Allstate Swings to Profit, Catastrophe Losses Dip

A milder hurricane season this year helped Allstate Corp. turn a third-quarter profit as its losses for storms and other catastrophes dropped sharply.

A sign for an Allstate insurance office in South Russell, Ohio is pictured below a stormy Fall sky...

A sign for an Allstate insurance office in South Russell, Ohio is pictured below a stormy Fall sky on Tuesday, Nov. 3, 2009. A sharp drop in losses from storms and other catastrophes helped Allstate Corp. move to a third-quarter profit from a year-ago loss. (AP Photo/Amy Sancetta)

(AP)

The property and casualty insurer said Wednesday its net income rose to $221 million, or 41 cents per share, from a loss of $923 million, or $1.70 a share, in the year-ago period.

During the third quarter, Allstate posted catastrophe losses of $407 million, down about 78 percent from the $1.82 billion it recorded in the year-ago period, which included $1.4 billion in losses from Hurricanes Ike and Gustav.

Operating income, which excludes investment gains and losses, rose to $538 million, or 99 cents per share, from a loss of $190 million, or 35 cents per share a year ago.

Analysts polled by Thomson Reuters were expecting earnings of $1.01 per share from the Northbrook, Ill. company. Analysts typically exclude investment gains and losses from their estimates.

Revenue rose 3.6 percent to $7.58 billion from $7.32 billion a year ago, despite a decrease in net investment income and property-liability premiums.

With the third-quarter falling short of analysts' forecasts, Allstate's shares slipped 62 cents, or 2 percent, to $29 in afterhours trading. They closed the regular session down 12 cents, almost flat for the past year at $29.62.

The company's consolidated investment portfolio rose $4.2 billion during the three months ended Sept. 30 to $100.6 billion. Gains on credit and stock investments more than offset some losses due to interest-rate hedging, said Allstate Chairman, President and Chief Executive Tom Wilson in an interview with The Associated Press.

Investment income fell $271 million from a year ago to $1.1 billion due to lower balances, lower yields and other investment actions. The company shifted to shorter-duration, low-yielding fixed-income securities to mitigate risk and increase availability of cash.

Allstate incurred $519 million in net realized capital losses for the quarter, before taxes, partly due to write-downs on real estate and other securities issued by European financial institutions.