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Allstate reports third straight profit on investments

Allstate Corp., the largest publicly traded U.S. home and auto insurer, reported its third straight quarterly profit on improved investment results and higher underwriting income.

Allstate's net income of $518 million, or 96 cents a share, compares with a loss of $1.13 billion, or $2.10, in the same period a year earlier, the Northbrook-based insurer said in a statement today. Operating income, which excludes some investment results, was $1.09 a share, beating by 7 cents the average estimate of 17 analysts surveyed by Bloomberg.

Chief Executive Officer Thomas Wilson appointed a marketing head and named new leaders for the property and life insurance units in the last six months as he refocuses on improving insurance results after reshaping the investment portfolio last year. The company earned $854 million for all of 2009, compared with a $1.68 billion loss the year before, a result of writedowns and investment losses.

"This year they can start playing a little more offense in terms of examining where the opportunities are for growth, ť said Meyer Shields, an analyst at Stifel Nicolaus & Co., in an interview before results were released. "There is a lot less panic about their aggregate capital levels because enough of that capital has come back to really reassure people. ť

Allstate fell 13 cents to $28.60 at 4:15 p.m. in New York Stock Exchange composite trading. The insurer has climbed about 39 percent in the past year, compared with the 29 percent increase in the Standard & Poor's 500 Index.

'Less Risky'Realized investment losses narrowed to $33 million before taxes, compared with $1.9 billion in the last three months of 2008. Investment income dropped 19 percent to $1.1 billion."Interest rates are so much lower than they were,Ãcent;â#130;not;circ;ť Paul Newsome, an analyst at Sandler O'Neill Partners LP, said before results were released. "Allstate's portfolio is a lot less risky. They've shed a lot of the more risky, but higher yielding assets.Ãcent;â#130;not;circ;ťAllstate is competing for customers with Progressive Corp. and Warren Buffett's Geico Corp. with a series of advertisements featuring Dennis Haysbert, the actor who played a U.S. president on the News Corp. television show, "24.Ãcent;â#130;not;circ;ť Allstate has said Haysbert targets older, more affluent drivers than Geico's gecko mascot and Progressive Corp.'s spunky saleswoman, Flo, and the average net premium per policyholder has increased for three straight quarters.Fewer PolicyholdersStill, the insurer has reported quarterly declines in the number of standard auto policyholders in the last eight quarters. The latest drop was less than a percent from the figure it reported Sept. 30. Progressive, the fourth-largest auto insurer, added to its personal auto policy count in each quarter of 2009.Property and liability premium revenue fell to $6.52 billion in the last three months of 2009 from $6.67 billion in the fourth quarter of 2008. Allstate's profit margin from the property-liability business improved to 6.8 cents for every premium dollar, compared with 3.6 cents in the same period a year earlier.State Farm Mutual Automobile Insurance Co., the only U.S. auto insurer larger than Allstate, is owned by its policyholders and has no publicly traded debt. Geico, the third-largest, is part of Buffett's Berkshire Hathaway Inc. Neither has reported full-year results. Progressive earned $305 million in the last three months of 2009, compared with $159.3 million in the same period a year earlier.On the RoadThe frequency of reported injuries and property damage claims in Allstate's auto business climbed in the first nine months of 2009 compared with the same period a year earlier. In 2008, higher gas prices and rising unemployment caused the number of accidents to fall, Wilson said in November. Progressive CEO Glenn Renwick said that month his company's bodily injury frequency was "up fairly significantlyÃcent;â#130;not;circ;ť in 2009.U.S. drivers logged 2.69 trillion miles through November, a 0.3 percent increase from the first 11 months of 2008, according to the Federal Highway Administration. The figure rose 1.4 percent in November compared with the same month a year earlier. The agency hasn't released December data.Auto insurers "could face pressureÃcent;â#130;not;circ;ť on quarterly results because earnings in the year-earlier period benefited from a drop in miles driven, which led to fewer accidents, Jay Gelb, a Barclays Plc analyst, said in a Jan. 4 note to investors.Allstate's investment portfolio included about $100 billion in assets as of Dec. 31 and is primarily comprised of fixed- income securities, including corporate and municipal debt. Allstate had $2.7 billion invested in limited partnership holdings, which includes private equity, real estate and hedge funds, as of Dec. 31, according to company reports.