Natural Catastrophes Continue To Challenge Insurers Through August

Allstate posted more than $2.3 billion in catastrophe losses in the second quarter, driving a $620 million second-quarter loss. The corporation's combined ratio for that quarter was over 123.

Allstate's announcement of losses is a continuation of a new plan to release monthly and quarterly catastrophe losses when they exceed $150 million, the Northbrook, Ill.-based company says.

Catastrophe losses in August also ate into Progressive Corp.'s earnings for the month as net income dropped 66 percent, the company says.

The Mayfield Village, Ohio-based auto insurer says net income, when compared with the same month a year ago, dropped $44 million, to $22.5 million.

The company says it was hit with about $37 million in catastrophe losses for August, compared to $2.2 million during the same 31 days last year.

The catastrophe losses accounted for 3.2 loss-ratio points in August, and the total combined ratio rose 4.5 points to 97.6.

About 64 percent of the catastrophe losses were attributed to Hurricane Irene. The states with the largest cat losses for the month were New York, Iowa, New Jersey, Virginia, Pennsylvania and Nebraska, Progressive says.

On a year-to-date basis, net income is down 1 percent, or $5.5 million, to $682 million over the same period last year. Total revenues are up 4 percent, or $441 million, to $10.4 billion.

The company saw business in both its direct-writer and independent-agency auto-insurance business increase during the month over the same period last year.

Overall, personal-lines policies-in-force increased 5 percent, or by 573,000 policies, to nearly 12.3 million. Commercial-auto policies dropped slightly, 1 percent, to 514,000.

Agency-written policies-in-force increased 3 percent to more than 4.6 million. Direct-written policies increased 7 percent to 3.8 million. 

Comparing August 2011 to August 2010, net-premiums written increased 5 percent, or $60 million, to $1.2 billion.

Last month Progressive said its July net income dropped 55 percent, compared to the same month last year, on $23 million in catastrophe losses.

Meanwhile, at a recent Barclays Capital conference in New York, Hartford Financial Services Group said it expects pretax catastrophe losses for July and August of $150-$250 million. Hartford said losses of between $75 million and $175 million can be attributed to Hurricane Irene, reports Reuters.

Catastrophe modelers have issued varied estimates of insurance-industry insured losses from Hurricane Irene. Most recently, Risk Management Solutions says the storm could cost insurers $2-$4.5 billion in the U.S.

Modeler Eqecat says U.S.-insured losses from Irene will fall between $1.5 billion and $2.8 billion. AIR Worldwide put the range of U.S.-insured losses at $3-$6 billion.

Aon Benfield's catastrophe-model development center, Impact Forecasting, estimates U.S. insured losses from Hurricane Irene of between $1.6 billion and $6.6 billion.

Insured losses from Hurricane Irene and other recent events will add to $17.3 billion in insured losses in the U.S. as of June 30—a 162 percent increase over insured losses during the first half of last year.

In a recent slide presentation given at the Houston Marine Insurance Seminar, Insurance Information Institute President Robert Hartwig said that in the U.S., as of June 30, 2011, there have been a total of 20,044 severe weather events, including 1,585 tornadoes, 7,176 reports of large hail and 11,283 high-wind events.

He added that, globally, there has been $55 billion in insured losses—more than double the amount for the 2010 first half.