Allstate earnings stages Q1 comeback; revenue up 10.7% to $15.3B

The Allstate Corporation on Thursday reported a significant earnings comeback compared to a year ago and executives even had positive things to say about auto and homeowners insurance, two of the industry’s most troubled lines.

Allstate, the nation’s largest publicly traded personal lines insurance company, blasted well past analyst estimates and reported a 10.7% increase in revenue to $15.3 billion, with net income of $1.4 billion, or $5.13 per share, versus a $346 million loss for the first quarter a year ago.

The Allstate earnings comeback in net income was attributed to improved property-liability underwriting numbers, particularly its auto insurance profit improvement plan and higher fixed income yields. In the first three months of the year, Allstate enjoyed rate increases in auto and homeowner's insurance to address the rise in loss costs.

“The profit improvement was broad based due to the successful execution of the auto insurance profit improvement plan, attractive homeowners insurance margins, and also benefited from lower capacity losses,” said Allstate chair, president, and chief executive Tom Wilson.

Wilson said profits began to improve in the third quarter of last year as premiums outpaced loss and expense increases and continued in this year's first quarter.

Q1 avg. underlying loss, expense up 6.7%

“The slight first quarter drop in underlying loss and expense reflects lower claim frequency that benefited from milder weather and improved operating efficiencies partially offset by higher severity relative to the prior year quarter,” said Wilson. “Average underlying loss and expense in the first quarter of 2024 was 6.7% higher.”

Investment income increased primarily due to higher yields and extension of fixed-income maturities over the last 18 months, he added.

Allstate offers a broad rage of protection products that includes auto, home, and life insurance. It has also added protection services to its mix, including everything from roadside assistance to device insurance, to meet the needs of its customers.

The improved loss experience and the 57% drop in catastrophe losses contributed to the underwriting profit turnaround. Wilson said this was indicative of the company’s strategic risk management and its focus on minimizing the financial impact of natural disasters.

Protection Services showed a revenue growth of 12.2% year over year, benefiting from the company’s expansion into new markets and the success of Allstate Protection Plans.

A look ahead at Allstate earnings

Looking ahead at Allstate earnings, Wilson said he expects improving auto profitability, even in underperforming states, that will increase returns. The company said this week will suspend its years-long pause on auto and homeowners underwriting in California as soon as the state insurance commissioner adopts proposed changes that will make it easier for insurers to raise rates.

“While auto margins have improved due to our profit improvement actions, we remain focused on ensuring that rate levels continue to keep pace with underlying cost trends and driving improved profitability in those states not yet achieving target margins,” said Mario Rizzo Allstate’s property-liability president. “We implemented rate increases exceeding 16% in both 2022 and 2023, In the first quarter of 2024, we implemented rate increases of 2.4% to keep up with the cost trends and improve margins in states not achieving target margins.”

Bundling continues apace

Allstate agents continue to bundle auto and homeowners insurance at historically high levels, Rizzo said.

Perhaps surprisingly, Allstate executives were upbeat about the homeowners business, which has been plagued in recent years by catastrophic storms, rising repair and replacement costs, and inflation.

“The homeowners business is a really attractive business for us because we're really good at it,” said Wilson. “We have an integrated business model that earned a 92 combined ratio over a 10-year period. Yes, customer risks are increasing, whether that's inflation in home values, whether it's demographic trends, people moving in the way of where there's severe weather or just increased severe weather.”

Despite those risks, Wilson’s said, at a time the industry has lost money, Allstate has persevered.

“The industry made about $10 billion in homeowners over a 10-year period, and we made about 75% of that,” he said. “So, we're really good at it.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].