Fourth quarter net income drops 50% for Allstate due to rising auto claims

Allstate Corp. said net income for the fourth quarter of 2021 fell 50% from results in the prior year quarter as the frequency and severity of auto claims increased.

Adjusted net income for the fourth quarter was $796 million, compared to approximately $1.6 billion in the last three months of 2020. The combined ratio for the quarter increased by 14.9 points compared to 2020 , to settle at 98.9. The automotive business posted an unprofitable combined ratio of 104.3 in the fourth quarter compared to 85.5 in 2020.

The insurer noted in a statement that the results for the fourth quarter of 2020 “reflected the low frequency of motor accidents linked to the effects of the pandemic. The increase in the loss rate in the motor sector in 2021 was also due to a more serious high claims due to rising used car prices, rising parts and labor costs, medical inflation and increased attorney representation.

Rising car prices are to blame for “about 80% of the overall severity of the problem,” Glenn Shapiro, president of Allstate Personal Insurance, said on a conference call.

Driving patterns may normalize somewhat to pre-pandemic levels, Shapiro added, but fewer people may come to the office as often as before. Since 40% of auto claims occur during peak hours, there could be changes in frequency and severity. However, Shapiro explained, “WWe also see some severity rising from this because driving has moved to more leisure time – to times when the roads are more open. People drive faster. It creates harder blows with greater severity. This hits us on both the physical damage side and the casualty side.

Thomas Wilson

“We are adapting to rising auto claims costs by increasing premiums with the Allstate brand which implemented rate increases in the quarter to 2.9% of national premiums, reducing expenses and managing costs,” CEO Tom Wilson said.

Rising labor and material costs also hurt home insurance’s fourth-quarter results, where the combined ratio rose 8.6 points to 87.1.

Although premiums written in Allstate’s liability business rose nearly 20% in the fourth quarter to $10.3 billion, underwriting revenue fell 92.1% to $113 million, in due to the increase in non-catastrophic losses in auto and home insurance, and the increase in reserves from the previous year.

Higher net investment income and revenue from Allstate’s acquisition of National General boosted fourth-quarter revenue 18.7% to about $13 billion.

For all of 2021, adjusted net income fell 10.6% from 2020 to around $4 billion. The full-year combined ratio is 95.9 compared to 87.6 in 2020.

Loss of Profit from Automobile Claims

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