Allstate Operating Profit Rises 4.8% -- Update

By Tess Stynes 

Allstate Corp. said its first-quarter operating earnings rose 4.8% as the auto and home insurer benefited from increased premiums and lower catastrophe-related losses.

Operating earnings are a widely watched benchmark for the insurance industry because they exclude realized capital gains and losses from companies' investment portfolios, among other items that aren't considered recurring in nature on a quarterly basis.

Persistent and historically low interest rates have continued to pressure the insurance industry, as insurers invest the premiums paid by customers to generate income while awaiting claims.

In the latest quarter, strength in Allstate's homeowners business margins, which benefited from low catastrophe-related losses, more than offset the impacts of elevated auto-insurance-related losses. Some of those losses were related to winter weather, with the rest linked to industry trends.

In an interview, Chairman and Chief Executive Thomas J. Wilson said the latest quarter reflected industrywide increases in the number of auto accidents and the costs of settling the accidents, noting that premium prices also have been rising to meet those.

Mr. Wilson also said the number of policies in force grew 2.6% in the latest period.

He also said that the company's online Esurance business, which competes with Geico and Progressive, has intentionally slowed its growth until the unit's loss ratio improves.

In all, Allstate reported operating earnings of $616 million, or $1.46 a share, up from $588 million, or $1.30 a share, a year earlier. Property-liability premiums written increased 4.8%, to $7.31 billion, while premiums earned in the business rose 5.1%, to $7.43 billion.

Analysts polled by Thomson Reuters expected per-share operating profit of $1.44 and property-liability premiums written of $7.32 billion.

Property-casualty catastrophe losses fell to $294 million in the latest quarter, from $445 million a year earlier.

The property-casualty combined ratio--a measure of the portion of premiums used to cover claims and expenses--fell to 93.7% from 94.7%.

In March, New York's financial watchdog warned insurers, including Allstate, about charging higher prices to customers least likely to shop around, the latest state to raise questions about how the industry uses data when setting rates. The practice, according to the regulator, could violate a state law that prohibits "unfairly discriminatory" rates.

Write to Tess Stynes at [e-mail]

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