Allstate reports $1.4B loss for 2022; increases rates, policy restrictions

Allstate on Thursday reiterated its aggressive strategy to stem huge underwriting losses in its auto lines, which includes raising premiums, cutting expenses, and implementing restrictions on policies.

The company reported a $1.4 billion net loss for the year, with the fourth quarter loss totaling $310 million as auto insurance costs and catastrophe losses skyrocketed requiring significant reserve increases. Catastrophe losses ballooned to $779 million in the fourth quarter, from $528 million in the previous quarter.

"Higher auto insurance prices were not sufficient to overcome increased loss costs and reserve increases," said Allstate chairman, president and CEO Tom Wilson. “The comprehensive plan to return auto insurance margins to target levels continues to be implemented in 2023 and is expected to further increase average premiums, reduce expenses and lower policy growth."

Property-liability underwriting loss was $1.04 billion for the year, compared with income of $113 million a year ago. Net investment income slid to $557 million from $847 million in the year-ago period, mostly due to lower performance-based income.

In a presentation during an earnings call Thursday, the company noted it had implemented rate increases of 16.9% in 2022, including a 6.1% increase in the fourth quarter.

“We expect to continue to pursue significant rate increases in 2023,” Wilson said.

The 2023 and 2024 earned premium growth is estimated to increase by $2.6 billion and $300 million, respectively, the company said, though actual amounts will be impacted by changes in policy retention and customer mix.

Allstate said it has temporarily reduced advertising spending in order to “manage” new business volume, a refrain heard from other insurers. It also is restricting new business in markets deemed unprofitable, with 37 states impacted by restrictions, including California, New York, and New Jersey. Those three states accounted for about 45% of the company’s auto insurance underwriting losses in 2022, the company said.

Allstate’s property-liability premiums earned increased 9% in the fourth quarter, compared to the previous year, with homeowners insurance continuing to be a strong source of profit.

“Homeowners insurance had excellent results generating $681 million of underwriting income for the year,” said Mario Rizzo, president of property-liability. “This reflects industry-leading underwriting and risk management in this line of business.”

But the gains were more than offset by the auto insurance dynamics, in which used car prices rose at unprecedented levels – 50% over the previous year.

“Claims severity increased above historical levels because of more severe increasing costs to settle claims with third parties, who are injured in accidents with our customers,” Rizzo said.

The losses mean more premium increases, the executives said.

“I think we’ve been very aggressive when you look at how much we’ve raised rates in total for the year across the country,” said Wilson. “We’ve been very aggressive. And depending whose measures you want to use, more aggressive. And you never really know where people start and what they finish and what their losses are.”

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].