Allstate (ALL) Provides October Catastrophe Loss Estimates
Property and casualty insurer The Allstate Corporation ALL has announced estimated catastrophe losses of $345 million pretax ($273 million after tax) for October.
These weather-related losses emanate from 10 events at an estimated amount of $324 million pretax ($256 million after tax). The rest of the loss anticipated at $21 million pretax relates to unfavorable prior-period reserve reestimates.
About 85% of the estimated catastrophe losses for the last month include the impacts of Hurricane Zeta and Hurricane Delta.
Due to a relatively large property insurance business, Allstate is significantly exposed to catastrophic events. Weather-related losses over the years have weighed on the company’s claims and benefits, expenses and cash flow, thereby draining its underwriting profitability.
In the first nine months of 2020, the company incurred catastrophe losses worth $2.38 billion, up 5.5% year over year. Though the company is firmly focused on reducing losses through its catastrophe management strategy and reinsurance programs, and makes efforts to limit exposure to riskier geographic markets by raising premiums, its actions will induce a decline in the number of policies in force.
Other property and casualty insurers that incur catastrophe losses include United Insurance Holdings Corp. UIHC, RLI Corp. RLI and Arch Capital Group ACGL.
This above-normal catastrophe loss combined with expenses borne by the company for its multi-year Transformative Growth Plan and low interest rates are likely to hurt the company’s 2020 earnings.
Nevertheless, given the company’s managerial skills in tackling losses due to cat occurrences, our confidence in its ability to deliver impressive underwriting results remains intact. Allstate is covered under a catastrophe reinsurance program, which materially mitigates its exposure to wind and earthquake losses. These reinsurance agreements are placed in the traditional reinsurance and insurance-linked securities markets.
Allstate has also been delivering solid revenues from the past many years, led by premium growth. The company’s strength in the first nine months of 2020 reflects its resilient strategy to rapidly adapt to the coronavirus pandemic environment.
Its aim to expand its personal Property-Liability market share and further penetrate other protection businesses also bodes well for the long haul. Moreover, its solid capital position boosts investment in business.
Shares of the company have lost 12.6% in six months’ time against the industry’s growth of 8.3%.
Allstate currently carries a Zacks Rank #3 (Hold), presently.
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