Allstate Q3 Profit Rises; Execs Talk Sandy and Overall Growth Strategy

Allstate Insurance reports 2012 third-quarter net income of $723 million, a sharp increase from the $175 million in net income reported during 2011’s third quarter, as operating income increased by over $600 million and catastrophe losses were over $800 million lower.

In a conference call, Chairman, President and CEO Tom Wilson addressed Hurricane Sandy, stating that it is “not expected to have a material impact on our overall financial condition.” He added that the company’s focus at this time is on its customers, not its monetary losses. He also said Allstate may not have a figure ready when it reports monthly cat loss estimates in mid-November, adding that the insurer will release its estimate for Sandy when it has one.

Pressed by analysts in the Q&A session to expand on possible Sandy losses, Wilson reiterated that it is far too early to provide perspective, but he did say that Allstate’s policy counts are down in all affected areas due to actions taken over the last few years to reduce coastal exposures.

For the third quarter, Allstate says catastrophe losses dropped to $206 million, compared to $1.1 billion in 2011’s third quarter. Operating income soared to $717 million in the quarter, up from from $80 million a year ago.

Allstate’s combined ratio dropped 14.6 points to 90.2, compared to 104.8 in 2011’s third quarter. 

For its auto segment, Wilson says Esurance, acquired in May 2011 by Allstate, “exceeded expectations,” with the policy count growing 22 percent since the beginning of this year. Allstate brand standard auto, meanwhile, saw a decline in policies in force.

Matt Winter, head of auto, home and agencies, tied  the company’s direction in standard auto to the company’s overall strategy, telling analysts that the company is generally first to take rate actions and other proactive strategies to remain disciplined. As a result, he said the company sometimes has a “first-mover disadvantage,” noting that a company cannot take rate and regional actions without some impact on retentions. 

But Winter added that the disadvantage turns into an advantage as other companies begin to make corrections. Allstate, taking these actions first, is able to emerge out of the cycle quicker than peers, Winter says, putting the company in a good spot to grow.

About the Author
Phil Gusman, PropertyCasualty360.com

Phil Gusman, PropertyCasualty360.com

Phil Gusman is Managing Editor of PropertyCasualty360.com. Prior to joining National Underwriter in 2008, he was Editor of Insurance Advocate. Gusman has also served as Associate Editor of Crackdown!, an insurance fraud publication, and Assistant Editor of Empire State Report, which covers New York politics. He graduated in 2002 from Plattsburgh State University in New York. Gusman may be reached at pgusman@summitpronets.com. Follow him on Twitter: pgusman and PC360_Markets

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