Allstate Corp., the largest publicly traded U.S. home and auto insurer, said third-quarter profit quadrupled on reduced disaster claims in the period before Hurricane Sandy lashed the East Coast.
Net income rose to $723 million, or $1.48 a share, from $175 million, or 34 cents, a year earlier, the Northbrook, -based insurer said today in a statement. Operating income, which excludes some investment results, was $1.46 a share, beating the $1.13 average estimate of 26 analysts surveyed by Bloomberg.
Allstate joins Chubb Corp. and Travelers Cos. in posting better third-quarter results a year after the industry faced record natural-disaster claims. Chief Executive Officer Tom Wilson, 55, has scaled back sales in Florida, bought reinsurance and raised prices for homeowners' coverage. Tornadoes and Hurricane Irene contributed to $3.8 billion in catastrophe claims at the company last year.
"Fundamentally, it was a benign weather quarter," Meyer Shields, an analyst at Stifel Nicolaus & Co., said of the three months ended Sept. 30 in an interview before today's release.
Allstate climbed 2.5 percent to $40.98 at 4:21 p.m. in extended trading in New York. The insurer had gained 46 percent this year before the announcement, leading the 24-company KBW Insurance Index.
Book value, a measure of assets minus liabilities, advanced to $42.64 a share from $39.73 at the end of June. Wilson has reshaped Allstate's investment portfolio since 2008, when writedowns contributed to an annual loss of $1.68 billion. The insurer reduced portfolio risk in the quarter by selling some structured securities, according to the statement.
Catastrophe costs in the third quarter fell 81 percent to $206 million from a year earlier. The insurer made 9.8 cents for every premium dollar in its property and liability coverage unit. That compares with an expense of $1.05 per premium dollar a year earlier.
"We improved underlying margins in both auto and homeowners insurance and benefited from lower catastrophe losses," Wilson said in the statement.
Insurers are assessing damage from Hurricane Sandy, which will affect results in the current period. The storm killed at least 50 people and caused flooding and billions of dollars in damage along the East Coast after making landfall Oct. 29 in New Jersey. It halted travel, shut U.S. financial markets and stopped the U.S. presidential campaigns.
Insured losses may be between $7 billion and $15 billion industrywide in the U.S., catastrophe risk modeler AIR Worldwide said yesterday in a statement. Allstate is among the largest writers of primary property coverage in the states affected by the storm, Morgan Stanley analysts said in an Oct. 28 note. The company hasn't yet released a loss estimate for the storm.
"It's way to early to tell" what effect Sandy may have on fourth-quarter earnings, Wilson said today in an interview on CNBC. "I would say based on the size of this storm, it'll be significant but not material."
The company acquired online auto-insurance seller Esurance last year. Allstate has been losing customers for its namesake brand of coverage as younger drivers shunned buying from agents and chose to shop on the Web. Berkshire Hathaway Inc.'s Geico unit and Progressive Corp., which sell directly to consumers through the Internet, have expanded in recent years.
Wilson hired Ally Financial Inc.'s Sanjay Gupta in August to lead Allstate's marketing efforts. Geico led U.S. property- casualty insurers with $993.8 million in advertising spending last year, according to data compiled by SNL Financial. State Farm Mutual Automobile Insurance Co. was No. 2, at $813.5 million. Allstate spent $745.3 million, while Progressive's cost was $536.1 million.