Allstate (ALL) Catastrophe Woes Continue With Losses in May

Dice with pencil on graph paper

The Allstate CorporationALL recently announced estimated pretax catastrophe loss of about $278 million or $220 million after tax for May 2018.

Of these, a $224-million was incurred from 12 events and the remainder was from adjustments to prior-period cat loss. About 60% of the catastrophe losses were related to two severe wind and hail events, primarily affecting Mid-Atlantic, Northeast and certain Midwest states.

For April, the company expects a cat loss of $211 million or $167 million after tax. Clubbing both, the company will likely bear a $489-million loss in the second quarter, per the recent estimates.

Per Aon's Impact Forecasting, cat loss for May is estimated at $2.3 billion and two-thirds of the same will be borne by the insurance and the reinsurance sector. According to Aon, May will be the most impactful month pertaining to severe weather so far this year across the United States and Canada.

Due to a relatively large property insurance business, Allstate is significantly exposed to catastrophic events. Weather-related losses for the past many years have weighed on the company's claims and benefits plus expenses and cash flow, draining its underwriting profitability.

In 2016 and 2017, the company's cat loss widened 51% and 26%, respectively, year over year. The company incurred $361 million of catastrophe loss during the first quarter of 2018.

Allstate remains focused on reducing losses through its catastrophe management strategy and reinsurance programs as well as by limiting exposure to riskier geographic markets via premium hikes, which might cause a decline in the number of policies in force. However, we cannot rule out the possibility of significant losses from cat events and inclement weather incidents.

Despite the cat loss incidence, our confidence remains intact in the company's ability to show strong results during the second quarter. Increasing premiums in property and casualty business, an improving auto business, growing net investment income, a low tax rate as well as a strong balance sheet should act as key catalysts for earnings growth.

Zacks Rank & Share Price Impact

Allstate carries a Zacks Rank #3 (Hold). Shares of the company have returned 3.6% in a year's time, underperforming the industry growth of 8.7%.

Stocks to Consider

Some better-ranked stocks in the same space are Alleghany Corp. Y , HCI Group, Inc. HCI and NMI Holdings Inc. NMIH , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Alleghany surpassed estimates in three of the trailing four quarters with an average beat of 17.6%.

HCI Group outpaced estimates in three of the last four quarters with an average earnings surprise of 1.57%.

NMI Holdings beat estimates in three of the preceding four quarters with an average positive surprise of 24.6%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

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 Allstate Corporation (ALL): Free Stock Analysis Report

Alleghany Corporation (Y): Free Stock Analysis Report

HCI Group, Inc. (HCI): Free Stock Analysis Report

NMI Holdings Inc (NMIH): Free Stock Analysis Report

To read this article on click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More