Allstate Recovers Over $700m From Reinsurance In Q4 2018

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Includes: GLRE, HVRRF, HVRRY, SSREF, SSREY, TPRE
by: Steve Evans
Summary

Hurricane Michael and the Camp and Woolsey wildfires in California made up the bulk of Allstate's losses during the period, accounting for around 85% of the insurers recorded catastrophe losses in the quarter.

Allstate's market share and the size of its wildfire losses continue to suggest that the industry loss for the California wildfires could approach $20 billion.

Allstate had previously pegged Hurricane Michael as a roughly $136 million loss pre-tax, but after reinsurance, loss.

U.S. primary insurance giant Allstate revealed that it made over $700 million of reinsurance recoveries in the fourth-quarter of 2018, as the impacts of losses largely from the California wildfires and Hurricane Michael triggered its protection.

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Hurricane Michael and the Camp and Woolsey wildfires in California made up the bulk of Allstate's losses during the period, accounting for around 85% of the insurers recorded catastrophe losses in the quarter.

On a gross basis, Allstate suffered somewhere around $1.663 billion of catastrophe losses during the quarter, but after the recoveries from its reinsurance program, the insurer saw this drop to $963 million.

As a result, the insurer's combined ratio came out at 97% for the fourth quarter, a full 6% higher than the prior year.

Allstate's losses for the California Camp and Woolsey wildfires were previously cited as over $1.2 billion in gross claims, but on a net basis, after reinsurance recoveries and reinstatements, the insurer said that its loss from the fires would be closer to $670 million before tax.

Allstate's market share and the size of its wildfire losses continue to suggest that the industry loss for the California wildfires could approach $20 billion.

Allstate had previously pegged Hurricane Michael as a roughly $136 million loss pre-tax, but after reinsurance, loss.

Hence, the over $700 million of recoveries and the $963 million of net loss figures do suggest some loss creep likely in the wildfire exposure the insurer suffered.

ILS funds and some collateralised reinsurance players likely helped by paying some of the recoveries Allstate made during the fourth-quarter of 2018, helping the insurer manage its gross exposures and come out of the period still profitable.

Allstate's nationwide excess catastrophe reinsurance tower attaches at $500 million of losses to the insurer, hence, this has likely been triggered by the Q4 losses from wildfires, with each layer of this tower 95% placed, so reinsurance capital taking the majority of losses above that point.

Allstate's catastrophe bond coverage does not come into play until much higher up its per-occurrence reinsurance tower, so these notes haven't been affected by the catastrophe losses.

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