Allstate forecast to report around $2.65bn in Q2 catastrophe losses: BMO analysts

Analysts at BMO Capital Markets are forecasting that US insurance giant Allstate will disclose around $2.65 billion in catastrophe losses for the entire second-quarter of 2024, suggesting the disclosure for the month of May that will be available later this week will be high.

After fellow US insurer Progressive announced significant catastrophe losses for May, that resulted in reinsurance recoveries under its per-occurrence tower and its aggregate reinsurance deductible almost being eroded, analysts have said this will read-across into a high catastrophe loss burden for Allstate.

BOM Capital Markets’ analyst team explained that they forecast a catastrophe loss ratio of around 20% for the full second-quarter of 2024 for Allstate, slightly better than the prior year’s 22.6%.

Last year, Q2 catastrophe losses reached $2.7 billion, pre-tax for Allstate, so the analysts are expecting a figure very close to that in 2024, with around $2.65 billion being the suggested figure from BMO.

While will no-doubt translate into some erosion of deductible for Allstate’s remaining aggregate catastrophe bonds.

As a reminder, Allstate has a number of aggregate catastrophe bond tranches in-force, with the lowest down attaching above $3.6 billion in qualifying losses.

The annual aggregate risk period for the cat bonds begins with the second-quarter, starting April 1st.

However, all of the remaining aggregate Sanders Re cat bonds that Allstate has sponsored feature a $50 million per-event deductible now, so do not aggregate losses from smaller events, unlike the previous generation of aggregate Sanders cat bonds that had a franchise deductible and in some cases had faced losses of principal over recent years.

Allstate’s occurrence reinsurance tower attaches at $500 million in losses, so it is perhaps unlikely any of the severe weather, hail and convective storm events that are driving the majority of losses in 2024 would get close to that alone.

We’d already reported that Allstate’s April catastrophe losses were $494 million pre-tax. The official May figures are due later this week.

It’s suspected they could reach around the $1 billion level or higher, while June is also on-track for a contribution from the continuing severe weather outbreaks, as well potentially as the recent flooding events seen in the United States.

BMO’s analysts state that Allstate is overweighted in Texas, which is where Progressive took a lot of its May cat losses.

It’s worth also noting that Texas is expected to experience torrential and flooding rains over the coming days, which could exacerbate losses for June as well.

It’s still early days though and Allstate will need to report a combined $2.15 billion in catastrophe losses to approach the level forecast by the analysts for the second-quarter. With more than ten days of June still to go, there is still the potential for the forecast to be surpassed as well.