Allstate Insurance Corp., reversing last year's loss for the period, reported a profitable third quarter with results driven by the lower than expected catastrophe losses and increases in its flagship auto product.

The Northbrook Ill.-based company reported third-quarter net income of $1.1 billion compared with a loss of $1.5 billion in the 2005 period.

Even more dramatically, the company posted property-casualty underwriting income of $1.08 billion, compared with a loss of $3.36 billion in the quarter marked by record losses from Hurricanes Katrina and Rita.

Morgan Stanley property-casualty analyst William Wilt said that earnings beat the consensus estimate by 17 cents per share. “The beat may not be enough to spark enthusiasm, though it bears noting that the consensus estimate has risen some 17 percent in the past three weeks,” he wrote.

Mr. Wilt said that 2.6 percent growth in Allstate's auto product “further eases concerns that its cat-reduction strategy would drive down sales.”

The company has stopped writing new homeowners business and renewing residential policies in a variety of coastal areas it views as vulnerable to high storm losses.

Bear Stearns analyst David Small said the p-c loss ratio, excluding catastrophes, of 59.7 indicated strong core profitability and exceeded his estimates by 50 basis points.

“Lower cats ($110 million) than even our revised estimate drove much of the upside surprise,” Mr. Small wrote. “We project the positive auto loss trends will continue and believe auto retentions of almost 90 percent highlight customer stickiness in the book and an auto cycle that is longer than many anticipate.”

But Mr. Small also noted that lower than expected top line growth in the homeowners book resulted from the company pulling back from catastrophe-exposed regions.

“Those results seem to be having limited impact on the auto book, but we wonder whether the company may overshoot its mark and begin missing profitable opportunities,” he wrote.

The company also announced a new $3 billion share repurchase program starting next year that will complement the $12.8 billion program due to be completed by the fourth quarter of this year.

Outgoing Chief Executive Officer Edward Liddy noted that property-liability premiums earned increased despite a 2.3 percent decrease in consolidated revenues and an increase in reinsurance and other costs aimed at reducing the company's catastrophe exposure following record 2005 losses.

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Allstate Posts Solid Earnings

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