Allstate's profit surges as investments improve

Allstate Corp., the largest publicly traded U.S. home and auto insurer, said third-quarter profit rose 66 percent as investment losses narrowed.

Net income climbed to $367 million, or 68 cents per share, from $221 million, or 41 cents, a year earlier, the Northbrook-based insurer said today in a statement. Operating profit, which excludes some investment results, was 83 cents a share, missing the 96-cent average estimate of 19 analysts surveyed by Bloomberg.

Chief Executive Officer Thomas Wilson reshaped Allstate's $100 billion investment portfolio since 2008 when the company posted a $1.7 billion annual loss, cutting back on stocks, municipal debt and commercial mortgage-backed securities while acquiring corporate bonds. Corporate debt returned 5.3 percent in the third quarter, according to Bank of America Merrill Lynch's U.S. Corporate & High Yield Master Index.

“The credit environment continued to improve,” said Alan Devlin, an analyst with Atlantic Equities LLP, in an interview before the company announced results. “Interest rates will help the investment portfolio.”

Allstate climbed about 8.1 percent this year in New York Stock Exchange composite trading, compared with the 18 percent rise in the 24-company KBW Insurance Index.

Realized investment losses narrowed to $144 million in the period ended Sept. 30 from $519 million a year earlier.

Underwriting profit at property-casualty operations fell 23 percent to $266 million from $346 million a year earlier. Allstate made 4.1 cents for every premium dollar in its property and casualty coverage, compared with 5.3 cents a year earlier. Catastrophe costs narrowed to $386 million from $407 million as the U.S. escaped damage from major hurricanes.

Premium revenue slipped to $6.5 billion from $6.54 billion as increased rates at the main auto business weren't enough to cushion a decline in the number of policies in force.

Allstate, which typically gets the largest portion of revenue from auto insurance and sells most policies through agents, is competing for new customers with Progressive Corp. and Warren Buffett's Geico Corp., which increased Internet and phone sales. Allstate is seeking to boost customer retention after losing clients in 2009.

“For the past 15 quarters they've had either negative or flat premium growth,” Devlin said. Allstate was among the first to raise rates in property casualty insurance three years ago, which contributed to a decline in market share, he said.