NU Online News Service, Feb. 10, 11:57 a.m. EST
An uptick in Allstate Corp.'s bodily injury claim frequency in auto insurance can largely be attributed to personal injury protection (PIP), no-fault laws in New York and Florida, but that alone did not drive a drop in fourth quarter profit for the insurer.
Allstate reported 2010 fourth quarter net income of $296 million, about a 43 percent drop from the same period in 2009, as higher catastrophe losses and the losses in standard auto added 7.6 points to Allstate's combined ratio.
The fourth quarter combined ratio came in at 100.8, up from 93.2 during the same time in 2009.
Catastrophe losses, mainly from a $355 million hailstorm in Arizona, accounted for 3.3 points of the 7.6-point increase in combined ratio. Nearly 4 points were due to losses in standard auto and underlying business.
However, for the year, Allstate said it fell within the range it had previously stated, with an underlying combined ratio of 89.6. The company has now set a range of between 88 and 91 for 2011.
Auto bodily injury and damage frequencies were at their highest levels in 6 years, mainly due to conditions in New York and Florida, the company said during a conference call.
In these states "results deteriorated substantially," said Thomas J. Wilson, chairman, president and chief executive of Allstate. About 85 percent of the uptick in frequency can be traced to New York and Florida.
"The rest of the business is running fine," Mr. Wilson said. "We have to fix those two states."
Allstate's standard auto renewal ratio for the quarter of 88.4 is its lowest in some time, as actions taken in the homeowners – rate increases and risk mitigation measures — affected the auto segment.
Mr. Wilson said he is "not going to lose money on homeowners to retain the auto." Overall Allstate increased average homeowners premiums 7 percent in 2010.
Prior to the release of fourth quarter and year-end results, Allstate said it was getting out of the banking business, selling about $1.1 billion in deposits to Discover Financial Services.
The business was "not strategic," said Mr. Wilson, and it "subjected the company to regulatory oversight at the holding company level" as the federal regulators increase scrutiny of the industry.
The added oversight could potentially "conflict with state-based regulation."
"This agreement will enable Allstate Financial to deepen its focus on producing differentiated products for our key markets, strengthening relationships with existing customers and creating profitable growth," said Matthew Winters, president and CEO of Allstate Financial, in a statement.
Terms of the deal, which is expected to close by mid-year, "are not considered material," Allstate said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.