Headwinds Should Ease for Allstate

The coronavirus boosted personal auto results, as quarantine efforts led to a stark decline in miles driven and claims and the company saw a dramatic short-term boost to underwriting margins while social distancing efforts were in effect. Ultimately, though, this benefit waned as vaccination efforts took hold, and the pandemic appears to have restarted the pricing cycle at a less attractive point. Further, insurers are absorbing a rise in claims costs due to multiple factors beyond the impact of drivers returning to the road. Auto insurers have endured a very difficult period recently, which has pushed Allstate to significant underwriting losses. However, pricing has improved, and the industry has shown an ability to recover from negative claims trends fairly quickly historically. The magnitude of recent claims issues may make normalization a longer process this time around, but we see signs that underwriting profitability is starting to normalize.