This past week, Allstate and Progressive reported their estimated cat losses for the month of February. Our cat loss analysis last month explored the impact of the California wildfires on January cat losses. We also discussed the ongoing rise in cat losses at the industry level, which further complicates a loss-cost environment already plagued by worsening social inflation.
However, we found that the latest disclosures from both carriers indicate that losses in February fell well below their historical monthly medians. In particular, Progressive reported estimated cat losses of $0, driven by favorable development on prior years’ storms. Allstate reported estimated cat losses of $92mn, bringing its year-to-date total to a sizable $1.2bn.
Progressive and Allstate report major claims monthly, providing the closest thing the industry has to a real-time barometer of insured cat losses.
While this month was lighter versus January, we expect losses will more than likely come in above historical Q1 trends due to the California wildfires. This will pose a significant challenge to exposed insurers, who will have to lean into their cat loss budget before the peak months for other severe weather events.
We expand upon these points in the following analysis.
February cat losses mark a break in the clouds for insurers, but wildfire impact remain in focus
As previously mentioned, both Progressive and Allstate reported estimated cat losses for the month of February below historical trends.
The chart below shows the updated five-year monthly median cat losses for both carriers. Note that we have revised our calculations to include an assumed $75mn, or the midpoint between $0-$150mn, for Allstate’s median for months in which losses fell below the $150mn reporting threshold.
The tables below show Allstate and Progressive’s updated monthly pre-tax cat losses since January 2019.
Turning to Allstate, the company’s reported losses of $92mn fell below the five-year median for February of $110mn. The insurer did not provide additional information regarding what severe weather events drove the result.
Nonetheless, the company’s year-to-date cat losses now total approximately $1.2bn, its largest year-to-date figure as of February in the six-year period we observed. This result is a testament to the sizable impact of the January California wildfires on cat loss results, especially among homeowners-exposed insurers such as Allstate.
For reference, Allstate’s losses in Q1 2024 totaled $731mn. Just two months into the year, the insurer’s cat losses are already over 1.5x its total quarterly loss in the prior-year period. They are also at nearly a quarter of its full-year 2024 losses of approximately $5bn.
Again, such significant losses in Q1 can prove problematic down the line. If severe convective storm and hurricane losses in the coming months trend similarly to how they have in the past several years, they could drive additional monthly losses in the $500mn-$1bn range.
This year may ultimately be shaping up to become a historic cat year. As AIG CEO Peter Zaffino noted during AIG’s Q4 2024 earnings call, the outsized losses from the California wildfires, coupled with the prospect of an active hurricane season due to rising ocean temperatures, make a $200bn insured cat loss year a plausible scenario.
Contrastingly, Progressive reported net catastrophe losses of $0. The company’s agency and commercial lines businesses did experience minor catastrophe losses, totalling less than half a point on the combined ratio.
However, the company reported approximately $11mn, or 4.5pts on the combined ratio, of favorable development on prior-year storms in its personal property line of business, which brought the company-wide net cat loss estimate to $0.
The result fell well below the company’s February median of $14mn, and the carrier’s catastrophe losses to-date total $46mn, its lowest year-to-date figure since 2022.
We would reiterate that the disparity between Allstate and Progressive’s results post-wildfires is due primarily to differences in business mix. Allstate wrote roughly $12bn in homeowner and farmowner lines of business in 2024, whereas Progressive primarily writes personal and commercial auto.
Geographic exposure is also a factor one must consider when looking at the latest data. As we discussed in our last cat loss note, Allstate is among the top 10 writers of California homeowners’ multi-peril insurance. We would note, though, that the latest statutory data shows Allstate ranked seventh in 2024 versus sixth in 2023, having been surpassed by Liberty Mutual.
Specifically, Allstate now only wrote 5.4% of the total California homeowners’ market as opposed to 5.8% in 2023. This is in line with the company’s ongoing strategy to reduce its homeowners’ market share in California, and fits with our broader expectation for carriers to continue to take steps to reduce their exposure in the state’s troubled admitted market.
In summary, February cat losses were below historical trends, but we still expect Q1 cat losses to be elevated versus prior year periods due to the California wildfires. This will place significant financial strain on exposed insurers, as they will be required to lean heavily into their cat budget just a few months into the year before potentially heavier losses from other severe weather events are incurred.