The Allstate Corporation (NYSE: ALL) today announced estimated
results for the third quarter of 2022 of a net loss between $675
million and $725 million and adjusted net loss* estimated between
$400 million and $450 million.
Property-Liability Premiums
- Premiums written increased 9.8% from Q3 2021 to $12.0 billion
due to higher average auto and home insurance premiums and policies
in force growth of 1.7%.
- Auto premiums written increased 9.6% to $7.9 billion and
premiums earned increased 9.2% to $7.5 billion, reflecting a 10.4%
increase in Allstate brand average premiums and a 1.9% increase in
total auto policies in force from the prior year.
- Allstate continued to implement significant auto insurance rate
actions in the second half of 2022 in response to inflationary
increases to loss costs. Our implemented auto rate exhibit has been
posted on allstateinvestors.com.
- During the month of September, Allstate brand implemented auto
insurance rate increases of 16.2% across 8 locations, resulting in
total Allstate brand insurance premium impact of 0.9%.
- Rate increases resulting in total Allstate brand auto insurance
premium impact of 10.8% have been implemented since the beginning
of the year generating increases of $2.6 billion year-to-date, of
which $1.1 billion was in the third quarter.
- Homeowners premiums written increased 9.4% to $3.3 billion and
premiums earned increased 10.1% to $2.8 billion reflecting a 13.3%
increase in Allstate brand average premiums due to inflation in
insured home valuations and rate increases, and a 1.4% increase in
total homeowners policies in force from the prior year.
_________
* 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.
Property-Liability Underwriting Results
- Property-Liability insurance loss costs continued to increase
in both bodily injury and physical damage coverages. As a result,
the estimated cost to settle claims was increased resulting in
increases in both current and prior year reserves.
- Unfavorable prior year reserve reestimates, excluding
catastrophes, totaled $875 million for the third quarter:
- Personal auto insurance adverse prior year reserve reestimates
totaled $643 million, primarily from bodily injury coverages. This
reflects updated assumptions related to medical inflation,
increased accident severity, more complex medical treatment and
greater attorney representation.
- Run-off property-liability adverse prior year reserve
reestimates totaled $120 million, which included the results from
our annual reserve review related to environmental and asbestos
exposures.
- All other non-catastrophe prior year reserve reestimates
totaled $112 million, primarily driven by commercial auto insurance
and personal homeowners insurance increases.
- Allstate brand auto insurance current report year incurred
severity on injury and physical damage coverages were increased
relative to 2021 reflecting ongoing cost pressure. The increase to
2022 first and second quarter costs are estimated to represent 2.6
points of the third quarter recorded and underlying combined
ratios.
- Allstate brand homeowners insurance current report year
incurred severity coverages were increased relative to 2021
primarily as a result of increasing labor and materials costs and
time to repair. The increase to 2022 first and second quarter costs
are estimated to represent 2.4 points of the third quarter recorded
and underlying combined ratios.
Catastrophe Losses
- Catastrophe losses for the third quarter, net of reinsurance,
are estimated to be $763 million, pre-tax.
- Estimated catastrophe losses, net of reinsurance, for the month
of September were $440 million, or $348 million after-tax, with
approximately 80% of losses related to Hurricane Ian.
- Estimated gross catastrophe losses due to Hurricane Ian,
excluding National Flood Insurance Program losses, totaled $671
million pre-tax, which will be reduced by $305 million in
anticipated reinsurance recoveries, for a net estimated loss of
$366 million.
- Homeowners policies exclude coverage for losses caused by flood
but generally provide for coverage for physical damage caused by
wind or wind-driven rain. Auto policyholders generally have
coverage for physical damage due to flood if they have purchased
optional auto comprehensive coverage.
- Enterprise risk and return management actions and comprehensive
reinsurance programs, including our stand-alone Florida property
coverage with a $40 million retention, significantly mitigated net
losses from Hurricane Ian. Given these actions, and 2.6% personal
property market share in Florida, approximately 25% of net
estimated losses relate to property lines and 75% to auto
coverages. The total impact from the catastrophe losses on the auto
insurance combined ratio was 4.4 points in the third quarter of
2022.
- For further information, refer to our 2022 reinsurance update
posted on www.allstateinvestors.com.
Estimated third quarter recorded and underlying combined
ratios*:
Three months ended September
30, 2022
Combined ratio
Underlying combined
ratio*
Property-Liability
111.6
96.4
Allstate Protection - auto
insurance
117.4
104.0
Allstate Protection - homeowners
insurance
91.2
74.6
Investment Results
- Net investment income in the third quarter of 2022 is estimated
at $690 million, including performance-based investment income
estimated at $335 million. Three individual investments generated
approximately 97% of the performance-based investment income in the
third quarter.
- Net losses on investments and derivatives for the third quarter
of 2022 are estimated to be $167 million, primarily due to lower
valuation on equity investments and losses on sales of fixed income
securities, which is partially offset by a valuation and settlement
of derivative gain of $299 million for the third quarter of 2022.
The derivative gains were primarily from interest rate futures used
as part of the duration reduction strategy.
- Total return on the $61.0 billion portfolio was (0.8)% in Q3
2022 and (6.4)% for the nine months ended September 30, 2022,
reflecting risk reducing actions and compares favorably to
year-to-date performance of the S&P 500 of (23.9)% and the
Bloomberg Intermediate Bond yield of (11.8)%.
- Investment portfolio risk to inflation was reduced beginning in
the fourth quarter of 2021 by shortening the duration of the fixed
income portfolio. This was accomplished through the sale of fixed
income securities and the use of derivatives so that duration was
reduced from 4.6 years in Q3 2021 to 3.0 years in Q3 2022. These
actions reduced the decline in portfolio value by approximately $2
billion this year, including approximately $730 million from
derivatives. Additionally, in the first half of 2022, we reduced
the allocation to recession-sensitive assets through the sale of
below investment grade bonds and public equities.
The company plans to file a current report on Form 8-K and its
Form 10-Q with the Securities and Exchange Commission announcing
quarterly results after close of market on Wednesday, November
2.
Financial information, including material announcements about
The Allstate Corporation, is routinely posted on
www.allstateinvestors.com.
Forward-Looking Statements
This news release contains “forward-looking statements” that
anticipate results based on our estimates, assumptions and plans
that are subject to uncertainty. These statements are made subject
to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements do not relate
strictly to historical or current facts and may be identified by
their use of words like “plans,” “seeks,” “expects,” “will,”
“should,” “anticipates,” “estimates,” “intends,” “believes,”
“likely,” “targets” and other words with similar meanings. We
believe these statements are based on reasonable estimates,
assumptions and plans. However, if the estimates, assumptions or
plans underlying the forward-looking statements prove inaccurate or
if other risks or uncertainties arise, actual results could differ
materially from those communicated in these forward-looking
statements. Factors that could cause actual results to differ
materially from those expressed in, or implied by, the
forward-looking statements may be found in our filings with the
U.S. Securities and Exchange Commission, including the “Risk
Factors” section in our most recent annual report on Form 10-K.
Forward-looking statements are as of the date on which they are
made, and we assume no obligation to update or revise any
forward-looking statement.
# # # #
Definition of Non-GAAP Measures
We believe that investors’ understanding of Allstate’s
performance is enhanced by our disclosure of the following non-GAAP
measures. Our methods for calculating these measures may differ
from those used by other companies and therefore comparability may
be limited.
Combined ratio excluding the effect of catastrophes, prior
year reserve reestimates and amortization or impairment of
purchased intangibles (“underlying combined ratio”) is a
non-GAAP ratio, which is computed as the difference between four
GAAP operating ratios: the combined ratio, the effect of
catastrophes on the combined ratio, the effect of prior year
non-catastrophe reserve reestimates on the combined ratio, and the
effect of amortization or impairment of purchased intangibles on
the combined ratio. We believe that this ratio is useful to
investors and it is used by management to reveal the trends in our
Property-Liability business that may be obscured by catastrophe
losses, prior year reserve reestimates and amortization or
impairment of purchased intangibles. Catastrophe losses cause our
loss trends to vary significantly between periods as a result of
their incidence of occurrence and magnitude, and can have a
significant impact on the combined ratio. Prior year reserve
reestimates are caused by unexpected loss development on historical
reserves, which could increase or decrease current year net income.
Amortization or impairment of purchased intangibles relates to the
acquisition purchase price and is not indicative of our underlying
insurance business results or trends. We believe it is useful for
investors to evaluate these components separately and in the
aggregate when reviewing our underwriting performance. The
underlying combined ratio should not be considered a substitute for
the combined ratio and does not reflect the overall underwriting
profitability of our business.
The following tables reconcile the respective combined ratio to
the underlying combined ratio. Underwriting margin is calculated as
100% minus the combined ratio.
Property-Liability
Three months ended September
30, 2022
Estimated Combined ratio
111.6
Effect of catastrophe losses
(6.8
)
Effect of prior year non-catastrophe
reserve reestimates
(7.8
)
Effect of amortization of purchased
intangibles
(0.6
)
Estimated Underlying combined
ratio*
96.4
Allstate
Protection - Auto Insurance
Three months ended September
30, 2022
Estimated Combined ratio
117.4
Effect of catastrophe losses
(4.4
)
Effect of prior year non-catastrophe
reserve reestimates
(8.5
)
Effect of amortization of purchased
intangibles
(0.5
)
Estimated Underlying combined
ratio*
104.0
Allstate
Protection - Homeowners Insurance
Three months ended September
30, 2022
Estimated Combined ratio
91.2
Effect of catastrophe losses
(14.1
)
Effect of prior year non-catastrophe
reserve reestimates
(1.8
)
Effect of amortization of purchased
intangibles
(0.7
)
Estimated Underlying combined
ratio*
74.6
Adjusted net income is net income (loss) applicable to
common shareholders, excluding:
- Net gains and losses on investments and derivatives
- Pension and other postretirement remeasurement gains and
losses
- Business combination expenses and the amortization or
impairment of purchased intangibles
- Income or loss from discontinued operations
- Gain or loss on disposition of operations
- Adjustments for other significant non-recurring, infrequent or
unusual items, when (a) the nature of the charge or gain is such
that it is reasonably unlikely to recur within two years, or (b)
there has been no similar charge or gain within the prior two
years
- Related income tax expense or benefit of these items
Net income (loss) applicable to common shareholders is the GAAP
measure that is most directly comparable to adjusted net
income.
We use adjusted net income as an important measure to evaluate
our results of operations. We believe that the measure provides
investors with a valuable measure of the Company’s ongoing
performance because it reveals trends in our insurance and
financial services business that may be obscured by the net effect
of net gains and losses on investments and derivatives, pension and
other postretirement remeasurement gains and losses, business
combination expenses and the amortization or impairment of
purchased intangibles, income or loss from discontinued operations,
gain or loss on disposition of operations and adjustments for other
significant non-recurring, infrequent or unusual items and the
related tax expense or benefit of these items. Net gains and losses
on investments and derivatives, and pension and other
postretirement remeasurement gains and losses may vary
significantly between periods and are generally driven by business
decisions and external economic developments such as capital market
conditions, the timing of which is unrelated to the insurance
underwriting process. Business combination expenses, income or loss
from discontinued operations and gain or loss on disposition of
operations are excluded because they are non-recurring in nature
and the amortization or impairment of purchased intangibles is
excluded because it relates to the acquisition purchase price and
is not indicative of our underlying business results or trends.
Non-recurring items are excluded because, by their nature, they are
not indicative of our business or economic trends. Accordingly,
adjusted net income excludes the effect of items that tend to be
highly variable from period to period and highlights the results
from ongoing operations and the underlying profitability of our
business. A byproduct of excluding these items to determine
adjusted net income is the transparency and understanding of their
significance to net income variability and profitability while
recognizing these or similar items may recur in subsequent periods.
Adjusted net income is used by management along with the other
components of net income (loss) applicable to common shareholders
to assess our performance. We use adjusted measures of adjusted net
income in incentive compensation. Therefore, we believe it is
useful for investors to evaluate net income (loss) applicable to
common shareholders, adjusted net income and their components
separately and in the aggregate when reviewing and evaluating our
performance. We note that investors, financial analysts, financial
and business media organizations and rating agencies utilize
adjusted net income results in their evaluation of our and our
industry’s financial performance and in their investment decisions,
recommendations and communications as it represents a reliable,
representative and consistent measurement of the industry and the
Company and management’s performance. We note that the price to
earnings multiple commonly used by insurance investors as a
forward-looking valuation technique uses adjusted net income as the
denominator. Adjusted net income should not be considered a
substitute for net income (loss) applicable to common shareholders
and does not reflect the overall profitability of our business.
The following tables reconcile net income (loss) applicable to
common shareholders and adjusted net income. Taxes on adjustments
to reconcile net income (loss) applicable to common shareholders
and adjusted net income generally use a 21% effective tax rate.
($ in millions, except per share
data)
Three months ended
September 30, 2022
Estimated range of net income (loss)
applicable to common shareholders
$
(675) - (725
)
Net (gains) losses on investments and
derivatives
167
Pension and other postretirement
remeasurement (gains) losses
79
Reclassification of periodic settlements
and accruals on non-hedge derivative instruments
—
Business combination expenses and the
amortization of purchased intangibles
90
Business combination fair value
adjustment
—
(Gain) loss on disposition of
operations
5
(Income) loss from discontinued
operations
—
Income tax expense (benefit)
(67
)
Estimated range of adjusted net income
(loss) *
$
(400) - (450
)
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version on businesswire.com: https://www.businesswire.com/news/home/20221019006161/en/
Al Scott Media Relations (847) 402-5600
Mark Nogal Investor Relations (847) 402-2800
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