Hike rates

Carriers continue to suffer financial losses and increase fares

Allstate has delivered on its promise to investors to aggressively pursue rate increases to return its auto insurance business to profitability, but continues to suffer huge losses, similar to those suffered by Progressive and GEICO.

Allstate previously announced the implementation of rate increases totaling $258 million in July and $601 million in the quarter after implementing $862 million and $702 million in rate increases. in the first quarter of 2022 and the fourth quarter of 2021, respectively.

“Allstate has a long history of successfully navigating challenging environments, and we are confident in our ability to restore profitability to target levels while continuing to innovate and transform our business,” said Tom Wilson, president, president and chief from Allstate management in a statement. . “The impact of higher claims repair costs and the upward development of claims reserves from prior years led to a recorded combined ratio of 107.9 in the second quarter. The underwriting loss combined with stock valuation declines and losses on sales of fixed income securities resulted in a net loss of $1.04 billion and an adjusted net loss of $209 million in the quarter.

Total revenue of $12.2 billion in Q2 2022 was down 3.4% from Q2 2021. Net loss to common shareholders was nearly the same in Q2 as Q2 2021 revenue, which was $1.60 billion.

Adjusted net loss drops to $209 million from adjusted net income of $1.15 billion generated in the second quarter of 2021 reflects higher claims severity and unfavorable re-estimates of prior year reserves, lower revenue net investment and increased catastrophe losses, according to Allstate.

“…[W]We are further accelerating insurance price increases, implementing underwriting restrictions in underperforming states and reducing advertising spend, which should improve profitability and slow policy growth,” Wilson said. “Insurance premiums earned of $10.9 billion increased 8.6%, primarily due to higher average auto and home insurance premiums. Although the current operating environment requires [a] focused on improving insurance margins, progress was made on the transformative growth strategy, including the launch of beta versions of a new auto insurance product and technology ecosystem. Shareholders also benefited from strong capital management with cash returns of $919 million from common shareholder dividends and share buybacks.

Premiums earned from Allstate Protection auto insurance increased 6.8% in the second quarter of 2022 “due to higher average premiums resulting from rate increases and in-force growth of 2.3% compared to the quarter of the previous year.

Allstate implemented auto rate increases at 30 locations during the second quarter at an average of 8.7%, or 2.5% on total premiums, bringing the year-to-date impact to 6.1% on total premiums.

“The increase in auto claims severity levels over the prior year reflects higher costs for used cars, parts and labor and is geographically widespread across the United States” , Allstate said. “The increase in personal injury claims costs reflects more serious car accidents, increased medical inflation, higher consumption of medical treatments and more claims involving the involvement of an attorney.”

Chief Financial Officer Mario Rizzo noted that Allstate “continued to deliver meaningful cash returns to shareholders” during the second quarter.

“We returned $919 million to common shareholders through a combination of $683 million in share buybacks and $236 million in dividends to common shareholders,” he said. “The number of shares outstanding has been reduced by 8.7% over the last twelve months and there is $1.8 billion remaining on the current $5 billion share buyback authorization, which is expected to be completed early next year,” concluded Rizzo.

Progressive’s second-quarter net revenue loss was $542.9 million, down 169% from the second quarter of 2021. The carrier saw an 8% increase in net written premiums at 12 Earned premiums also increased, 11%, on Q2 last year to $12.14 billion from $10.98 billion. . The carrier says premium growth is mainly due to fare increases taken in 2021 and the first half of 2022.

Total revenue for the quarter was $11.51 billion, with losses and claims expenses totaling $9.42 billion. For the first half of the year, ending June 30, the carrier lost $1.16 billion on all route rewards received. Year-to-date to June 30, personal auto products suffered nearly $45 million in adverse losses and loss adjustment expense (LAE) reserve development, according to Progressive’s 10-Q filing. with the SEC.

“The adverse development was primarily attributable to higher than expected severity and frequency of auto property damage payments on previously closed claims and late reported personal injury claims, partially offset by more subrogation and salvage recoveries. and lower loss settlement expenses than originally anticipated,” Progressive said.

According to S&P Global Market IntelligenceProgressive affiliates raised rates 24 times in six states in July, “which could increase the group’s overall premiums by $671.7 million.”

Progressive recorded a decrease during the second quarter in personal auto insurance policies, which the carrier said “reflects the significant decline in new personal auto insurance claims in the first half of 2022, compared to the same period last year, reflecting increases in personal auto insurance rates taken since the first quarter of 2021 and a decline in advertising spend, year-over-year, over the past 12 months.

According to Fortune and CFRA Research analyst Cathy Seifertprivately-held GEICO reported a second-quarter underwriting loss of $487 million “even as the conglomerate’s other lines of insurance grew in line with divisional investment income.”

Owner Berkshire Hathaway said the losses at GEICO “were the result of greater claims severity due to higher used car prices and auto parts shortages,” according to Fortune.

“The company said in-force policies declined even as it increased premiums, a potential sign the company is losing market share as customers seek better rates elsewhere,” the article said.

S&P reports that GEICO “continued to raise private car rates, securing 14 rate hike approvals in May,” which could increase the carrier’s cumulative premium by $147.9 million.

Berkshire reported a net loss of $43.8 billion due to a $53 billion loss in the company’s investment portfolio, according to Fortune.

State Farm implemented 17 rate hikes in May, which could increase the group’s total premiums by $380.7 million, according to S&P. The carrier does not share quarterly financial reports because it is not publicly traded.


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