Two of the largest U.S. primary insurance companies have surprised analysts with lower than expected catastrophe losses for the month of September 2018, but across the third-quarter as a whole it is Allstate who has experienced the highest loss bill.
For September Allstate reported a catastrophe impact of $177 million, pre-tax ($140 million after-tax), with 13 events costing it $145 million, pre-tax, and the rest coming from unfavorable reserve development on previously reported catastrophe losses.
This is lower than all of the major equity analyst firms had been expecting, causing them to largely raise their Q3 earnings estimates for the firm.
Allstate said that hurricane Florence has accounted for roughly 50% of the insurers September event catastrophe losses.
For the entire third-quarter Allstate has now reported $625 million of catastrophe losses, pre-tax ($494 million after-tax), which is lower than the $861 million the firm reported for the third-quarter of 2017.
Travelers reported third-quarter 2018 catastrophe losses of just $264 million after reinsurance, again significantly lower than most of the equity analysts had been expecting and much lower than the $700 million of Q3 2017 catastrophe losses the insurer reported a year ago.
Travelers said that its quarterly catastrophe losses were primarily related to Hurricane Florence, wind and hail storms across the United States and a wildfire in California (likely the Carr fire).
The fact that both of these insurers estimates of catastrophe losses have come in below analyst expectation in a quarter that looks set to see reinsurance firms reporting higher than expected losses from catastrophes, perhaps reflects the type of events seen and also the more robust reinsurance programs many insurers are now buying.
Travelers estimates are delivered net of reinsurance and Allstate’s estimates are typically delivered pre-tax and after reinsurance has been taken into account, but without revealing how much of the periods losses have fallen to their reinsurance partners.
It’s possible that this trend will be one repeated through the Q3 results season, with insurers faring better than anticipated while reinsurers report slightly higher than expected loss burdens (see RenaissanceRe and Swiss Re from earlier today), a trend that will likely read across to the ILS fund sector if this proves to be the case.
So Allstate has taken the largest bill for the quarter, but the amount passed on to their reinsurance partners is likely to have been relatively significant and a key lever in helping these insurers to manage the volatility in their earnings.