"Elevated Catastrophic Losses", "Deteriorating Underwriting Results" Behind Downgrade Of Allstate

[hatrack]

Ask not for whom the bell tolls, it tolls for thee. Not just in Florida. Major insurance companies that we all rely on are under increasing strain from a steady increase in climate amplified weather events. Allstate Insurance was recently downgraded by Standard & Poors

The Insurer: (paywall)

Allstate has had the issuer credit and financial strength ratings on its core operating subsidiaries downgraded from AA- to A+ by S&P after a challenging first half of the year saw it report deteriorating underwriting results driven by cat(astrophic) losses, auto losses and modest adverse reserve development.

Financial Times quoted S&’s evaluation:

“The downgrade reflects Allstate’s continued weak underwriting performance given elevated catastrophe losses, persistently high loss costs for the personal auto business, and the increased exposure — measured by premiums — consuming higher levels of capital. Through the first six months of 2023, the S&P-adjusted consolidated combined ratio for Allstate rose to 115.6% from 105.4% for the same period in the prior year. The homeowners line of business saw the steepest erosion with the company’s reported combined ratio increasing to 132.3% for the first six months of 2023 from 95.9% for the same period in 2022 with Property-Liability year-to-date catastrophe losses of $4.4 billion, greater than the $3.1 billion loss in all of 2022. The auto business, while improving on an underlying basis in the quarter, still weakened year to date on a calendar year basis to 106.4% from 105% as elevated catastrophe losses and minimal adverse development outpaced a meaningful expense improvement. As a result, we expect the company to achieve a net loss for the year with the combined ratio in the 108%-110% range, assuming a normalised level of catastrophe losses in the second half of the year.”

FT also noted that “not only did Allstate swing to a steep loss for the first half of this year in its homeowners’ insurance business, it also saw greater catastrophe losses than it did for all of last year.” Further, FT noted that typically, Insurers hit with major catastrophes count on the mammoth “Reinsurance” companies (insurance companies that insure insurance companies, for instance, Lloyds of London) to take the pressure off following a major Hurricane Katrina of Sandy scale disaster, what they’ve seen lately is a steady increase in the number of lower amplitude events, primarily severe convective (thunder) storms. FT notes that “this year has brought a steady storm of only moderate disasters to the mainland US, leaving Allstate on the hook for more of the claims.”

EDIT

https://climatecrocks.com/2023/08/17/major-insurer-downgraded-after-climate-losses/

[jimfields33]

1. California getting a hurricane even a cat 1 will be messy.

Allstate must be nervous.