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Allstate (ALL) Expects After-Tax Cat Loss of $179M for July

The Allstate Corporation ALL anticipates a headwind of $179 million after tax linked with catastrophe losses for July. Catastrophe losses for the month primarily stemmed from 18 events.

Shares of Allstate inched up 0.4% on Aug 20.

Being significantly exposed to the property and casualty (P&C) business line, Allstate remains susceptible to severe catastrophic events. Consequently, weather-related losses continue to increase the company’s claims and claims expense, and put pressure on its underwriting results. This has acted as a drag on the company’s bottom-line growth.

Case in point, in the first half of 2021, Allstate incurred catastrophe losses of $1.5 billion, which increased 10.4% from the prior-year comparable period. On reporting increased catastrophe losses, the company’s claims and claims expense increased 25.4% year over year, while combined ratio deteriorated 220 basis points year over year during the same time frame.

The bottom line of Allstate is expected to remain under pressure in the days ahead considering the 2021 Atlantic hurricane season, which commenced from Jun 1 and will last through Nov 30. This year’s season is expected to be an above-average one per the Climate Prediction Center of National Oceanic and Atmospheric Administration (NOAA). The same source points out that atmospheric and oceanic conditions are clearly exhibiting all possible signs of making the season an above-average one.

Per the latest annual mid-season update issued by NOAA, there can be 15 to 21 named storms this time around. Among them, seven to 10 are likely to be hurricanes out of which three to five might evolve into major ones.

AccuWeather stated that 2021 is likely to be an above-normal tropical season activity across the Atlantic. The company’s team of tropical weather forecasters expects the season to witness 16-20 named storms, out of which seven to 10 can be hurricanes.

Though catastrophe losses will always be a concern because of the uncertainty of occurrence and degree of impact, Allstate remains equipped with appropriate strategies that should continue to impress investors. The company continues to rely on minimizing losses through its catastrophe management strategy and reinsurance programs. In spite of the company being exposed to catastrophe losses, its top line has continued growing for the past many years. The same improved 23.8% year over year in the first half of 2021 attributable to diversified product suite and pricing discipline. Its past buyouts such as that of National General have been driving the company’s top-line growth as well.

Besides, the insurer sincerely follows a policy of boosting market share of its personal property-liability business through broadening its personal lines solutions portfolio. The company pursues numerous cost-cutting efforts with a view to boost margins in the days ahead. Apart from reducing costs, these initiatives have resulted in enhanced efficiencies of the claims process and extended digital competencies.

Other P&C insurers that are exposed to catastrophe losses include Chubb Limited CB, The Travelers Companies, Inc. TRV and AXIS Capital Holdings Limited AXS.

Zacks Rank & Price Performance

Shares of Allstate, which carries a Zacks Rank #3 (Hold), have gained 41.6% in a year compared with the industry’s growth of 24.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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