The Allstate Corporation has reported robust financial results for the second quarter of 2024, showcasing significant improvements across various performance metrics. However, the positive financial news is clouded by recent legal issues involving its subsidiary, National General, and a substantial rate increase request in California.
Impressive Q2 Financial Performance
Allstate’s total revenues for Q2 2024 reached $15.7 billion, marking a $1.7 billion increase from the previous year. This growth was primarily driven by an uptick in property-liability earned premiums. The company posted a net income of $301 million attributable to common shareholders, a stark contrast to the $1.4 billion net loss reported in the same period last year.
Adjusted net income also saw an upswing, standing at $429 million, or $1.61 per diluted share, compared to an adjusted net loss of $1.2 billion in the previous year. Property-liability earned premiums increased by 11.9% to $13.3 billion, largely due to higher average premiums following rate hikes.
The underwriting loss for Q2 was $145 million, a substantial improvement from the $2.1 billion loss recorded in the previous year. Premiums written surged by 13.1%, with the Allstate brand experiencing a 10.0% rise and National General seeing a remarkable 29.1% increase.
Catastrophe losses for the quarter totaled $1.6 billion, reflecting a $573 million reduction from the prior year, showcasing Allstate’s enhanced resilience. The property-liability combined ratio was 101.1 for the quarter and 97.1 for the first six months of 2024, while the underlying combined ratio stood at 85.3, an enhancement of 7.6 points from the previous year.
Allstate’s auto insurance segment reported a combined ratio of 95.9, a 12.4-point improvement from the previous year. The Allstate brand auto insurance recorded a combined ratio of 96.9, down 11.2 points, driven primarily by higher average earned premiums. National General auto insurance’s combined ratio was 91.9, a 17.9-point decline, reflecting better results and favorable reserve re-estimates.
For homeowners insurance, the insurance giant implemented rate increases in 12 locations, averaging 9.9%, resulting in a 10.7% increase in average gross written premium. The combined ratio for homeowners insurance improved to 111.5, down 33.8 points from the previous year, owing to lower catastrophe losses and higher earned premiums.
Tom Wilson, chair, president, and CEO of The Allstate Corporation, commented on the company’s performance, stating, “Allstate’s strategy of providing affordable, simple, and connected protection resulted in strong policy growth in National General branded property-liability insurance and Allstate protection plans sold by retailers.”
Legal Troubles for National General
Despite positive financial performance, Allstate faces a significant legal challenge as the U.S. Department of Justice (DOJ) has filed a civil lawsuit against its subsidiary, National General, alleging that the auto insurance brand defrauded customers by force-placing unnecessary Collateral Protection Insurance (CPI) on vehicles financed by Wells Fargo. Additionally, the DOJ asserts that National General failed to verify whether borrowers already had adequate insurance, rendering the force-placed CPI unnecessary.
Request for a 34% Rate Increase in California
Adding to its challenges, Allstate has requested a 34% rate increase in California. The company cites several reasons for this substantial rate hike:
- Rising Claim Costs and Operating Expenses: Allstate emphasizes the need to adjust rates to adequately cover the increasing costs associated with claims and operating expenses, including legal and medical services.
- Impact of Inflation: The company notes that inflation has driven up the prices of parts and labor for vehicle repairs, contributing to the overall rise in claim costs.
- Severe Weather Events: Allstate highlights the ongoing challenge of managing and covering losses from severe weather events, including wildfires, as a significant factor in determining the necessary rate increase.
- Maintaining Financial Strength: The request for a 34% rate increase is also attributed to the desire to maintain financial stability and strength in the face of changing market conditions, ensuring that the company can continue to provide reliable coverage and service to its policyholders.
Conclusion
Allstate’s second-quarter financial results for 2024 demonstrate strong performance and growth, underscored by significant improvements in revenue, net income, and key insurance metrics. However, the company faces notable challenges, including the DOJ lawsuit against National General and the substantial rate increase request in California. These factors will be critical to monitor as Allstate navigates the complexities of maintaining its financial health and addressing regulatory and legal concerns.