Allstate Has Lower Louisiana Risk as Isaac Approaches
Allstate Corp. (ALL) may benefit from its decision to scale back homeowners’ risk in Louisiana and cede market share to State Farm Mutual Automobile Insurance Co., as Tropical Storm Isaac threatens the U.S. Gulf Coast.
Allstate’s sales of residential policies in Louisiana fell to $209 million last year, 19 percent less than in 2006, according to A.M. Best data compiled by Bloomberg. State Farm, the only U.S. homeowners’ carrier larger than Allstate, sold $466 million of the protection in the state in 2011, a 25 percent increase from five years earlier.
Isaac may make landfall early Aug. 29 in southeastern Louisiana with winds as strong as 90 miles (144 kilometers) per hour, according to the National Hurricane Center. Allstate, led by Chief Executive Officer Tom Wilson, has been raising prices for coverage, buying reinsurance and shifting where it sells policies to improve homeowners’ underwriting results nationally.
“They’ve cut back on coastal exposure, in general,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said of Northbrook, Illinois-based Allstate in a phone interview today. “It’s been a major strategy for them.”
Allstate fell 12 cents to $37.64 in New York today, and is up 37 percent since Dec. 31. State Farm is owned by policyholders and isn’t publicly traded.
Allstate has taken “prudent but difficult actions to responsibly manage risk so that it can be in a strong position” for all its customers, April Eaton, a spokeswoman for the company, said in an e-mail.
State Farm seeks to “manage its business growth carefully, and is continuing to do so,” said Holly Anderson, a spokeswoman for the Bloomington, Illinois-based insurer.
Insured losses in the U.S. from Isaac could be more than $800 million with most of the costs in Louisiana, according to estimates from Kinetic Analysis Corp. compiled by Bloomberg. Hurricane Katrina, the 2005 storm that caused levees to fail in New Orleans, cost insurers $41.1 billion. Allstate dropped 11 percent in the four weeks ended Sept. 21, 2005, as the company confronted losses from Katrina.
Isaac may peak at Category 1 strength on the five-step Saffir-Simpson scale, according to a forecast from the hurricane center. Katrina grew into a Category 5 system, the strongest, and went ashore as a Category 3, according to Weather Underground in Ann Arbor, Michigan.
BP Plc (BP/) and ConocoPhillips (COP) were among oil producers evacuating personnel or halting production at offshore rigs and platforms in the Gulf. The Republican Party’s national convention in Tampa was pushed back a day from its scheduled start today even as Isaac tracked west of earlier forecast paths that indicated it might hug Florida’s western coast.
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