US P&C Q1'24 earnings recap – Allstate books another strong quarter

The Allstate Corp. turned in another strong earnings report in the first quarter of 2024, booking a solid increase in net income as rate increases in personal auto started to earn in while its combined ratio also declined significantly year over year.

The Northbrook, Ill.-based insurer reported net income before taxes of $1.46 billion compared to a net loss of $410 million in the first quarter of 2023, according to an S&P Global Market Intelligence analysis of leading US property and casualty (P&C) and multiline insurers.

Earnings per share improved to $5.13 from a loss of $1.30, and the company's combined ratio improved to 93.0% from 108.6% as catastrophe losses decreased to $731 million from $1.69 billion.

After ratcheting up personal auto rates over the last two years, Allstate boosted rates by another 2.4% in the first quarter as it resumed writing new business in California.

With both The Progressive Corp. and The Travelers Cos. Inc. also booking year-over-year gains in net income, Keefe Bruyette & Woods analyst Meyer Shields was generally upbeat on the sector.

"Some of the big nonpublic companies like State Farm Mutual Automobile Insurance Co., have a ways to go, but the bigger, better public companies are in OK to really good shape," Shields said in an interview. "The underwriting profit crisis in personal auto ... is mostly over."

During Allstate's first-quarter earnings call, Mario Rizzo, president of property-liability, said because of the "levers" it has in place, the insurer is "positioned to generate sustainable, profitable growth."

Rizzo said rolling back restrictions on new business is one of those "levers." As rate adequacy has been achieved in more states, the insurer has eased "restrictive underwriting policies ... representing more than 75% of Allstate brand auto premium, and planned Allstate-brand advertising is also expected to increase growth," he said.

Shields said the current quest for growth is being "carefully couched as profitable growth," and the key to that growth is underwriting skill, which he said is routinely overlooked in some industry analyses.

"Whether it's data and analytics or just judgment, it makes a huge difference," Shields said. "If you are a company with good underwriting talent, which varies hugely from company to company, then, yes, the fact that there are significant rate increases and continuing economic growth means that you can grow and not sacrifice your margins.

Industrywide

Progressive and American International Group Inc. booked the largest year-over-year increases in pretax net income in the analysis.

Progressive's income rose to $2.94 billion from $550 million, while AIG improved to $2.05 billion from a loss of $230 million. Travelers' net income for the quarter was $1.37 billion, an increase from $930 million a year ago.

Markel Group Inc. more than doubled its operating earnings per share to $78.34 from $36.49 in 2023, while pretax net income rose to $1.34 billion from $670 million.

Improved ratios

All but two of the insurers in the analysis saw their combined ratios decrease year over year. Arch Capital had the lowest ratio at 78.8%, while Markel had the highest at 95.2%, up from 94.0% a year ago.

Markel CFO Brian Costello said during the Glen Allen, Va.-based insurer's earnings call that the increase was "primarily attributable to a higher attritional loss ratio within our US general liability and professional liability product lines within our Insurance segment."

Janney Montgomery Scott analyst Robert Farnam said in a research note that because of "management's conservatism and the deterioration in casualty loss trends," he expects to see less favorable prior-year loss reserve development and continued pressure on "attritional loss ratios."

"Management made a number of changes in 2023 and 2024 (rate increases, changes in policy terms & conditions, personnel changes, exiting certain classes of business, etc.), but it may be a year or more for the impact of these changes to flow through [Markel's] financial statements," Farnam said.

Mostly mild cat losses

Favorable weather continued to hold cat losses down for a majority of insurers in the analysis. Six of nine companies saw their losses decrease, led by Allstate's decrease to $731 million from $1.69 billion. AIG slashed its cat losses to $107 million from $265 million.

Travelers' cat losses increased to $712 million from $535 million, which the company attributed to "severe wind and hail storms in the central and eastern regions of the United States."

Low bridge fallout

Chubb Ltd. is in the process of making a payment of $350 million to the state of Maryland for coverage from the March 26 collapse of the Francis Scott Key Bridge in Baltimore, for which Chubb is the primary insurer. It was the first large payout from the incident, which is expected to be the largest marine insured loss in history, surpassing the $1.5 billion loss from the grounding and sinking of the passenger liner Costa Concordia in 2012.

Overall, the losses in the quarter from the collapse were "pretty manageable," said TD Cowen analyst Andrew Kligerman. Along with Chubb, carriers such as Everest Group Ltd., RenaissanceRe Holdings Ltd. and Arch Capital Group Ltd. took charges from the collapse.