The Allstate Corp. reported a fourth quarter loss of $1.13 billion and says it plans to eliminate 1,000 positions in the next two years in response to the economic downturn.

Reporting its fourth quarter results, the company said its income loss came in at an estimated $1.13 billion compared to net income of $760 during the same period of 2007. This translated into loss income per share of $2.11 compared to earnings per share of $1.36 the year before. Consolidated revenues during the period dropped 27 percent, or $2.42 billion, to $6.57 billion.

The company said its 1000 job reduction in its life unit will take place over the next two years by attrition and elimination of jobs. Allstate said it plans to save 20 percent in operating expenses, for savings of $90 million by 2011.

For the year, loss income stood at $1.68 billion, or loss income per share of $3.07, compared the prior year's net income of $4.64 billion, or $7.77 a share. Consolidated earnings were down $7.38 billion to $29.39 billion.

The Northbrook, Ill., insurer said total catastrophe losses for 2008 were $3.3 billion compared to $1.4 billion in 2007.

The full year combined ratio stood at 99.4 leading to property-liability operating income of $1.4 billion. The company said that if it had not taken action to lessen its property loss exposure in 2005, its losses for the year would have been twice as high as reported.

Allstate said the results of the financial turmoil garnered unrealized losses of $8.8 billion in the quarter. The company's fixed income securities portfolio provided approximately $8.6 in principal and interest cash flow.

"We expect 2009 to challenge businesses and consumers alike," said Thomas J. Wilson, chairman, president and chief executive officer for the company in a statement. "As people focus more on value, we're reaching out with a variety of initiatives to help consumers make the best use of their insurance and investment dollars. We are taking the actions necessary to protect Allstate's financial strength, improve customer loyalty and introduce new products and services."

On the property-casualty side, the company said it plans to reduce homeowners exposure to catastrophe losses; limit short term growth with stronger underwriting and reduction of catastrophe exposure; keep the p-c combined ratio to between 87 and 89 for 2009, excluding the effects of catastrophes and prior year reserve re-estimates.

During a conference call with financial analysts, Don Civgin, senior vice president and chief financial officer for Allstate said the company has $20 billion in cash or other liquid investments that are saleable in one quarter without generating net investment losses.

"In this financial environment, we believe that strong liquidity is an absolutely critical component to protecting Allstate's financial strength," he said.

"We feel comfortable with where we are on capital," added Mr. Wilson later during the conference call, adding, "Our number one goal this year is to protect Allstate's financial strength this year."

Reflecting on business growth, Mr. Wilson said the major strategy will be to improve customer loyalty. Improvements in customer loyalty index will be tied to the 401(k) plan benefits. He also warned that those Allstate agency owners and employees who do not treat customers well "will no longer be a part of the Allstate family."

Today, Standard & Poor's downgraded the company's financial strength and counterparty credit rating of its core property-liability and life insurance business to "double-A-minus" from "double-A." It also lowered the counterparty credit rating on the corporation to "A-minus/A-2" from "A-plus/A-one." The outlook is negative.

S&P said the action reflected "significant deterioration in the operating companies' capital adequacy" and financially "weakened flexibility." The rating agency expects strong underlying earnings power in 2009, but it does not expect it to return historic highs in the near term. If the company can turn around its current losses in the next two years, S&P could revise its outlook to stable.

Mr. Wilson said the rating would have no impact on the company's business and adding that it was still a "pretty good rating."

(This story was updated at 3:45 p.m.)

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Allstate Reports $1.13B Loss; To Eliminate 1,000 Positions

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