Operating income up, catastrophe losses down at Allstate

Allstate Corp. released Wednesday its financial results for the quarter ending June 30, recording a 21% year-to-year drop in second-quarter catastrophe losses and a 2.9% year-over-year increase in property and liability insurance premiums.

Northbrook, Ill.-based Allstate reported its Q2 operating income increased 22.4% year-over-year, from $432 million in 2012 to $529 million this year. All figures are in U.S. currency.

“The improvement was due primarily to lower catastrophe losses in the second quarter compared to the prior year quarter,” Allstate stated in a press release.

In its filing with the U.S. Securities and Exchange Commission, the carrier reported second-quarter catastrophe losses dropped 21%, from $819 million in 2012 to $647 million this year.

In Q2 2012, Allstate reported $777 million in catastrophe losses from wind/hail and $125 million from tornadoes.

Wind/hail losses in Q2 2013 were $513 million while tornado losses were $136 million. For the first six months, cat losses dropped from $1.08 billion in 2012 to $1.01 billion this year.

Allstate reported its property-liability combined ratio was 96.1 in the second quarter of 2013, down from 98.0 in the second quarter of 2012. The property-liability combined ratio was 94.7 in the first six months of 2013, down from 95.1 in the first six months of 2012.

Revenues from property and liability insurance were $6.862 billion, up 2.9% from $6.666 billion during the same period in 2012. For the first half of the year, property and liability premiums were $13.63 billion, up 2.5% from $13.3 billion for the same period of 2012.

Net investment income for the second quarter dropped 4% year over year, from $1.026 billion in 2012 to $984 million in 2013.

Premiums for auto increased, from $4.48 billion in Q2 2012 to $4.599 billion in Q2 2013. Premiums for homeowner polices increased, from $1.580 billion in Q2 2012 to $1.63 billion in Q2 2013.

Total premiums written in property-liability increased 4.2% year-over-year, from $6.86 billion in Q2 2012 to $7.15 billion in Q2 2013. For the first six months of the year, property-liability premiums written increased 3.4% year-over -year, from $13.33 billion in 2012 to $13.78 billion this year.

Allstate reduced its reserves for asbestos claims (net of reinsurance recoverables) from $1.03 billion as of Dec. 31, 2012 to $973 million as of June 30, 2013. Reserves for environmental claims (net of reinsurance recoverables) also dropped, from $193 million as of Dec. 31, 2012 to $189 million as of June 30, 2013.

As of June 30, about 52% of the total net asbestos and environmental reserves were for incurred but not reported estimated losses.

“Establishing net loss reserves for asbestos, environmental and other discontinued lines claims is subject to uncertainties that are much greater than those presented by other types of claims,” Allstate said in its SEC filing, adding it “is not practicable to develop a meaningful range for any such additional net loss reserves that may be required.”

This is due to a multitude of factors, Allstate suggested in its filing, including lack of historical data, long reporting delays and uncertainty as to the number and identity of insureds with potential exposure.

“There are also complex legal issues concerning the interpretation of various insurance policy provisions and whether those losses are covered, or were ever intended to be covered,” Allstate stated.

“Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage.”