Tags: allstate | insur | casualty | earn

Allstate Profit Rises as Natural-Disaster Costs Ease

Wednesday, 02 May 2012 04:44 PM

Allstate Corp., the largest publicly traded U.S. home and auto insurer, said first-quarter profit rose 46 percent as costs tied to natural disasters declined.

Net income rose to $766 million, or $1.53 a share, from $524 million, or 98 cents, a year earlier, the Northbrook, Illinois-based insurer said Wednesday in a statement. Operating income, which excludes some investment results, was $1.42 a share, beating the $1.12 average estimate of 23 analysts surveyed by Bloomberg.

Chief Executive Officer Thomas Wilson, 54, is charging customers more for homeowners’ coverage and changing terms of policies after the insurer faced $3.8 billion in claims costs tied to natural disasters last year. Travelers Cos. and Chubb Corp. are among U.S. property-casualty insurers that posted lower catastrophe losses in the first quarter.

“It was a pretty mild winter across the country,” Cliff Gallant, an analyst at KBW Inc., said by phone before results were released. “Except for a few isolated areas in the Midwest that got hit,” insurers were spared, he said.

Allstate declined 1.4 percent to $32.91 at 4 p.m. in New York. The insurer has surged 20 percent this year, compared with the 12 percent advance in the Standard & Poor’s 500 Index.

The insurer booked lower catastrophe costs in the quarter, in part, because it determined it had set aside more money than necessary for claims in prior quarters, according to an April 19 statement.

Car Insurance

Wilson has reduced sales of some retirement products and made acquisitions in addition to raising prices for home coverage to boost earnings. Allstate purchased online car- insurance seller Esurance in October after losing market share to direct-to-consumer rivals Progressive Corp. and Berkshire Hathaway Inc.’s Geico unit, as younger customers shunned agents.

“Being in the direct market is a tool that they need to have,” Mark Dwelle, an analyst with RBC Capital Markets, said before results were announced. “How big that can become for them and whether that will really drive the business in a meaningful way” has yet to be shown, he said.

Allstate has lost auto-insurance customers for most of the last four years as drivers chose to shop online. Geico, which surpassed 11 million policyholders in March, and Progressive have added drivers during that period.

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Wednesday, 02 May 2012 04:44 PM
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