An airboat passes through flood waters in the downtown area of Crystal River, Fla., after Hurricane Idalia passed offshore Aug. 30.
Allstate Corp. booked a pretax loss in the third quarter for the sixth consecutive quarter, but it was an almost $1 billion improvement from last year thanks to improvement in its property-liability underwriting and ratios.
The insurer reported a net loss before taxes of $21 million in the period, compared to a net loss of $910 million in the third quarter of 2022, while operating EPS improved to 81 cents per share from a loss of $1.53. The company's combined ratio improved to 103.4% from 111.6% despite absorbing $1.18 billion in catastrophe losses.
Another positive result is the improvement of Allstate's auto loss ratio to 81.4% from 95.3% last year, according to Keefe Bruyette & Woods analyst Meyer Shields. It was the first year-over-year improvement for that ratio since 2021 thanks to two factors: rate increases, which Shields said is under Allstate's control, along with some moderation in loss trends, which is not.
"[Loss trends] are out of anyone's control," Shields said in an interview. "That's just an economic issue, but it seems to be helping ... Allstate get their loss ratio down to where it needs to be."
The road ahead
There were several indicators in Allstate's results that paint a brighter picture for the insurer, despite booking another quarterly loss.
The $21 million loss was a significant sequential improvement from the $1.75 billion loss booked in the second quarter, while EPS rebounded to 81 cents per share from a loss of $4.42 last quarter.
There also was a year-over-year improvement in adjusted net income. Allstate booked $214 million in the quarter, up from a loss of $411 million in 2022. It was the first time in five quarters that adjusted net profit finished in positive territory.
Allstate did have unfavorable reserve development of $183 million, but it was a big improvement from $866 million in unfavorable development a year ago.
Allstate declined to comment to S&P Global Market Intelligence.
While the fourth quarter is a tough one for auto lines because of bad weather, icy roads and holiday driving, Shields sees room for positivity.
"The good news is that the magnitude of rate increases and the fact that Allstate's fourth-quarter loss ratio last year was so bad that they should come out with even more improvement on a year-over-year basis, even with that cyclicality being a factor," he said.
Root Inc. and Universal Insurance Holdings Inc. also recorded pretax losses in the quarter, while The Travelers Cos. Inc., American International Group Inc. and Markel Group Inc. saw their pretax income decrease year over year.
Root had a loss of $45.8 million compared with a loss of $64 million a year ago, while Universal had a $7.9 million loss, an improvement from a loss of $93.2 million in the third quarter of 2022.
Markel had the steepest year-over-year drop by percentage in pretax income in the analysis, falling 52% to $67.5 million from $140.5 million. Travelers fell to $472 million from $528 million and AIG fell to $3.57 billion from $3.9 billion.
Chubb Ltd., The Progressive Corp. and Arch Capital Group Ltd. all had significant year-over-year increases in pretax income.
Chubb's income rose to $2.45 billion from $1.08 billion, while Progressive rose to $1.41 billion from $142 million. Arch Capital rebounded from a loss of $5.1 million a year ago to $741 million in the third quarter.
Combined ratios recover
Ten of the 12 companies in the analysis saw their combined ratios improve year over year compared to the third quarter of 2022 when Hurricane Ian struck the Gulf Coast of Florida and inflicted an estimated $63 billion in insured losses.
The company with the biggest year-over-year improvement, Root, also had the highest combined ratio at 143.1%, a 32-percentage-point improvement from 185.1%. Universal's ratio improved 28.5 percentage points to 110.7% from 139.2% and Arch Capital improved to 77.9% from 97.3%.
Two companies, Travelers and Markel, saw deterioration in their ratios. Travelers' ratio rose to 101% from 98.2%, while Markel's went to 99.1% from 93.4%.