Summary of Allstate’s Q2 2022 earnings call

Allstate  hosted its Q2 2022 earnings call on August 4, 2022.

The highlights:

  • Allstate’s strategy to increase shareholder value has 2 components: increase personal property-liability market share and expand protection services. 
  • Implementing a strategy to improve profitability by raising auto and home insurance rates. In the second half of 2022, Allstates plans to file for rate increases in excess of the increases implemented in the first half of this year, which were 6.1% of Allstate’s countrywide premiums.
  • It’s reducing expenses on advertising and growth investments.
  • Underwriting guidelines have been and will be changed to reduce new business volume, where Allstate is not earning adequate returns.
  • Total revenues decreased 3.4% in the prior year quarter, despite property liability premiums earned increasing 8.6%, which reflected higher average premiums and policy growth.
  • The adjusted net income return on equity was 6.9% over the last 12 months.
  • Underlying combined ratio of 93.4 for the second quarter and a recorded combined ratio of 107.9.
  • It has a target combined ratio for auto insurance in the mid-90s – 2020 was an outlier because Allstate had much better target results then due to some of the early pandemic frequency impacts.
  • Used car prices have gone up more than 60% and continue to stay at an elevated level. OEM parts and labor rates have increased during the first half of this year, which causes severity increases for coverages like collision and property damage.
  • Allstate’s expectation for paid losses for 2021 claims from months 13 to 18 was that it would be about $1.25 billion, but at the end of the second quarter, the actual paid losses were $1.48 billion.
  • Auto rates have been increased in 48 locations, inclusive of Canadian provinces. Those rate increases are expected to increase Allstate brand annualized written premium by 6.1%.
  • Allstate hasn’t been able to get adequate rate in New York or any increase in rate in California. New York represents about 9% of its auto premium.
  • Similarly, in California, which represents about 12% of its auto premium, its recently filed a 6.9% increase, which is significantly below the overall rate need there.
  • Homeowners insurance net written premium has grown  by 15.2% from the prior year.
  • In the quarter, Allstate has launched beta versions of a new, fully digital auto insurance product and sales experience.
  • PIF decreased by 1.6%, reflecting expiring Protection Plan warranties and lower retail sales compared to prior year quarter.
  • Progressive reported a better combined ratio than Allstate this quarter as they began raising prices earlier in 2021.
  • “And so we think we have a great opportunity to expand in the independent agent channel, not just for the nonstandard piece but in what’s affectionately called, I guess, the Robinson by progressive because we’re really in that segment. And we think there’s a great opportunity for us to compete there.” – CEO Tom Wilson