Allstate Sets $3 Billion Buyback as Profit Beats Estimates

Allstate Corp., the largest U.S. publicly traded seller of auto and home insurance, said it will repurchase as much as $3 billion of its stock as fourth-quarter profit exceeded analysts’ estimates.

Operating income, which excludes some investment results, was $1.72 a share, beating the $1.69 average estimate of 22 analysts surveyed by Bloomberg. Net income declined to $795 million, or $1.86 a share, from $810 million, or $1.76, a year earlier when there were more shares outstanding, Northbrook, Illinois-based Allstate said Wednesday in a statement.

Chief Executive Officer Tom Wilson returned $2.8 billion to shareholders in 2014 with dividends and buybacks, Allstate said. Allstate said Wednesday that it raised the quarterly dividend 7 percent to 30 cents a share. The new $3 billion repurchase program is set to be completed by July 2016.

“Some of that $3 billion is because we earned the money and we’re earning more than we need to reinvest in growth,” Wilson said in a telephone interview. “Some portion of that is due to the sale of our Lincoln Benefit Life business that we closed in April.”

Allstate rose less than 1 percent to $72.58 at 4:02 p.m. in New York before the announcement. The shares hit a record $72.87 on Wednesday, almost a year after the insurer approved the existing $2.5 billion stock repurchase, which was its biggest buyback since 2006.

Premium Revenue

Premium revenue in the property and liability business advanced to $7.35 billion in the fourth quarter from $7.01 billion a year earlier. Catastrophe costs fell to $95 million from $117 million.

A lack of major weather events boosted earnings for Allstate and rivals including Travelers Cos. and Progressive Corp., Jim Shanahan, an analyst with Edward Jones & Co., said in an interview prior to results. Travelers, the only property-and-casualty insurer in the Dow Jones Industrial Average, said on Jan. 22 that fourth-quarter profit rose 5.1 percent to $1.04 billion.

Allstate said it spent 90 cents for every premium dollar in its property-and-liability unit in the fourth quarter, compared with 88.7 cents a year earlier. Book value, a measure of assets minus liabilities, fell to $48.24 a share from $48.28 at the end of September.

For the full year, net income climbed to $2.75 billion from $2.26 billion in 2013.

Progressive said in December that it had agreed to pay almost $900 million for a stake in ARX Holding Corp. The deal allows the fourth-largest U.S. auto-insurer to expand into home coverage and compete with Allstate’s namesake brand. Allstate had purchased online unit Esurance in 2011 in a challenge to Progressive.

“What Progressive is attempting to do is what we do,” Wilson said. “We’ll compete with them just as we do in the auto-insurance business.”

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