Allstate’s first quarter profits drop as catastrophes damage triples

(Reuters) – Allstate Corp reported a 52.4% decline in first quarter profits on Wednesday as California wildfire losses wiped out investment gains and reduced 2.5% in extended transactions.

The results also reported a decline in profits for the first quarter last week as industry-wide catastrophe loss offset operational gains.

California suffered a catastrophic wildfire in January, burning its entire Los Angeles neighborhood. Estimated to be the most expensive wildfire in US history for the insurance industry, the disaster has taken several lives and caused estimated economic damages to up to $250 billion.

The state’s strict insurance regulations require insurers to seek regulatory approval before raising prices for most insurance contracts, limiting their ability to adjust prices according to their assessed risks.

The insurance company reported net $2.22 billion disaster losses for reinsurance for the quarter ended March 31.

Net catastrophe losses in the company’s homeowner insurance unit have more than tripled the $1.8 billion driven primarily by California wildfires and March Wind events.

The Northbrook, Illinois-based insurer said earlier this year it expects a pre-tax loss of about $1.1 billion related to the California wildfires that benefited from reinsurance.

The company’s consolidated revenue for the reported quarter was $16.45 billion, a 7.8% jump from a year ago.

Allstate’s net investment revenue jumped to $854 million from $764 million the previous year.

Last year, AllState reported $566 million ($2.11 per share) for the three months ended March 31st.

The company’s property liability segment recorded an underlying total ratio of 83.1%, compared to 86.9% the previous year. A ratio below 100% means that the insurance company has earned more premiums than was paid in the claim.

(Reporting by Ateev Bhandari of Bengaluru, edited by Shailesh Kuber)