Allstate CAT Loss Soars for April - Analyst Blog
May 13 2011 - 6:48AM
Zacks
Yesterday, home and auto insurer Allstate Corp.
(ALL) projected about $1.4 billion in catastrophe (CAT) losses for
April 2011. Of this, $1.37 billion has been estimated for the
Allstate brand while $30 million of loss is expected from the
Encompass brand. This projection is almost close to the CAT loss
recorded for whole of 2010.
Allstate’s CAT losses in April include 13
natural disasters in the US and Canada. Particularly,
tornadoes harshly hit the Midwest and Southern areas such as
Alabama, Arkansas, Georgia and Virginia, thereby increasing the
claims payments in these areas.
According to leading insurer Aon Corp. (AON),
insurance industry CAT losses were impacted by over $5 billion,
last month, from the storms in Alabama and wildfires in Texas.
Allstate has more than 10,000 claims cases to deal with till
date, for which the company has positioned over 3,000 professionals
in these areas.
Furthermore, given the extreme loss nature of
catastrophes,
Allstate has decided to regularly the release of its CAT losses if
they exceed $150 million on a monthly basis. However, CAT losses
for Allstate have exceeded this benchmark for only 30% of the
months over the past decade.
Even during the first quarter of 2011, Allstate’s CAT losses
stood at $333 million, substantially lower than $648 million in the
year-ago period. This also helped the net income in
Property-Liability segment to surge to $468 million from $164
million in the prior-year quarter.
Reduced expenses and losses also aided in improving the first
quarter operating earnings of 93 cents per share, which came in
substantially ahead of the Zacks Consensus Estimate of 68 cents and
69 cents per share recorded in the year-ago quarter.
However, we believe that despite the increase in rates, Allstate
would report earnings of 79 cents in the second quarter, down 2.3%
year over year, according to the Zacks Consensus Estimate, on the
back of
mounting CAT losses.
Severe weather-related adverse events have become a growing
concern for insurers and reinsurers in recent years. The
weather-pattern changes have been leading to regular occurrence of
floods, earthquakes, hurricanes, hailstorms, tsunami etc.
During the first quarter, almost all the insurance giants posted
lower-than-expected earnings owing to higher CAT losses. While
PartnerRe Ltd. (PRE) plummeted on charging $1.02
billion driven by the huge loss from the
recent catastrophes in Japan, New Zealand and Australia.
Aflac Inc.
(AFL) incurred increased expenses due to the Japan catastrophe.
Operating earnings for MetLife Inc.’s (MET)
auto and home segment significantly plummeted 21% year over year
based on higher-than-expected CAT losses while insurance products
also witnessed a decline.
AFLAC INC (AFL): Free Stock Analysis Report
ALLSTATE CORP (ALL): Free Stock Analysis Report
AON CORP (AON): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PARTNERRE LTD (PRE): Free Stock Analysis Report
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