Canadian Underwriter

Premiums earned up 4%, catastrophe losses up 181% at Allstate

May 9, 2016   by Canadian Underwriter

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First-quarter underwriting income dropped about 73% year-over-year for The Allstate Corp. in the wake of two large hailstorms in late March in the southern United States.

The Northbrook, Ill.-based insurer reported May 4 that catastrophe losses were $827 million during the three months ending March 31, up nearly threefold from $294 million during the same period in 2015. All figures are in U.S. dollars.

Underwriting income dropped from $467 million in Q1 2015 to $125 million in the most recent quarter.

Alltstate reported premiums earned, in property and liability, of $7.723 billion in the latest quarter, up 4% from $7.426 billion in Q1 2015.

The combined ratio deteriorated by 4.7 points, from 93.7% in Q1 2015 to  98.4% in the latest quarter. The effect of catastrophe losses on the combined ratio was 10.7 points in the latest quarter, compared to four points in Q1 2015.

Seventeen events contributed to the $827 million in cat losses in the first quarter of this year. Of those, 15 were wind/hail events, causing $783 million in losses. One catastrophe event caused losses of $340 million while another caused losses of $196 million.

“Two severe hail events, primarily impacting the state of Texas in March, accounted for two-thirds of the catastrophe losses for the quarter,” Allstate said in a release April 21. “The larger of the two storms occurred on March 23, 2016, extended from Texas to Florida and produced violent thunderstorms with 2.5-inch hail and 65 mph winds in Texas, and 1-inch hail and similar winds in Florida.”

Allstate said April 21 that the smaller of the two hail events “occurred during morning rush hour on March 17, 2016 and produced hail as large as 2.75 inches in Texas and 1.75 inches as it moved east into Louisiana. The cities of Fort Worth and Arlington, Texas, saw the greatest amount of damage from the storm.”

Allstate defines catastrophe “as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event.”

One such event produced $63 million in losses in Q1, Allstate reported May 4 in a filing with the U.S. Securities and Exchange Commission. Fourteen events – which caused less than $50 million in losses each – caused a total of $231 million in losses.

There were no hurricanes or tropical storms affecting Allstate’s cat losses in Q1. There were also no tornadoes (compared to one in Q1 2015) and no wildfires (compared to one in Q1 2015).

Property-liability revenues were $7.926 billion in Q1 2016, compared to $7.812 billion in Q1 2015. Of the revenues in the latest quarter, $5.22 billion was from auto premiums, $1.81 billion was from homeowner premiums, $421 million was from other personal lines, $129 million was from commercial lines and $143 million was from other business lines.

Net investment income was $302 million in Q1 2016, down 15.6% from $358 million in Q1 2015.

Company-wide, Allstate reported net income of $246 million on revenues of $8.871 billion in the most recent quarter, compared to net income of  $677 million on revenues of $8.952 billion in the three months ending March 31, 2015.