NU Online News Service, May 03, 8:43 a.m.EDT

Allstate Corp. says first-quarter net income increased about 46percent to $766 million.

Thomas J. Wilson, chief executive officer, says Allstate'sstrategy to improve margins in auto and homeowners insurance ispaying off.

Allstate's property-liability segment turned in an underwritingprofit of $523 million after the first three months, compared to$328 million during the same period a year ago. First-quarteroperating income in the segment increased to $601 million, comparedto $427 million a year ago.

Catastrophe losses were $259 million during the first quarter,compared to $333 million during the same time in 2011.

Premiums written increased 4 percent compared to 2011's firstquarter due primarily to Allstate's acquisition of Esurance.

Approved rate increases and a decline in loss costs pushed thefirst-quarter combined ratio in the homeowners segment to 80.2,compared to 91.4 for the prior-year quarter. Allstate expects toapply for high single-digit rate increases going forward, saysMatthew Winter, president of Allstate auto, home and agency, duringa conference call.

Premiums written by agents were negatively affected by plannedsteps to improve auto results in the personal-injury-protectionstates of New York and Florida and rate increases in the homeownerslines. Winters says the rating actions have had a “chilling effecton our ability to grow” but “growth in the absense of profit is thewrong strategy.”

Winters says Allstate sought rate earlier than its competitionbut the rest of the marketplace is now catching up. He tellsanalysts on the call that about 40 percent of results in homeownersis sustainable—the product of rate increases andre-inspections—while about 60 percent is due to other factors, likea drop in catastrophe losses.

The insurer launched a controversial agency-consolidation plan about a year ago to in an effort tocreate larger, more-efficient agencies. But Winters now says thecompany “did a bad job of explaining” the initiative.

Wilson says bigger could be better, but Allstate is “seeking tohave all agents be more successful,” and it's “not like we'retrying to get rid of a certain class” of agencies.