Allstate Profit Slides 57% on Loss Tied to Unit Sale
Net income fell to $310 million, or 66 cents a share, from $723 million, or $1.48, a year earlier, the Northbrook, Illinois-based company said today in a statement. Operating profit, which excludes some investment results, was $1.53 a share, beating the $1.44 average estimate of 22 analysts surveyed by Bloomberg.
Chief Executive Officer Thomas Wilson, 56, has been seeking to minimize risk from life insurance and retirement products as low interest rates pressure returns. He sold a variable-annuity business in 2006 and in July struck a deal to divest Lincoln Benefit Life Co. as the insurer works to expand its larger, more profitable auto-and-home unit.
“When Allstate’s doing its best, they tend to focus on their core operations,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said in an interview before results were announced. He recommends buying the stock.
Allstate fell less than 1 percent to $52.50 at 4:27 p.m. today in extended trading in New York. The insurer had advanced 32 percent through today’s close, compared with the 24 percent gain in the Standard & Poor’s 500 Index.
The sale of Lincoln Benefit to Clive Cowdery’s Resolution Life Holdings Inc. resulted in a loss of about $475 million in the quarter. Allstate has said that the transaction will free about $1 billion of capital.
Allstate’s book value, a measure of assets minus liabilities used by analysts and investors, rose to $43.49 a share from $41.63 at the end of June. The insurer said in July that it was cutting some retirement benefits for employees and that the change would lead to an increase in the figure.
Margins at the insurer’s home business have improved in recent quarters as the company bought reinsurance, raised rates and exited some markets after severe weather boosted claims costs. Those changes hurt sales of Allstate’s namesake brand of auto insurance, because the products are often bundled together, Wilson has said.
That trend is starting to reverse. The number of Allstate-brand standard auto policies in force climbed to 17 million as of Sept. 30 from 16.9 million a year earlier, according to data posted on the insurer’s website. The count also climbed sequentially for the second straight quarter.
“We have made most of the progress we needed to make on fixing our homeowners business,” Wilson said in a phone interview after the announcement. “You’re starting to see the beginnings of growth, which is what our shareholders have been looking for.”
The insurer made 10 cents for every premium dollar in its property and liability unit compared with a profit of 9.8 cents a year earlier. Catastrophes cost the company $128 million in the quarter, down from $206 million a year earlier.
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