Allstate Profit Rises 13% on Better Margins, Claims Costs

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Allstate CEO Tom Wilson
Allstate Corp. Chief Executive Officer Tom Wilson has been investing in technology that can track driver behavior to improve underwriting. Photographer: Andrew Harrer/Bloomberg

Allstate Corp., the largest U.S. publicly traded seller of auto and home insurance, said first-quarter profit rose 13 percent as margins improved at the property-liability business and catastrophe losses fell.

Net income climbed to $677 million, or $1.53 a share, from $600 million, or $1.30, a year earlier, the Northbrook, Illinois-based company said Tuesday in a statement. Operating income was $1.46 a share, beating the $1.44 average estimate of 22 analysts surveyed by Bloomberg.

Chief Executive Officer Tom Wilson has been investing in technology that can track driver behavior to improve underwriting. Allstate said it spent 93.7 cents for every premium dollar in its property-and-liability unit in the first quarter, compared with 94.7 cents a year earlier. Catastrophe costs fell to $294 million from $445 million.

“There was no news on the catastrophes. That’s news,” Cliff Gallant, an analyst at Nomura Holdings Inc., in an interview before results were released. “The weather was good for Allstate. They’re much more sensitive than anyone else” because of their homeowners exposure, he said.

Allstate rose less than 1 percent to $70 in New York on Tuesday, and is little changed this year. The insurer released results after the close of regular trading.

Auto Coverage

While profit improved at Allstate’s namesake homeowners unit, underwriting income from auto coverage fell 48 percent to $144 million. Geico, the auto insurer owned by Berkshire Hathaway Inc., said in a filing on Friday that it will charge drivers more after margins declined due to a higher frequency of claims for collisions and injuries.

“There are more accidents now over the last couple of years than there have been because economic activity has gone up” and more people are driving, Tom Wilson, Allstate’s chief executive officer, said in an interview. “We and other people have been raising our rates to account for that.”

Allstate’s premium revenue in the property and liability business advanced to $7.43 billion from $7.06 billion a year earlier. Book value, a measure of assets minus liabilities, rose to $49.19 a share from $48.24 at the end of December.

Net investment income fell 11 percent to $850 million from a year ago. Insurers’ bond portfolios have been pressured by low interest rates, and for Allstate, the decline was also tied to the sale of the Lincoln Benefit life insurer, Wilson said.

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