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Allstate (ALL) Suffers Catastrophe Loss From Hurricane Ida

·4 min read

The Allstate Corporation ALL estimates a headwind of $876 million or $692 million after tax. Catastrophe losses for July and August totaled $1.1 billion pretax.

The havoc was caused by 11 weather-related occurrences. Hurricane Ida impacted 19 states with the majority of losses occurring in Louisiana, resulting in gross losses of $1.4 billion. Net losses are estimated at $631 million pretax ($498 million after tax), reflecting anticipated reinsurance recoveries.

Hurricane Ida, which hit Louisiana and other Northeast areas, was of great intensity and is estimated to have induced insured losses in the range of $20-$30 billion. Insurers like CNA Financial Corp. CNA, American International Group Inc. AIG, Chubb Ltd. CB and The Travelers Cos. Inc. (TRV) will suffer claims from Hurricane Ida this quarter as they have business exposure in these highly affected areas.

Allstate’s exposure to property and casualty insurance makes it prone to losses due to cat events. In the first half of 2021, the company incurred catastrophe losses of $1.5 billion, up 10.4% from the prior-year comparable period’s figure.

These losses were, however, to some extent offset by reinsurance and subrogation recoveries. This shows that Allstate can effectively deal with catastrophe losses via its catastrophe management strategy and reinsurance programs.

The company also aims at limiting its exposure to riskier geographies by raising premiums but the same may reduce the number of policies in force.
Despite Allstate’s vulnerability to Mother Nature’s wrath, our confidence in its ability to deliver impressive underwriting results is intact.

This property and casualty insurer has been witnessing annual revenue growth since 2011 and also tided over the pandemic-ravaged 2020 with a 0.3% revenue rise. The company’s resilience to survive against the backdrop of a tough operating environment is quite impressive. In the first quarter of 2021, the top line grew 14% while the bottom line soared 73%.

Allstate’s long-term strategy of boosting its personal property-liability market share and expanding its protection offerings will fuel growth. With the acquisition of National General under its belt, the company broadened its market share in the said space by more than one percentage point and enhanced its independent agent-facing technology.

The company is on course to acquire SafeAuto. This deal will expand its presence in non-standard auto insurance operations. Non-standard insurance pertains to offering insurance policies to customers with a riskier driving profile.

To focus on its core growth areas like the auto and homeowners insurance, Allstate sold its Life insurance businesses in the March quarter.

It is also overhauling its operations by investing in technology. This should increase its efficiency and save operational costs.

We believe, the company is firing on all cylinders to boost growth and that the catastrophe losses will not dent its profitability.

In a year’s time, shares of the company have gained 42.5% compared with the industry's growth of 33.9%.

Zacks Investment Research
Zacks Investment Research


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The stock carries a Zacks Rank #3 (Hold) at present.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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