Wednesday, October 19, 2005 - Page updated at 12:00 AM

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Katrina sends Allstate to biggest-ever quarterly loss of $1.55 billion

AP Business Writer

CHICAGO — The insurer Allstate Corp. reported a third-quarter loss of $1.55 billion today as a result of Katrina and other hurricanes that pounded the Gulf Coast over the summer — its biggest quarterly loss as a publicly traded company.

Allstate, the second-largest U.S. personal-lines insurer behind State Farm, said it had catastrophe losses of $3.06 billion, of which $2.39 billion was from Hurricane Katrina and $553 million from Hurricane Rita along with smaller amounts from Dennis and Ophelia. The Northbrook, Ill.-based company trimmed its estimate for 2005 profits by more than half as a result of the hurricane losses.

The net loss for the July-through-September quarter amounted to $2.36 per share, compared with a profit of $56 million, or 9 cents per share, a year earlier.

The company said it had an operating loss of $1.65 billion, or $2.52 per share. That far exceeded the consensus estimate of 68 cents per share by analysts surveyed by Thomson Financial.

Revenues rose 6 percent to $8.94 billion from $8.44 billion, below the $9.4 billion that analysts forecast.

Allstate's only previous loss since going public in June 1993 when it was spun off by Sears, Roebuck and Co. was a $275.2 million deficit in the first quarter of 1994, according to Allstate spokesman Michael Trevino, who said initially that the third-quarter loss was a first.

Citing the hurricane-related losses which generated a nearly tenfold increase in average quarterly catastrophe losses, the company reduced its estimate for 2005 operating earnings to $2.35 to $2.50 per share, down from the previous range of $6 to $6.40 per share.

"The destructive and devastating effects of Hurricane Katrina significantly overshadowed Allstate's strong underlying performance trends in the quarter," said Edward Liddy, chairman and CEO.

Sears said its property-liability premiums written grew 2.9 percent over a year earlier, driven by an increase in the number of auto and homeowners premiums. Operating income from its Allstate Financial rose 3 percent to $156 million.

Analyst Adam Klauber of Cochran, Caronia and Co. in Chicago said Allstate showed improved operating earnings overall, excluding the catastrophe losses, citing significantly better profitability in its auto insurance business in particular. He said the Wall Street consensus number was misleading because not all analysts had factored in the hard-to-predict total of hurricane losses.

Allstate, which holds its conference call with analysts on Thursday morning, did not address in its release whether it might raise rates.

"On the homeowners side and along the (Gulf) coast, I think they will gradually raise rates," Klauber said. "It's a question whether rates will go up across the country. They may not have the flexibility to raise the rates in non-coastal areas."

Allstate shares declined 2 cents in extended-hours activity after rising $1.02, or 1.9 percent, to close at $54.40 on the New York Stock Exchange before the report was released.

Copyright © 2005 The Seattle Times Company


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