Allstate Corp. has claimed a loss of $620 million in the second-quarter. This is the worst quarter for Allstate and the losses have mounted due to a sharp rise in catastrophe claims ever since Hurricane Katrina hit the Gulf Coast during 2005.
Around $2.34 billion has been contributed towards the damages caused due to the devastating tornadoes that hit the Midwest and the South. Allstate had earlier issued a warning to its shareholders with regard to these estimated losses. These tornadoes have proven to be very costly for the entire insurance industry, but Allstate being the largest publicly traded insurance company in the United States seems to have absorbed these huge losses. Although, the company has made a conscious effort to limit its losses by insuring just a limited number of homes in the coastal regions, the losses could not be curtailed. It is not only because the coastal areas are more vulnerable to hurricanes, but also due to the tornadoes that struck areas away from the coastal region. This caused widespread destruction in places such as Joplin, Mo., and Birmingham, Alas.
The net loss has been $620 million which is $1.19 per share when compared to the last years’ profit of $145 million or 27 cents per share. For every dollar that was collected by way of premiums during the quarter, the company spent $1.23 on the claims where the catastrophe claims contributed 36 cents to that figure.
This has proved to be the costliest quarter for Allstate, but the company has also faced a number of claims due to severe weather conditions since the past several years. There has been a hike in the home insurance rates in most states due to this.
Tom Wilson, Chief Executive, has stated in an interview on Monday, that there is no clarity regarding where the new normal is. He added that it has been a good thing that they have been there for their customers, but unfortunately they have not managed to collect enough money to do these things. He also stated that they were acting as if these levels are presently the new normal, especially since the last 3 years.
Insurers such as Allstate as well as the others normally urge shareholders to look beyond the losses due to natural disasters that keep fluctuating. They are instead asked to concentrate more on the underlying results. To that extent, the company has reported an underlying profit margin where Allstate has spent around 87.5 cents on every dollar that was collected by way of premiums.
