Allstate cut by Sandler O'Neill

Progressive Corp. was raised and Allstate Corp. was cut by Sandler O'Neill & Partners LP, as the brokerage firm said there will be “winners and losers” in the improving property casualty market.

Progressive, the fourth-largest U.S. auto insurer, was raised to “buy” from “hold” by Paul Newsome, an analyst at Sandler. He cited strong third-quarter earnings and good management at the Mayfield, Ohio-based insurer in his rating change. No. 2 Allstate was cut to “hold” from “buy,” as Newsome said that the company is “executing less effectively in the United States.”

Allstate typically gets the largest portion of revenue from auto insurance and sells most policies through agents. Progressive increased Internet and phone sales after some drivers shunned using agents in the U.S. insurance market that has been in decline for most of the past three years.

Progressive “is an industry winner in a sector we think will experience a divergence of performance,” Newsome said.

Progressive's third-quarter profit of 37 cents a share met the average estimate of 20 analysts surveyed by Bloomberg as sales climbed. Northbrook-based Allstate's net income was 83 cents a share, missing by 13 cents the average estimate of 19 analysts surveyed by Bloomberg.

Travelers Corp., the insurer added to the Dow Jones Industrial Average in 2009, was cut to “hold” from “buy.” Newsome said prices for insurance sold to businesses, which have fallen for the past four years, are expected to drop further in the rest of 2010 and early 2011.

Progressive advanced 16 cents to $20.92 at 2:57 p.m. in New York Stock Exchange composite trading. The insurer has climbed 16 percent since Dec. 31. Allstate dropped 47 cents to $29.86 and is little changed this year. Travelers, based in New York, dropped 50 cents to $54.99 and has climbed 10 percent this year.