Allstate (ALL) Expects To Incur Catastrophe Loss In May
Zacks Investment Research | Jun 21, 2019 05:31AM ET
The Allstate Corporation (NYSE:ALL) expects to incur $473 million pre-tax ($374 million after-tax) catastrophe loss for May 2019. The same can be attributed to seven weather-related events at an estimated cost of $504 million, pre-tax, which is partially offset by favorable reserve re-estimates of prior-reported catastrophe losses.
For the month of April, the company expects $290 million, pre-tax ($229 million after-tax), bringing estimated catastrophe losses for the second quarter months of April and May 2019 to $763 million, pre-tax ($603 million after-tax).
Being a relatively large property insurance business, Allstate is significantly exposed to catastrophic events. Natural calamity-oriented losses for the past many years have weighed on the company’s claims and benefits plus expenses and cash flow, thereby draining its underwriting profitability.
In 2016 and 2017, the company’s catastrophe loss increased 51% and 26%, respectively, year over year. The company, however, further incurred catastrophe loss of $2.6 billion in 2018 which was down 11.7% year over year.
Other companies in the property and casualty space, such as W.R. Berkley Corp. (NYSE:WRB) , Chubb Ltd. (NYSE:CB) and Everest Re Group, Ltd. (NYSE:RE) also remain exposed to catastrophe losses, owing to their property and casualty businesses.
Allstate’s weather related losses have caused historically induced volatility to its results. To address the same, the company is focused on reducing losses through its catastrophe management strategy and reinsurance programs along with limiting exposure to riskier geographic markets via premium hikes. This, in turn, might cause a decline in the number of policies in force. However, we cannot rule out the possibility of massive losses suffered due to cat events and inclement weather incidents.
Despite the cat loss, our confidence in the company’s ability to deliver impressive result remains intact. Increasing premiums in property and casualty businesses, an improving auto business, growing net investment income, a low tax rate and a strong balance sheet should act as key catalysts for earnings growth.
Year to date, shares of the company have gained 25%, wider than the industry ’s rally of 5%.
Allstate carries a Zacks Rank #3 (Hold).
You can see .
Today's Best Stocks from Zacks
Get The News You Want
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.