This excerpt taken from the ALL 8-K filed Aug 5, 2009.
Strong Auto Performance Offset by Impact of Catastrophe Losses on Homeowners
Allstates Property-Liability business produced an underlying combined ratio within the companys full-year guidance, resulting from low loss ratios in the auto business and actions taken to reduce expenses. Record catastrophe losses affected results, however, reducing homeowners profitability and leading to an overall combined ratio of 100.0.
Allstate brand standard auto premiums written for the second quarter of 2009 decreased 2.0% and total policies in force declined 1.6% versus the prior year quarter due to fewer policies available to renew and a slight decline in the renewal ratio. The combined ratio was 94.9, up 4.3 points from the second quarter of 2008, primarily due to higher loss frequency, as frequency returned to historical norms following low levels in 2008. Average claim cost increases were within expectations.
Allstate brand homeowners premiums written for the second quarter of 2009 were comparable to the same period a year ago, while total policies in force fell 4.2%, driven by an 11.6% decline in new issued applications. Allstates risk management programs contributed to the drop in homeowners business. The combined ratio increased 8.6 points to 116.3 in the second quarter of 2009 compared to the second quarter of 2008 due to higher catastrophe losses, claim frequencies and severities. Allstate continues to implement profit improvement actions in this business, including obtaining approval for rate increases averaging 13.3% in 16 states during the quarter.
Allstate had record catastrophe losses of $818 million for the quarter and $1.3 billion for the first six months of the year due to a large number of costly windstorms and hailstorms. The company continued to maintain its aggressive hurricane risk management programs into the 2009 hurricane season.
Operating costs and expenses declined in the second quarter of 2009 when compared to the prior year quarter resulting from more focused spending on marketing and technology. This decline was offset by lower premiums earned and higher restructuring charges resulting from staff reductions, which caused a slight increase in the expense ratio. Excluding restructuring, the expense ratio declined 0.4 points to 23.3 in the second quarter of 2009 compared to the second quarter of 2008.
The underlying combined ratio rose from 84.1 in the second quarter of 2008 to 87.2 in the second quarter of 2009, which was within Allstates 87-89 outlook range for the full year. Management anticipates that the underlying combined ratio will finish the year within the previously announced outlook range.