)

NM

per diluted common share

2.24

(4.60)

NM

Adjusted net income*

726

1,871

(61.2)

per diluted common share*

2.58

6.11

(57.8)

Return on Allstate common shareholders' equity (trailing twelve months)

 

 

 

Net income applicable to common shareholders

15.4 %

15.1 %

0.3

Adjusted net income*

12.8 %

23.2 %

(10.4)

Common shares outstanding (in millions)

275.7

300.1

(8.1)

Book value per common share

75.95

81.08

(6.3)

Property-Liability combined ratio

 

 

 

Recorded

97.3

83.3

14.0

Underlying combined ratio*

90.9

77.1

13.8

Property and casualty insurance premiums earned

10,981

10,307

6.5

Catastrophe losses

462

590

(21.7)

Total policies in force (in thousands)

190,309

182,912

4.0

*

Measures used in this release that are not based on accounting principles generally accepted in the United States of America (“non-GAAP”) are denoted with an asterisk and defined and reconciled to the most directly comparable GAAP measure in the “Definitions of Non-GAAP Measures” section of this document.

NM = not meaningful

“Allstate is addressing inflation by raising prices, reducing expenses and changing investment allocations,” said Tom Wilson, Chair, President and CEO of The Allstate Corporation. “Premiums earned were $11.0 billion in the quarter, an increase of 6.5% over the prior year due to policy growth and increased average premiums, as auto and home insurance rate increases begin to increase revenues. Net income was $630 million and adjusted net income* was $726 million ($2.58 per share). Excellent profitability in homeowners insurance, strong investment income and earnings from Protection Services and Health and Benefits mitigated the negative impact of inflation on auto insurance margins. Shareholder value also benefited from a shortening of the bond portfolio duration in late 2021 to reduce enterprise exposure to inflation and higher interest rates.”

“We made excellent progress on the Transformative Growth strategy by expanding customer access, improving pricing sophistication and advancing expense reduction programs. Customer access was expanded as Allstate agent new business sales were maintained while direct distribution grew to 38% of new business and National General expanded through independent agents. Allstate brand auto insurance price increases of $862 million were implemented in the quarter using sophisticated pricing algorithms. While the expense ratio increased compared to prior year quarter from higher employee-related costs, we remain committed to our three-year expense reduction goals. Transformative Growth has positioned us to quickly adapt to this inflationary environment while improving our competitive position to grow market share,” concluded Wilson.

First Quarter 2022 Results

  • Total revenues of $12.3 billion in the first quarter of 2022 decreased 0.9% compared to the prior year quarter, reflecting losses on fixed income sales and equity valuations in 2022 compared to net gains in 2021. This was partially offset by higher Property-Liability earned premium and increased Protection Services revenue.
  • Net income applicable to common shareholders was $630 million in the first quarter of 2022 compared to a loss of $1.4 billion in the prior year quarter, primarily due to a loss from discontinued operations in 2021 associated with the sales of Allstate Life Insurance Company and Allstate Life Insurance Company of New York, partially offset by lower underwriting income and equity valuation decreases.
  • Adjusted net income* of $726 million, or $2.58 per diluted share, was below the $1.9 billion generated in the prior year quarter. The decrease reflects higher auto accident frequency and increased inflation, unfavorable prior year reserve reestimates and lower net investment income, partially offset by higher earned premium and lower catastrophe losses.

Property-Liability Results

 

Three months ended March 31,

($ in millions, except ratios)

2022

2021

% / pts

Change

Premiums earned

$

10,498

$

9,896

6.1

%

Allstate Brand

 

9,011

 

8,681

3.8

 

National General

 

1,487

 

1,215

22.4

 

 

 

 

 

Underwriting income

 

280

 

1,657

(83.1

)

Allstate Brand

 

251

 

1,515

(83.4

)

National General

 

29

 

138

(79.0

)

 

 

 

 

Recorded combined ratio

 

97.3

 

83.3

14.0

 

Allstate Protection auto

 

102.1

 

80.5

21.6

 

Allstate Protection homeowners

 

84.2

 

88.8

(4.6

)

 

 

 

 

Underlying combined ratio*

 

90.9

 

77.1

13.8

 

Allstate Protection auto

 

98.8

 

80.1

18.7

 

Allstate Protection homeowners

 

69.0

 

67.7

1.3

 

  • Property-Liability earned premium of $10.5 billion increased 6.1% in the first quarter of 2022 compared to the prior year quarter, driven by higher average premiums and item growth in both the National General and Allstate brands. The recorded combined ratio of 97.3 generated underwriting income of $280 million compared to $1.7 billion in the first quarter of 2021.

    • Lower underwriting income compared to the prior year quarter was primarily driven by lower auto insurance margins, reflecting the impact from inflationary increases in claim severity and increased auto insurance accident frequency as miles driven increased with economic activity. This was partially offset by higher premiums earned and lower catastrophe losses. Non-catastrophe prior year reserve strengthening of $158 million was primarily driven by adverse loss development in auto physical damage and bodily injury coverages.

    • The underlying combined ratio* of 90.9 in the first quarter of 2022 was 13.8 points above the prior year quarter, reflecting higher auto and homeowners claims severity due to increased inflationary impacts and higher auto accident frequency.

    • The expense ratio of 24.0 in the first quarter decreased 0.5 points compared to prior full year and increased 0.8 points compared to the first quarter 2021. The increase from the prior year quarter was driven by higher operating costs and increased amortization of purchased intangibles from the National General acquisition, partially offset by lower distribution related acquisition costs. While quarterly fluctuations are anticipated, Allstate remains committed to the long-term objective of reducing the adjusted expense ratio(1) to approximately 23.0 by year end 2024.

    • Allstate Protection auto insurance earned premium increased 4.0% driven by higher average premiums and policies in force growth of 2.4% compared to the prior year quarter. Written premium increased 7.8%, which was higher than earned premium growth as rate increases are earned over the 6-month policy period after customer renewal. Policies in force growth was driven by National General, including impacts from the SafeAuto acquisition, and the Allstate brand. New issued applications increased by 14.3% compared to the prior year quarter due to growth in the direct and independent agent channels. Allstate brand auto net written premiums increased by 4.1% compared to the prior year quarter due to increased average premiums and policies in force growth of 0.7%. Allstate brand implemented auto rate increases were made in 28 locations in the first quarter at an average of 9.3%, or 3.6% on total premiums.

      The recorded auto insurance combined ratio of 102.1 in the first quarter of 2022 was 21.6 points above the prior year quarter, and the underlying combined ratio* of 98.8 was 18.7 points above the prior year quarter. This increase was driven by higher claim severity and accident frequency compared to the lower levels experienced during the first quarter of 2021 due to the pandemic. The first quarter of 2022 was also adversely impacted by 2.1 points of unfavorable non-catastrophe prior year reserve reestimates driven by physical damage and bodily injury coverages.

      Rising severity levels compared to the prior year reflect increased used car prices, higher parts and labor costs, medical inflation, and greater attorney representation. In response, Allstate is taking comprehensive action to improve profitability, including rate increases, reducing expenses and claims operational actions. Given ongoing inflationary pressures, we expect to implement rate increases greater than our initial expectations for 2022 to restore auto margins to target levels.

    • Allstate Protection homeowners insurance earned premium grew 8.8%, and policies in force increased 1.1% compared to the first quarter of 2021. Allstate brand net written premium increased 17.0% compared to the prior year quarter, driven by an increase in average premiums of 14.3% due to inflation in insured home valuations and implemented rate increases combined with policies in force growth of 1.7%.

      The recorded homeowners insurance combined ratio of 84.2 was 4.6 points better than the first quarter of 2021 and generated an underwriting profit of $410 million in the quarter. The improvement was driven by lower catastrophe losses. The underlying combined ratio* of 69.0 increased 1.3 points compared to the first quarter of 2021, driven by higher severity due to inflation in labor and material costs, partially offset by higher average earned premium.

_____________

(1)

A reconciliation of non-GAAP measure to the expense ratio, a GAAP measure, is not possible on a forward-looking basis because it is not possible to provide a reliable forecast of future expenses and targeted reductions as of the reporting date.

Protection Services Results

 

Three months ended March 31,

($ in millions)

2022

2021

% / $

Change

Total revenues (1)

$

627

 

$

552

 

 

13.6

%

Allstate Protection Plans

 

329

 

 

275

 

 

19.6

 

Allstate Dealer Services

 

135

 

 

123

 

 

9.8

 

Allstate Roadside

 

65

 

 

59

 

 

10.2

 

Arity

 

62

 

 

64

 

 

(3.1

)

Allstate Identity Protection

 

36

 

 

31

 

 

16.1

 

Adjusted net income (loss)

$

53

 

$

49

 

$

4

 

Allstate Protection Plans

 

43

 

 

45

 

 

(2

)

Allstate Dealer Services

 

9

 

 

8

 

 

1

 

Allstate Roadside

 

2

 

 

4

 

 

(2

)

Arity

 

(1

)

 

2

 

 

(3

)

Allstate Identity Protection

 

 

 

(10

)

 

10

 

(1) Excludes net gains and losses on investments and derivatives

  • Protection Services revenues increased to $627 million in the first quarter of 2022, 13.6% higher than the prior year quarter, primarily driven by Allstate Protection Plans. Adjusted net income of $53 million increased by $4 million compared to the prior year quarter due to the absence of restructuring charges incurred in 2021.

    • Allstate Protection Plans revenue of $329 million increased $54 million, or 19.6%, compared to the prior year quarter, reflecting increased policies in force. Written premium of $429 million increased 10.6% compared to the prior year quarter, primarily driven by international growth and a full quarter of results for policies distributed through The Home Depot compared to the prior year quarter. Written premiums are earned into revenue over the contractual period, generally one to five years, with unearned premiums of $2.2 billion at quarter end. Adjusted net income of $43 million in the first quarter of 2022 was $2 million lower than the prior year quarter.

    • Allstate Dealer Services revenue of $135 million was 9.8% higher than the first quarter of 2021, driven by higher earned premium. Adjusted net income of $9 million in the first quarter was $1 million higher than the prior year quarter.

    • Allstate Roadside revenue of $65 million in the first quarter of 2022 increased 10.2% compared to the prior year quarter, as rescue volumes increased compared to the first quarter of 2021. Adjusted net income declined by $2 million compared to the prior year quarter from increased costs to tow vehicles.

    • Arity revenue of $62 million decreased $2 million compared to the prior year quarter as increased Milewise device revenue was offset by lower LeadCloud and software revenue. Adjusted net loss of $1 million in the first quarter of 2022 was $3 million worse than the prior year quarter, primarily driven by lower revenue and increased expenses related to growth. Arity continues to expand its data acquisition platform with over 800 billion miles of traffic data being used to serve an increasing number of insurance and third-party application customers.

    • Allstate Identity Protection revenue of $36 million in the first quarter of 2022 increased 16.1% compared to the prior year quarter, and policies in force increased by 9.1% to 2.9 million. Adjusted net income was breakeven, $10 million better than a loss in the first quarter of 2021, driven by the absence of a restructuring charge and higher revenue.

Allstate Health and Benefits Results

 

Three months ended March 31,

($ in millions)

2022

2021

% Change

Premiums and contract charges

$

469

$

455

3.1

%

Employer voluntary benefits

 

266

 

263

1.1

 

Group health

 

94

 

83

13.3

 

Individual health

 

109

 

109

 

Adjusted net income

 

53

 

65

(18.5

)

  • Allstate Health and Benefits premiums and contract charges increased 3.1% compared to the prior year quarter, primarily due to growth in group health. Adjusted net income of $53 million in the first quarter of 2022 decreased $12 million compared to the first quarter of 2021, primarily due to increases in individual and group health claims and favorable reserve reestimates for group health in the prior year quarter.

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Allstate Investment Results

 

Three months ended March 31,

($ in millions, except ratios)

2022

2021

$ / pts

Change

Net investment income

$

594

 

$

708

 

$

(114

)

Market-based investment income (1)

 

323

 

 

354

 

 

(31

)

Performance-based investment income (1)

 

306

 

 

378

 

 

(72

)

Net gains (losses) on investments and derivatives

 

(267

)

 

426

 

 

(693

)

Change in unrealized net capital gains and losses, pre-tax

Full story available on Benzinga.com



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