Allstate Corp., the largest publicly traded U.S. auto and home insurer, rose to the highest level since 2008 after second-quarter profit beat analysts’ estimates amid lower costs tied to natural disasters.
The insurer surged 6.6 percent to $36.56 at 10:09 a.m. in New York, the biggest advance this year. Operating profit, which excludes some investment results, was 87 cents a share, exceeding the 52-cent average estimate of 23 analysts surveyed by Bloomberg, the Northbrook, Illinois-based insurer said yesterday in a statement.
Chief Executive Officer Tom Wilson, 54, has been seeking rate increases and expanded into selling car coverage directly to consumers over the Internet to boost profitability. Allstate had advanced 25 percent this year through the close of regular trading yesterday, the best performance in the 24-company KBW Insurance Index, after slumping about 60 percent in the five years ended Dec. 31.
“While Allstate is no longer the deeply discounted name it once was, we believe we are still early in the company’s long-term revaluation story,” Josh Stirling, an analyst at Sanford C. Bernstein, said in a note to clients today. As “the logic of its strategic repositioning becomes clear, investors’ skepticism will wane,” he said.
Catastrophes cost Allstate $819 million in the quarter, compared with $2.34 billion a year earlier when tornadoes wiped out profit. Net income was $423 million compared with a loss of $624 million in the second quarter of 2011.
Allstate’s operating return on equity for the 12 months ended June 30 climbed to 11.4 percent from 3.2 percent a year earlier, according to a presentation on the company’s website. The insurer has set a goal of 13 percent by 2014.
“We still feel good about getting to 13 percent” by 2014, Wilson said during a conference call with analysts today to discuss the company’s results. “To the extent we get there sooner, we’ll just make our shareholders even happier.”