Allstate Third-Quarter Profits Soar as Disaster Losses Shrink

A gigantic drop in disaster-related losses and rises in property and liability premiums led to a year-over-year quadrupling of profits and a successful third quarter for Allstate Corp., which released its quarterly earnings figures Thursday.

The insurance carrier reported a net income of $723 million, a massive jump from the $175 million reported during the third quarter in 2011.

Allstate president Thomas Wilson said that much of the improved performance in the insurer’s auto and homeowners sectors was due to the absence of huge catastrophe-related losses.

Catastrophe losses totaled $206 million for the quarter, shrinking a huge 81 percent from the $1.1 billion reported during the third quarter of 2011, back when the company was having to pay out large sums for Hurricane Irene damage.

The insurer’s rosy profitability picture reflected “positive contributions from rate increases and the impact of favorable weather on loss cost trends,” according to a company statement.

Allstate saw a significant decline in investment income between the third quarters of 2011 and 2012, dropping from $994 million down to $940 million, a 5.4 percent decline.

Insurer’s Financial Outlook May Dip in Sandy’s Wake

The insurance carrier has begun claims response and cleanup efforts following Hurricane Sandy, which struck the East Coast earlier this week. It reported the opening of “Mobile Claims Centers” in the New England region, including sites at a Home Depot in Brick, N.J., and a Marriott in Uniondale, N.Y.

The insurer is also readying to enter disaster sites for a closer view of the damage wrought by the hurricane, which is expected to be one of the most expensive of its kind in recent history.

In videos posted on the insurer’s website, a representative said that catastrophe response vehicles have been deployed “into neighborhoods to supplement our boots on the ground with wheels on the road.”

Still, Hurricane Sandy is not expected to significantly drag down the insurer’s finances in the upcoming quarter, according to Wilson.

“It’s too early to estimate the impact of Hurricane Sandy on Allstate’s fourth-quarter earnings,” he said in a statement. “However, this catastrophe is not expected to have a material impact on Allstate’s overall financial condition. Allstate is amply well-capitalized to meet its obligations to policyholders.”

Lower catastrophe figures throughout the year have contributed to strong quarterly showings from several insurers, including Liberty MutualMercuryTravelers and Progressive, which all showed profit gains compared with last year’s third quarter.

Esurance Policy Figures Float Overall Numbers

In the auto sector, Allstate reported writing $4.6 billion in net insurance premiums during the third quarter this year, an increase of almost 6 percent from the $4.35 billion written in the same period last year.

Allstate purchased Esurance in a bid to compete with the rise of insurance providers like Progressive that focus on Web-based business in which consumers can retrieve car insurance quotes online and purchase their policy straight from the Internet. Esurance buoyed Allstate’s auto premium numbers, giving it an additional $282 million for the quarter that it didn’t have last year.

Allstates quarterly policies in force that fell 0.3 percent for Allstate “were offset somewhat” overall by Esurance’s figures, which showed a 7.8 percent increase in auto and homeowners policies.

However, Esurance had the highest losses so far this year, coming in at $192 million, and the second-highest operating expenses, coming in at $102 million.

Even with Esurance’s mounting expenses, Allstate has reported that overall income from auto insurance policy underwriting is $572 million so far in 2012, up from $526 million during the same period last year.

In a slide presentation accompanying the earnings release, Allstate stated that it is seeking to “maintain auto profitability” as one of its priorities for the year.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

No comments yet.

Comment on this article