Allstate posts 1Q loss as investments fall

NEW YORK - Allstate Corp. on Thursday posted a big loss for the first quarter, reversing a year-ago profit, citing falling investment income and a lower number of insurance policies in force.

The property-and-casualty insurer's results also reflected a high number of claims due to catastrophes like wind and hail storms.

The Northbrook, Ill., company lost $274 million, or 51 cents per share, for the three months ended March 31. That compares with profit of $348 million, or 62 cents per share, last year. It is the third consecutive quarter the company posted a loss.

Operating income, which excludes investment gains and losses, fell 39 percent to $454 million, or 84 cents per share.

Analysts polled by Thomson Reuters, on average, expected profit of $1.23 per share. Analysts typically exclude investment results from their estimates.

The miss sent Allstate shares down $1.60, or 5.8 percent, to $26 in aftermarket electronic trading. The stock closed Thursday's regular session at $27.60, down about 16 percent for the year.

Net investment income dropped 23 percent to $1.18 billion. Net realized capital losses for the period, before taxes, totaled $359 million, and included $620 million of write-downs on investments where losses were deemed permanent, $143 million of losses on the valuation of limited partnerships and $105 million of losses on securities the company no longer plans to hold until their value recovers. Those negatives were partially offset by $418 in net gains on sales, mainly of U.S. government bonds sold by Allstate Financial, the company's financial arm. The company also posted $91 million in gains from derivatives.

Unrealized capital losses increased $590 million to $9.4 billion, before taxes, mostly due to increases for fixed income and equity holdings. The company said it expects to hold these assets until they recover their value.

Catastrophic events were less costly than a year ago, but still came in as the third worst for the March quarter in the company's 78-year history.

Property and liability premiums written, or new and renewed insurance contracts, slipped 3.8 percent to $6.27 billion.

One bright spot was an increase in new auto insurance business. Allstate is the nation's second-largest auto and property insurer after State Farm. Premiums written and total polices in force declined, but new applications jumped nearly 15 percent, an increase the company attributed to new sales and marketing strategies. Severe weather in Eastern states led to a jump in claims, but the average costs for property damage claims decreased.

Allstate Financial's operating income fell 41 percent to $85 million from $143 million.

Allstate's combined ratio for the quarter rose to 96.8 percent from 94 percent in last year's first quarter.

Combined ratios measure the amount of money insurers pay out in claims and expenses compared with how much they receive from writing new business. A ratio above 100 means the insurer pays out more in claims and expenses than it takes in from writing new premiums.

Chairman, President and Chief Executive Thomas J. Wilson, in a statement, said the company has sufficient capital reserves. The company has access to $1 billion from either commercial paper or an unsecured credit facility, in addition to $3.35 billion in liquid investments, along with its required capital reserves.

Allstate did not seek government funding to shore it up during the financial crisis, though during the quarter Allstate cut its dividend by more than half and halted its share buyback program to preserve capital.