(Reuters) – Allstate Corp reported a 52.4% fall in first-quarter profit on Wednesday as losses from California wildfires erased investment gains, sending the company’s shares down 2.5% in extended trading.
The results mirror those of peers W R Berkley and Chubb, which also reported a drop in first-quarter profit last week as industry-wide catastrophe losses offset operational gains.
California suffered from devastating wildfires in January that scorched entire Los Angeles neighborhoods. Estimated to be the costliest wildfires in U.S. history for the insurance industry, the disaster claimed several lives and caused an estimated economic damage of as much as $250 billion.
The state’s stringent insurance regulation mandates insurers seek regulatory approval before raising prices for most policies, thus limiting their ability to adjust prices according to the assessed risk.
The insurer reported catastrophe losses of $2.22 billion, net of reinsurance, for the quarter ended March 31. This compares with $731 million in catastrophe losses in the year-ago period.
Net catastrophe losses in the company’s homeowner’s insurance unit more than tripled to $1.8 billion, primarily driven by California wildfires and March wind events.
The Northbrook, Illinois-based insurer had said earlier this year it expected about $1.1 billion in pre-tax losses related to the California wildfires, net of reinsurance.
The company’s consolidated revenue for the reported quarter was at $16.45 billion, a 7.8% jump from a year ago.
Allstate’s net investment income jumped to $854 million from $764 million a year earlier.
Allstate reported a net profit of $566 million, or $2.11 per share, in the three months ended March 31, compared to a profit of $1.19 billion, or $4.46 per share, last year.
The company’s property-liability segment posted an underlying combined ratio of 83.1%, compared to 86.9% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims.
(Reporting by Ateev Bhandari in Bengaluru; Editing by Shailesh Kuber)
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