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Allstate Reports High Catastrophe Losses, Increased Revenues for Q2

posted Apr 9, 2011, 11:50 PM by Ryan Lange

Allstate Corp. reported improved underlying profitability across all business lines for the second quarter quarter, but those gains were more than offset by $2.3 billion in record second quarter catastrophe losses.

Allstate reported a net loss of $620 million, compared to a year-earlier profit of $145 million.

The company’s combined loss ratio for the first six months of 2011 was 88.7. However for the second quarter, it was 123.3, reflecting the catastrophe losses of $2.3 billion, or 36.2 points. During the period, Allstate experienced 33 catastrophe loss events including five tornadoes, three wildfires and 25 wind/hailstorms.

“Our key profitability benchmark continued to improve,” said Thomas J. Wilson, chairman, president and CEO. “We also advanced our strategy of broadening our profitable protection relationships by offering differentiated products tailored to the needs of specific customer segments.”

The company said its strategy of raising prices in New York, Florida and elsewhere to improve profitability has hurt growth in policies but this was expected. Allstate Protection’s policies in force declined slightly when compared to the prior year quarter, as a 0.6 percent reduction in Allstate brand standard auto and a 3.9 percent reduction in homeowners were only partially offset by increases in specialty lines and Canada.

Premiums written declined 0.9 percent for the second quarter of 2011 compared to the prior year second quarter, reflecting declining policies in force and lower average premiums. Policies in force declined by 0.6 percent compared to the second quarter of 2010, as the level of new policies issued was not sufficient to make up for policies not renewed. New issued applications declined 5.2 percent in the quarter when compared to the prior year quarter, while retention improved to 89.2 from 89.0 in the second quarter of last year. Average gross premium decreased 0.5 percent in the second quarter of 2011 when compared to the second quarter of 2010, in part due to customers electing lower coverage options.

Allstate brand standard auto combined ratio was 98.2, or 3.7 points higher than the second quarter of 2010 due to a 4.7 point increase in the impact of catastrophe losses. Allstate brand standard auto underlying combined ratio was 93.6 in the second quarter of 2011, compared to 94.1 in the second quarter of 2010.

Allstate brand homeowners premiums written increased 2.6 percent in the second quarter of 2011 compared to the same period a year ago, as a 6.0 percent increase in average gross premium was partly offset by a 3.9 percent decline in policies in force. Rate increases averaging 6.0 percent were approved in 18 states during the second quarter, as Allstate continued to take actions to improve homeowners returns. Catastrophe losses impacted the Allstate brand homeowners combined ratio by 123.2 points in the second quarter of 2011.

On July 18 the company announced that the president of its Allstate Protection auto and home subsidiary was leaving the company immediately. The company gave no explanation for the departure of Joseph Lacher, a former Travelers executive who led the unit selling auto and homeowner’s insurance since November 2009.