U.S. Markets closed
  • S&P 500

    3,443.12
    +16.20 (+0.47%)
     
  • Dow 30

    28,308.79
    +113.39 (+0.40%)
     
  • Nasdaq

    11,516.49
    +37.59 (+0.33%)
     
  • Russell 2000

    1,617.71
    +4.08 (+0.25%)
     
  • Crude Oil

    41.51
    +0.68 (+1.67%)
     
  • Gold

    1,909.40
    -2.30 (-0.12%)
     
  • Silver

    24.75
    +0.05 (+0.19%)
     
  • EUR/USD

    1.1833
    +0.0060 (+0.5088%)
     
  • 10-Yr Bond

    0.7970
    +0.0360 (+4.73%)
     
  • Vix

    29.35
    +0.17 (+0.58%)
     
  • GBP/USD

    1.2941
    +0.0001 (+0.0039%)
     
  • USD/JPY

    105.4430
    +0.0130 (+0.0123%)
     
  • BTC-USD

    11,887.45
    +830.44 (+7.51%)
     
  • CMC Crypto 200

    238.95
    +0.03 (+0.01%)
     
  • FTSE 100

    5,889.22
    +4.57 (+0.08%)
     
  • Nikkei 225

    23,567.04
    -104.06 (-0.44%)
     

Will August Weather Losses Mar Allstate's (ALL) Profitability?

Zacks Equity Research
·3 mins read

Property and casualty insurer The Allstate Corporation ALL has announced estimated catastrophe losses $985 million pretax ($778 million after tax) for the month of August.

These weather-related losses emanate from 11 events at an estimated cost of $969 million pretax ($766 million after tax). The rest of the expected loss that is $16 million pre-tax relates to unfavorable prior-period reserve reestimates.

Estimated catastrophe losses for the month include the impacts of Hurricane Laura ($430 million pretax) and Hurricane Isaias ($200 million pretax). Other insurers likely to suffer losses from Hurricane Laura are The Travelers Companies, Inc. TRV, Chubb Limited CB, Berkshire Hathaway Inc. BRK.B and Progressive Corp. among others.

In August, Allstate announced that the impact of PG&E recoveries and July 2020 catastrophe losses generated income of $334 million pretax ($264 million after tax). Therefore the July recoveries along with August losses net out to pretax losses of $651 ($514 million on a post-tax basis).

In the first half of 2020, the company incurred catastrophe losses worth $1.39 billion, down 20% year over year. It is likely to see higher cat loss this year as the 2020 Atlantic hurricane season is expected to be above normal.
Per the U.S. National Oceanic and Atmospheric Administration (NOAA), the current-year Atlantic hurricane season will be active enough, perhaps similar to last year’s or more intense with greater number of storm names than an average season can witness.

This above-normal catastrophe loss combined with Shelter-in-Pay expense (expense incurred to pay back a portion of the auto insurance premium to customers due to a decline in automobile insurance claims) is likely to deteriorate the combined ratio and drain the company’s underwriting profitability.

Nevertheless, given the company’s managerial skills in tackling catastrophe-related losses, 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 been delivering solid revenues from the past many years, led by premium growth. The company’s strength in the first half of 2020 reflects a resilient strategy and its rapid adaptation to the coronavirus pandemic environment.

Allstate’s focus on increasing its personal Property-Liability market share and further penetrating other protection businesses also bodes well for the long haul. Moreover, its solid capital position spurs investment in business.

Shares of the company have rallied 24.3% in six months’ time compared with the industry’s growth of 23.3%.

The stock sports a Zacks Rank #1 (Strong Buy), presently.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


 


 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
 
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.