The Allstate Corp. was one of the best-performing listed US insurers this week as the carrier released August catastrophe results that were mostly what the market expected.
Allstate said Sept. 21 that it expects catastrophe losses for the month of August to hit $551 million, or $435 million, after tax. The insurer's results included 18 events with a total estimated impact of $641 million, but these were partially offset by favorable reserve reestimates for prior events.
About half of Allstate's August losses were related to the Maui wildfire in Hawaii, a state where Allstate controls the third-largest share of the homeowners market at 8%.
For the week ending Sept. 22, Allstate's stock was trading up about 5% as of midafternoon on Friday.
The property and casualty (P&C) giant also revealed that it was able to implement auto rate increases of 7% across five locations in the month, which resulted in a total brand premium impact of 0.2%.
The wider view
Allstate's results are emblematic of a growing trend in the P&C space of significantly elevated catastrophe loss loads for primary insurers, according to CreditSights analyst Josh Esterov. But unlike other years, the losses have stemmed from accumulating smaller weather events as opposed to one or two major calamities.
"To the extent that this trend persists, that's potentially a big positive for reinsurers at the expense of the primary insurers," Esterov said in an interview.
Although investors may have breathed a "sigh of relief" that Allstate's results were not any worse given the Maui wildfire, Esterov did not see anything in Allstate's August results related to Hurricane Idalia.
"I'm a little bit concerned ... folks might be looking past potential Hurricane Idalia losses," Esterov said. "That made landfall right at the end of August so it's possible those losses are going to accrue to September numbers."
Assurant Inc. said this week that it expects to book less than $50 million of pretax reportable catastrophes for its global housing segment in the third quarter. More than half of the estimated pretax losses were driven by Idalia; the rest were related to the Hawaii fires.
Assurant shares also fared well this week, rising a bit more than 4.5% as of Friday afternoon.
The broader markets fared somewhat poorly for the week, with the S&P 500 losing more than 2.5% as the closing bell on Sept. 22 approached. The S&P 500 US Insurance index was slightly higher for the week through that same time frame.
In a move that may have significant ramifications for the California insurance market, the state's insurance commissioner, Ricardo Lara, announced a "sustainable insurance strategy" bundle of actions aimed at improving the homeowners insurance market after a number of carriers, including Allstate, pulled back on coverage.
Lara's plans include improving rate filing timelines and procedures and working to push homeowners and businesses off of the Golden State's insurer of last resort and back into the regular market. The regulator is also looking for commitments from insurance companies to cover all parts of California by writing no less than 85% of their statewide market share in high wildfire-risk communities.
Insurers that agree to write insurance in areas with higher risk will be allowed to factor in climate change when setting their prices, according to Lara's new rules.
Gallagher cuts a deal
Earlier this week Arthur J. Gallagher & Co. agreed to buy Eastern Insurance Group LLC, a provider of commercial property and casualty and personal lines products across the Northeastern part of the country for $510 million. Parent company Eastern Bankshares Inc. said it was looking to cash out on the high valuation of its insurance brokerage business in order to capitalize on the lower valuations in the banking space.
Arthur J. Gallagher's shares were up more than 1.7% for the week as of Friday afternoon.
In other news this week, third-party reports revealed that American International Group Inc. is among the insurers likely to face losses after the cyberattack on casinos in Las Vegas. The insurance conglomerate is reportedly the primary layer on MGM Resorts International's more than $200 million tower.
AIG shares were up more than 1% as of Friday midafternoon.
