Catastrophes continue to drive down second-quarter results for insurers as both domestic carriers and Bermuda companies report net-income declines and even losses, headlined by Allstate's $620 million second-quarter loss.
Allstate's loss compares to 2010 second-quarter net income of $145 million. The Northbrook, Ill.-based insurer says it suffered more than $2.3 billion in catastrophe losses from 30 events in the quarter. The events include 25 wind and hailstorms, five tornadoes and several wildfires, accounting for 36.2 points to Allstate's 123.3 second-quarter combined ratio.
Addressing reports of a decline in morale among agents, President and CEO Thomas J. Wilson said during a conference call that he recently met with more than a dozen senior vice presidents who work the agency field, as well as with 1,000 of the company's top agent performers, and they are "highly supportive of our strategy" and are focused on what he termed the Personal Touch loyalist segment.
Allstate continues steps to increase the size of its agencies and align its compensation system with individual performance. Allstate says its variable compensation to agents will be increased from 10 percent to 25 percent commission, based on improvements in the agency's business, which will mean more cross-selling and building the scale of the firm. However, compensation on the sale of policies will be dropped from 10 percent to 8 percent on new and renewal business.
The company has loaned money to agency owners to help mergers along, Wilson says.
Wilson admits this is a "hard thing to do," particularly as the insurer works to fix its homeowners' business—making it smaller in some areas and raising prices—in order to restore profitability.
Nevertheless, Wilson says, "We're on our way to do this together." The company and agency force are aligned and are "locked arm-in-arm to go forward," he continues.
Wilson says many agents are excited about the acquisition of Esurance, on track to close later this year.
"This is about doing what the customer wants," Wilson says. "Everybody gets it."
The National Association of Professional Allstate Agents Inc. (NAPAA) says it is asking members to vote on a proposal for the association to affiliate with the Office and Professional Employees International Union (OPEIU) as a guild in order to defend the interests of agents, who NAPAA says are being taken advantage of by Allstate.
Among other domestic insurers, Boston-based Liberty Mutual Group reports a second-quarter net loss of $170 million, driven by nearly $1.3 billion in catastrophe losses, compared to net income of $220 million a year ago. The catastrophes pushed the company's combined ratio up to 112.4, a 7.7 increase over the 2010 second quarter.
State Auto Financial Corp. calls the second quarter "unprecedented and unexpected" as it reports a quarterly loss of $201.4 million. The company says its second-quarter combined ratio was 147, and that its claims staff handled almost 32,000 claims from weather events. Half of those claims came from one weather event, which President and CEO Bob Restrepo says rivals the 17,000 claims the company saw from Hurricane Ike in 2008.
Chicago-based insurer CNA says 2011 second-quarter net income was $126 million, down 55 percent from a year ago. Catastrophe losses more than doubled in the quarter to $65 million, and the company's combined ratio climbed 16.2 points to 105.7.
Catastrophes also impacted results for Bermuda insurers and reinsurers. Partner Re says 2011 second-quarter net income dropped 35 percent to $124 million, driven by $181 million in catastrophe losses. Of those losses, $89 million came from tornado activity in the U.S., but the company also contended with a major fire in Canada and the aftershocks in Christchurch, New Zealand that contributed to overall losses. Partner Re's combined ratio was 101.7.
Flagstone Re suffered a second-quarter net loss of $20 million, driven by catastrophes, compared to 2010 second-quarter net income of $14 million. The company's combined ratio was 107.1, up 3.7 points from a year ago.
Everest Re Group Ltd. says second-quarter net income fell about 16 percent to $131.3 million as pretax catastrophe losses net of reinstatement premiums were $113 million—up from $64.6 million a year ago during the same period. Catastrophe losses are higher than previously announced, the company says, because of the "late reporting by a single client of increased exposures to the New Zealand earthquake" earlier this year.
Montpelier Re Holdings Ltd. says $39 million of net-catastrophe losses from tornadoes in the U.S. in April and May, plus another $15 million of non-catastrophe losses during the second quarter, resulted in net income of $23.6 million—about a 66 percent drop from net income of $69.9 million the prior year during the same quarter.
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