Allstate earnings suffer $320M Q1 hit on inflation, claims costs

Catastrophe losses, higher auto claims costs, and inflation all contributed to Allstate Corp.’s first quarter loss of $320 million – compared to a profit in the same period last year – company executives said this week.

During its quarterly earnings call, the Good Hands company, based in Northbrook, Ill.,  reported revenue of $13.77 billion, up 9.3% over the same period last year, and earnings per share of -$1.30, versus $2.58 in the 2022 first quarter.

Execs put optimistic spin on Allstate earnings

It wasn’t all bad news for Allstate, whose top officials tried to put an optimistic shade on the quarterly earnings story in a call to analysts Thursday. The results, such as they are, actually beat Wall Street estimates by a significant amount. The average estimate of six analysts surveyed by Zacks Investment Research was for a loss of $1.94 per share.

“Higher premiums were offset by increased loss costs,” said Mario Rizzo, president property-liability for Allstate. “Most of the increase in the combined ratio was driven by higher catastrophe losses, reflecting the widespread severe weather in the first quarter of this year.”

Since 2021, Rizzo said, auto loss costs have increased rapidly but he assured analysts the company is making progress addressing the increases, concentrating on four areas: raising rates, reducing expenses, implementing underwriting actions, and enhancing claim practices to manage lost costs. He said auto rates increased nearly 17% in 2022, and an additional 1.7% in the first quarter this year.

“We will continue to pursue rate increases in 2023 to restore auto insurance margins,” he said.

Like many of its peers, Allstate has temporarily reduced advertising that “reflect the lower appetite for new business” that isn’t adequately compensated by state set rates.

“Our Allstate brand relative competitive position has deteriorated recently, as rate increases have exceeded some competitors,” Rizzo said. “We expect that those competitors will eventually raise rates, improving our competitive position and growth prospects.”

Rate increase approvals sought, received

The company just received approval for a 6.9% rate increases in California and New Jersey and expects to soon file for additional rate increases in New York.

“We anticipate implementing additional rates across the country into 2023 to counteract persistent loss cost increases,” he said.

Meanwhile, Allstate shares have declined 18% since the beginning of the year, while the S&P’s 500 index has risen 6.5%. In the trading on Wednesday, shares hit $111.50, a decrease of 14% in the last year. The share price increased slightly in early trading Thursday.

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].