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Allstate falls to $534mn underwriting loss as cats bite, frequency picks up

Aerial view of downtown Chicago

Personal lines giant Allstate fell to a $534mn underwriting loss in its property-liability division, hurt by higher catastrophe losses, a $163mn reserve charge and higher claims frequency as economic activity returns to normal levels.

On Wednesday, the Illinois-based carrier said it generated $0.73 in adjusted earnings per share, a nearly 75% decline from a year ago when the company benefitted from a drop off in claims frequency last year as the pandemic continued to rage.

Companywide net investment income increased to $764mn from $464mn last year.

The carrier reported a nearly 14-point jump in its combined ratio, mostly tied to an 11.3-point deterioration in its underlying loss ratio, which rose to 66.1%. Allstate said the higher attritional loss ratio came from increasing severity of personal auto and homeowners claims, partly because of higher inflation.

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Catastrophes cost the insurer $1.3bn in the third quarter, up from $990mn last year. A 0.2-point increase in the company’s expense ratio was more than offset by a $163mn reserve charge, a bigger charge than the $72mn Allstate took a year ago.

Allstate said $111mn of the reserve hike was tied to an increase in prior-year loss estimates for asbestos and environmental claims.

About $311mn of the underwriting loss came from legacy Allstate brand business, while National General, which Allstate acquired earlier this year, contributed a $112mn underwriting loss.

Net written premiums leapt by almost 17% to $11bn from $9.4bn.

“Auto insurance had an underwriting loss in the quarter as supply chain disruptions drove rapid price increases for used cars and original equipment parts,” said Allstate chairman, president and CEO Tom Wilson.

“Auto insurance did generate attractive margins for the first nine months of the year, and we are filing for rate increases to maintain historical profitability levels.”

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