Allstate Insurance CEO says...

[beavis1729]

Personally, I disagree with these comments, especially without a more detailed explanation given.

Sure, there have been more catastrophe losses over the past 8 years in the U.S. P&C industry, probably because of population/exposure increase, bad luck of where the storms hit (e.g., the October 2010 hailstorm in Phoenix metro), increased labor/building material costs, etc.

We happened to have two consecutive years of extremely active hurricane seasons and landfalls (2004-2005)...and then the winter of 2009-10 (which happened to hit the populated areas of the northeast)...and now the devastating storms of April 2011. But as we all know, we're in a +AMO, and there are many cyclical drivers of weather patterns over a given 5-10-15-30+ year period.

But the earth has been around for 4.6 billion years...and all of a sudden weather patterns have permanently changed over the last 8 years????

Hmmm...

Here is the link/article. Also, similar comments were made in the 1Q2011 earnings release.

I'd be interested in everyone's thoughts. Remember, Allstate is the largest publicly traded P&C insurance company in the U.S.

From the April 2011 catastrophe loss estimate (statement to Wall Street):

http://finance.yahoo...4.html?x=0&.v=6

NORTHBROOK, Ill. (AP) -- Allstate Corp. said Thursday that the tornadoes that ripped through the South led to an estimated $1.4 billion in catastrophe losses last month.

The home and auto insurer said the losses include 13 natural disasters in the U.S. and Canada. But the largest losses came from tornadoes in Alabama, Arkansas, Georgia and Virginia in the last week of April.

More than 100,000 claims have been reported so far in these areas, the company said.

Allstate declined to give its previous monthly record for catastrophe losses. But the last time company's quarterly catastrophe losses exceeded the April estimate was in the third quarter of 2008, when Hurricanes Ike and Gustav drove up losses to $1.8 billion.

Quarterly catastrophe losses are typically far lower, however. In the first three months of this year, catastrophe losses totaled $333 million.

Severe weather-related incidents have become a growing concern for Allstate in recent years. CEO Tom Wilson has said he believes there have permanent changes in weather patterns, with a growing number of incidents such as hurricanes, floods and hailstorms.

As a result, the company has been pursuing rate hikes in several states to improve returns in its homeowners units to make up for the uptick in payouts

Allstate also said Thursday that it plans to announce monthly catastrophe losses when they are expected to top $150 million. Over the last decade, the company said that level of loss has occurred about one-third of the time.

Citing the estimated catastrophe losses for April, Citi analyst Keith Walsh lowered his estimate for Allstate's second quarter to a loss of 95 cents per share, compared with his previous forecast for a profit of 73 cents per share. For the full year, Walsh lowered his estimate to $1.37 per share from $30.5 per share.

Shares of Allstate, based in Northbrook, Ill. slipped 23 cents to $32.82 in midday trading.

[aslkahuna]

He's been listening to Albert I . If there have been permanent changes to the weather patterns then none of the extreme events that he mentions should have not occurred in the past. Climatic history tends to refute that idea.

Steve

[Clifford]

We discussed Tornadoes earlier.

There has been a large reporting bias on the weakest tornadoes.

http://www.plainschase.com/secondary/MS%20Prop.pdf

With apparently no significant trends for the strongest tornadoes.

Here is a list of the F5 tornadoes in the USA, with a big rash of tornadoes in the 60's and 70's.

http://en.wikipedia.org/wiki/List_of_F5_and_EF5_tornadoes

Oddly, the biggest rash of tornado outbreaks in 1968 and 1974 would put them in the previous weak solar cycle #20.

I agree that there are many changes since the 60's and 70's including a large population increase in the USA (and thus more homes that may get struck). More expensive homes. More expensive cars. Not just inflation, but actually building more homes, and more expensive homes.

There is also a sense of entitlement with the insurance business. If a person pays for insurance, then they feel entitled to benefits. Rather than cleaning the garage and parking the car inside, they leave it on the street, then rush outside after a hailstorm to see if they can get a bonus check from the insurance company.

The Mississippi River regularly floods, but people continue to build in the flood plain. And the bigger dikes they build, the more it exacerbates the problem. Land subsidence is a real issue, and a growing issue which is affecting New Orleans. You can hardly blame it on the climate, but if New Orleans takes another direct hit from a Cat 5 hurricane in 50 years, the damage will be extreme.

It is awfully easy to forget the 1964 floods on the West Coast which happened before I was born. Once a century floods? I don't know. Certainly the conditions that led to extreme events in the past can return, and the weak solar cycle in the 60's coincided with many extreme events.