Allstate drops as profit falls on catastrophe losses

Allstate Corp., the largest publicly traded U.S. home and auto insurer, fell the most since October after fourth-quarter results missed analysts' estimates on losses tied to natural disasters.

Allstate declined $1.16, or 3.6 percent, to $31.20 at 4:15 p.m. in New York Stock Exchange composite trading. Net income slipped to $296 million, or 55 cents a share, from $518 million a year earlier, the Northbrook-based insurer said yesterday in a statement. Operating income, which excludes some investment results, was 50 cents a share, missing by 36 cents the average estimate of 19 analysts surveyed by Bloomberg.

Catastrophe costs surged 64 percent to $537 million on costs from an Arizona hailstorm. Competitors Travelers Cos. and Chubb Corp. also reported a decline in fourth-quarter profit tied to losses from natural disasters.

“In our business, of course, the most volatile item is catastrophes,” said Chief Executive Officer Thomas Wilson in an interview after the release yesterday. “Nobody knows when a storm's going to happen or how much it's going to cost. Nobody would have predicted we would have a $355 million hailstorm in Arizona.”

Storms that passed through Arizona on Oct. 5 and 6 caused hail that punctured homes and vehicles and wind that derailed 28 Burlington Northern Santa Fe train cars, according to a report from Aon Corp. Insurers' losses were estimated at $750 million and economic losses at $1.25 billion, the Chicago-based insurance broker said on Dec. 16.

Allstate, which gets most of its revenue from auto coverage sold through agents, is competing for customers with Warren Buffett's Geico Corp. and Progressive Corp., as more drivers buy insurance through direct channels such as the Internet. Wilson is seeking to boost customer retention after losing clients for most of the past three years.

The overall standard auto policy count dropped 1.5 percent from a year earlier to 17.5 million, Allstate said in a presentation its website. Progressive Corp., the fourth-largest U.S. auto insurer, said last month that total personal auto insurance policies rose to 8.09 million at the end of the fourth quarter from 7.5 million a year earlier. Allstate lost some customers as the company increased rates to improve profit margins, Wilson said.

Allstate's stock has advanced about 9.1 percent in the past 12 months, compared with the 22 percent gain at Progressive.