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Allstate Reports PG&E Recoveries and July 2020 Cat Losses

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The Allstate Corporation (ALL - Free Report) recently announced July 2020 catastrophe results along with the effects of PG&E Corporation and Pacific Gas and Electric Company (together “PG&E”) subrogation recoveries.

The company reported catastrophe results for July generated income of $334 million, pretax ($264 million after tax) as PG&E subrogation recoveries more than offset the impact of events in the month.

The leading insurance giant recorded recoveries of $450 million pretax ($356 million after tax), net of expenses and reinsurance adjustments from the settlement with PG&E in relation to the 2017 Northern California wildfires and the 2018 Camp Fire.

PG&E has been returning capital to insurers after it was deemed liable for causing massive blazes that ran into huge losses for the insurance and reinsurance sectors.

Allstate's report came after The Hartford Financial Services Group, Inc. (HIG - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) reported subrogation recoveries.

We expect that a proportion of the subrogation settlement recoveries made by Allstate will reduce its ultimate losses from paid claims for the devastating California wildfires of recent times.

Catastrophe Report

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

The company recorded $145 million pretax ($115 million after tax) in losses from catastrophe events last month with 65% of the total losses stemming from Hurricane Hanna and two severe wind and hail events.

There was also $29 million pretax ($23 million after tax) of favorable prior-period catastrophe reserve re-estimates, which are not related to PG&E recoveries.

Though the company remains focused on reducing losses through its catastrophe management strategy and reinsurance programs, and continues limiting exposure to riskier geographic markets by raising premiums, it would lead to a decline in the number of policies in force.

In the first half of 2020, the company incurred catastrophe losses worth $1.39 billion, down 20% year over year.

Other companies like Chubb Ltd. (CB - Free Report) and Everest Re Group, Ltd. are also vulnerable to catastrophe losses, given the nature of business.

The company is likely to see higher cat loss this year as the 2020 Atlantic hurricane season is expected to be above normal.

However, given the company’s efficient cat loss management, our confidence in its ability to deliver impressive underwriting results is intact. Allstate is covered under a catastrophe reinsurance program, which materially lowers its exposure to wind and earthquake-emanating losses. These reinsurance agreements are placed in the traditional reinsurance and insurance-linked securities markets.

Zacks Rank and Price Performance

Shares of the company have lost 6.9% in a year’s time compared with the industry’s decline of 2.9%.



The stock carries a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

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