Surge in Cat Losses Affects Allstate Second-Quarter Earnings of $389 Million

NORTHBROOK, Ill., Aug 05, 2009 (A. M. Best via COMTEX) --  Despite more than $800 million in catastrophe losses, Allstate Corp. reported net income of $389 million during the second quarter this year, compared with net earnings of $25 million the same period last year.

The company's combined ratio was 100 during the second quarter, an increase of 5.6 points over the ratio during the second quarter in 2008. Allstate said its underlying combined ratio, excluding catastrophes, was 87.2 -- in line with expectations and the company's efforts to reduce expenses.

However, a 17.2% increase in catastrophe losses compared to the second quarter last year affected results. The losses were due to a "large number of costly windstorms and hailstorms."

Operating income decreased more than 56% to $297 million. Revenues increased 14.5% to about $8.5 billion from $7.4 billion last year.

Allstate said its risk management program continued to contribute to a drop in homeowners business as it sheds risky policies. Total policies in force dropped 4.2%. Allstate said it sought approval for an average 13.3% rate increase in homeowners in 16 states during the quarter. In auto, premiums written fell 2% compared to the same time a year ago.

Allstate reported a first-quarter 2009 net loss of $274 million and catastrophe losses of $516 million -- the third-worst first-quarter catastrophe loss in its history (BestWire, May 7, 2009).

Allstate Financial's net income was $19 million this year during the second quarter, compared to a net loss of $379 million during the second quarter in 2008.

Allstate Insurance Group currently has a Best's Financial Strength Rating of A+ (Superior).

Shares of Allstate closed at $27.60 May 7, up 6.98% from the previous close.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)