Allstate Quarterly Net Up 76%
NU Online News Service, July 20, 9:50 a.m. EDT?Allstate Corp. reported late yesterday that second-quarter consolidated net income had jumped 76 percent, driven mainly by a $440 million increase in property-casualty operating earnings.[@@]
The rise in property-casualty earnings was primarily attributable to a lower level of catastrophe losses and favorable loss reserve development.
The Northbrook, Ill.-based insurer's consolidated net income topped $1 billion. In 2003, second-quarter net income was $588 million.
On a per share basis, the dollar figures translate to $1.47 for second-quarter 2004 and 88 cents for second-quarter 2003.
While property-casualty written premiums grew only five percent to $6.7 billion in the quarter, p-c after-tax operating income rose to $936 million from $496 million in second-quarter 2003. Contributing to the operating income surge was a $318 million decline in catastrophe losses and $77 million of favorable loss developments.
While prior-year loss development for Allstate's continuing business was favorable?to the tune of $395 million?discontinued lines actually experienced $318 million of unfavorable development, with the two netting out to $77 million.
Lower catastrophe losses and favorable development meant a much improve combined ratio. The second-quarter combined ratio came in at 86.3?nearly 11 points lower than the 97.1 combined ratio that Allstate recorded for last year's second quarter.
Allstate Chairman, President and CEO Edward M. Liddy also cited a continuation of favorable claim frequencies for auto and homeowners in explaining the result, noting that the favorable reserve re-estimates of $395 million reflected lower actual claim frequency and severity trends than anticipated in previous estimates.
The $318 million unfavorable reserve re-estimate for discontinued business was primarily related to a $216 million re-estimate of asbestos reserves, Mr. Liddy said.
In its earnings statement, Allstate noted that management will complete an annual comprehensive "ground up" review of reserves for the discontinued lines in the third quarter, noting that "further changes to reserve estimates may occur upon completion of this review."
With the earnings announcement, Mr. Liddy said the company was increasing its operating income per share guidance for 2004 to a range of $5.40 to $5.65 (assuming the level of average expected catastrophe losses used in pricing for the remainder of the year). Prior guidance put full-year operating earnings at $4.80 to $5.10.
Through six months, operating income was $2.91 per share, compared to $1.80 for the first six months of 2003.
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