Allstate Corp., the largest publicly traded U.S. home and auto insurer, dropped the most in 11 months in New York trading after third-quarter profit fell short of analysts’ estimates as premium revenue declined.
Operating profit, which excludes some investment results, was 83 cents a share, missing by 13 cents the average estimate of 19 analysts surveyed by Bloomberg. Property-liability premiums slumped to $6.5 billion from $6.54 billion in last year’s third quarter, the Northbrook, Illinois-based company said late yesterday, and profit margins declined.
“Allstate is clearly spending more on advertising, which shows in the form of a higher expense ratio, but unfortunately the company has little to show for its ad spending,” Bijan Moazami, an analyst at FBR Capital Markets, said in a note today. “The results are quite different from what one would have anticipated, given industry trends.”
Allstate, which gets the largest portion of revenue from auto insurance and sells most policies through agents, is competing for customers with Progressive Corp. and Warren Buffett’s Geico Corp., which increased Internet and phone sales. Higher rates at Allstate’s main auto business weren’t enough to cushion a decline in the number of policies in force. The company said that some of the lost business was part of a strategy to improve profitability in large states.
“Estimates are notoriously volatile,” Chief Executive Officer Thomas Wilson said in an interview. “We’re right in the middle of the range we gave people. From our standpoint, we’ve achieved the results we said we were going to.”
Allstate slipped $2.11, or 6.5 percent, to $30.37, at 9:37 a.m. in New York Stock Exchange composite trading. The company has advanced about 1.7 percent this year, compared with the 19 percent gain of the 24-company KBW Insurance Index.
Investment Losses Narrow
Net income climbed to $367 million, or 68 cents a share, from $221 million, or 41 cents, as investment losses narrowed. Wilson reshaped Allstate’s $100 billion investment portfolio since 2008 when the company posted a $1.7 billion annual loss, cutting back on stocks, municipal debt and commercial mortgage-backed securities while acquiring corporate bonds.
Underwriting profit at property-casualty operations fell 23 percent to $266 million from $346 million a year earlier. Allstate made 4.1 cents for every premium dollar in its property and casualty coverage, compared with 5.3 cents a year earlier.
Premium revenue for Allstate’s standard auto policies fell to $4.13 billion from $4.17 billion in the same period last year, according to a supplemental filing on Allstate’s website. The number of policyholders decreased to 17.479 million from 17.529 million at the end of the second quarter.