Allstate announces second quarter loss of $620 million

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Allstate announces second quarter loss of $620 millionAllstate Corp has been hit by a loss of $620 million in the second quarter and it has been the worst hit for the company since the catastrophe claims made during Hurricane Katrina when it struck the Gulf Coast during 2005.

The devastating tornadoes that had hit across South and Midwest also cost about $2.34 billion, which was in tune with the predictions made by Allstate to its shareholders, according to WSJ reports.

The operating loss excluding some investment results was at $1.23 a share and beat the Wall Street expectations of a steeper loss of 33 cents.

Tornadoes seem to have proven very costly for the entire insurance sector.

However, Allstate, which is the largest publicly traded auto and home insurer in the United States, has absorbed some of the biggest losses.

In fact, the company has limited its home insurance by making a conscious effort to limit the number of homes that it insurers in these coastal regions that are vulnerable to hurricanes. However, the tornadoes seem to have struck away from the coastal areas and yet have caused widespread damage in Birmingham, Ala., as well as Joplin, Mo., as per reports from WSJ.

The net loss for Allstate has been $620 million or $1.19 per share, when compared to profits a year earlier of $145 million or 27 cents per share.

For every dollar that the company had collected by way of premiums, around $1.23 was spent on claims as well as expenses, where the catastrophe claims had contributed 36 cents to that entire figure.

This quarter has proved to be the costliest ever for Allstate although the company has faced a number of claims caused by freaky weather in the last several years. Hence, this has led to increase in home insurance rates in many states.

Tom Wilson, Allstate Chief Executive has stated in an interview on Monday that it was no longer clear as to what the new normal is, according to WSJ reports.

Although he stated that they were glad that they could be there for their customers, he added that the money collected was insufficient.

However, it has been a standard practice for all insurers including Allstate to urge their shareholders to look beyond these natural disaster costs that can fluctuate wildly, and instead focus more on the underlying results. To that extent, the company has reported underlying profit of a margin figure which removes the effect of such catastrophes as well as reserve adjustments.