Allstate reports third straight quarterly loss
Allstate Corp., the largest publicly traded U.S. home and auto insurer, posted its third straight loss on declines in the value of investments.
The first-quarter net loss of $274 million, or 51 cents a share, compares with a profit of $348 million, or 62 cents, in the same period a year earlier, the Northbrook-based company said in a statement distributed by Business Wire today. Profit before investment losses was 84 cents a share, compared with the $1.25 estimate of 14 analysts surveyed by Bloomberg.
Chief Executive Officer Tom Wilson halved the firm's dividend, halted share buybacks and is cutting 1,000 jobs at Allstate's money-losing life insurance business to preserve capital. The insurer in December announced it was replacing the heads of its life and investing units.
Insurers typically add to profits by investing payments from customers until the funds are needed to pay claims. The model backfired last year, leaving 23 of the 24 companies in the KBW Insurance Index with a profit decline or a net loss. The trend has continued as companies report first quarter results, with Hartford Financial Services Group Inc., MetLife Inc. and Lincoln National Corp. among those with losses.
Allstate, which gets about 60 percent of revenue from its auto unit, has been raising the price of car coverage in some states. Rivals including Bloomington, Illinois-based State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer, and No. 4 Progressive Corp. are following suit as drivers pare back coverage and insurers face more fraudulent claims because of the slumping economy.
Auto Fraud
The number of auto-theft claims where drivers are suspected of abandoning their cars increased 24 percent in the first quarter from the same period a year earlier, the National Insurance Crime Bureau said last week.
"We're taking very proactive actions to make sure that we're not at the receiving end of the some of this fraud," said George Ruebenson, the president of Allstate's home and auto business, in a presentation to investors in March
Allstate is the second largest home and auto insurer in the U.S. by premium behind State Farm, according to 2008 data compiled by the National Association of Insurance Commissioners.