Allstate (ALL) expects $ 179 million after-tax cat loss for July
The Allstate Company ALL is forecasting a $ 179 million after-tax headwind from catastrophic losses for July. The catastrophic losses for the month are mainly due to 18 events.
Allstate shares rose 0.4% on August 20.
Being heavily exposed to the P&C business line, Allstate remains vulnerable to severe catastrophic events. As a result, weather related claims continue to increase the Company’s claims and claims expense and put pressure on its underwriting results. This acted as a drag on the growth of the company’s bottom line.
For example, in the first half of 2021, Allstate incurred disaster-related losses of $ 1.5 billion, an increase of 10.4% from the same period a year earlier. Following the increase in catastrophic claims, the company’s claims and claims expenses increased 25.4% year-over-year, while the combined ratio deteriorated by 220 basis points from year after year during the same period.
Allstate’s bottom line is expected to remain under pressure in the days ahead given the 2021 Atlantic hurricane season, which began on June 1 and will last until November 30. This year’s season is expected to be above average according to the climate forecast. National Oceanic and Atmospheric Administration Center (NOAA). The same source points out that atmospheric and oceanic conditions clearly show all possible signs of an above-average season.
According to the latest annual mid-season update released by NOAA, there may be 15 to 21 named storms this time around. Of these, seven to ten are likely to be hurricanes, of which three to five could become major hurricanes.
AccuWeather said 2021 will likely be above normal tropical seasonal activity across the Atlantic. The company’s tropical weather forecasters team expects the season to witness 16 to 20 named storms, of which seven to 10 may be hurricanes.
While disaster losses are always a concern due to the uncertainty of their occurrence and the degree of impact, Allstate remains with the right strategies that should continue to impress investors. The company continues to focus on minimizing losses through its disaster management strategy and reinsurance programs. Despite the company’s exposure to catastrophic losses, its turnover has grown steadily in recent years. The same result improved 23.8% year over year in the first half of 2021 due to a diverse product line and pricing discipline. Its past buyouts, such as that of National General, have also contributed to the company’s revenue growth.
In addition, the insurer is sincerely pursuing a policy of increasing the market share of its property and casualty business by expanding its portfolio of provident solutions. The company is pursuing numerous cost reduction efforts with a view to increasing its margins in the days to come. In addition to reducing costs, these initiatives have helped improve the efficiency of the claims process and expand digital skills.
Other P&C insurers that are exposed to catastrophe losses include Chubb Limited CB, The Voyageurs’ Companies, Inc. VTR and AXIS Capital Holdings Limited AXS.
Zacks Ranking and Price Performance
Shares of Allstate, which holds a Zacks Rank # 3 (Hold), gained 41.6% year-on-year compared to industry growth of 24.9%. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
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