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Allstate (ALL) to Incur Cat Loss, But No Reasons to Worry

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The Allstate CorporationALL recently announced estimated pretax catastrophe loss of about $211 million or $167 million after tax for April 2018.

The company expects reinsurance recoveries to reduce the loss to $195 million. These losses pertain to 10 events that occurred in April. About 60% of the catastrophe losses were related to two severe wind and hail events which occurred in Texas and some parts of Southeastern states.

Per a recent report from Aon Benfield, five separate storm systems caused severe thunderstorms across the United States during the month of April. Total combined economic losses from these events were estimated at $2.3 billion, with public and private insurers expected to pay at least $1.5 billion in claims.

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

In 2016 and 2017, the company's cat loss increased 51% and 26%, respectively, year over year. The company incurred $361 million of catastrophe in the first quarter of 2018. The company remains focused on reducing losses through its catastrophe management strategy and reinsurance programs, and limiting exposure to riskier geographic markets by raising premiums that would lead to a decline in the number of policies in force. However, we cannot rule out the possibility of significant losses from catastrophes and severe weather incidents.

Despite the cat loss incidence, we have confidence in the company's ability to show strong results in the second quarter. Increasing premiums in property and casualty business, growing net investment income, a low tax rate and a strong balance sheet should act as catalysts to earnings growth.

Zacks Rank & Share Price Impact

The Allstate carries a Zacks Rank #2 (Buy). Its shares have returned 15% in a year's time underperforming the industry growth of 18%.

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You can see the complete list of today's Zacks #1 Rank stocks here .

Some other stocks in the same space are Alleghany Corp. Y , The Progressive Corp. PGR and RLI Corp. RLI .

Alleghany beats estimates in three of the four reported quarters with average positive surprise of 17.6%

The Progressive Corp. surpassed estimates in three of the four reported quarters with average positive surprise of 6.23%.

RLI Corp. surpassed estimates in each of the four reported quarters with average positive surprise of 33.7%.

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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.

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