UPDATE: Allstate Aims To Improve Home, Auto Units By 2013

Executives at Allstate Corp. (ALL) are hoping to add customers at the company's auto-insurance unit and improve home-insurance profitability by 2013 under new targets disclosed to investors Wednesday.

But the company warned its auto-insurance unit, which has been losing customers for three years, will cede further ground to rivals in 2011 before returning to "low-single digit growth" in 2013.

The home-insurance unit, meanwhile, is raising prices and tightening underwriting standards to improve profit margins in a line of business "where our returns have clearly been inadequate," in part because of a series of natural disasters across the country, said Joe Lacher, the president of the home and auto unit, in a presentation to investors.

Executives led by Chief Executive Tom Wilson outlined their goals for the company in their first "Investor Day" presentation in more than a decade after Allstate missed Wall Street's earnings expectations in 13 of the last 17 quarters. The missed estimates have prompted analysts to express frustration at the company's direction as the stock underperformed benchmark indexes.

Allstate shares fell 1.7% to $30.86 in morning trading; other financial stocks also fell.

The company is aiming for by the end of 2013 a homeowners combined ratio, a measure of its profit margin, in the "low 60s" when the costs of disasters are excluded, compared with a combined ratio of about 75 when disasters are excluded now.

A combined ratio in the low 60s indicates the company is spending just over 60 cents on claims and expenses for every dollar it collects in premiums. But the company has spent just over 20 cents of every dollar on catastrophes in recent years, and Lacher said the company needs to earn "somewhere in the low to mid-eighties" when disasters are included to "generate adequate returns over time."

In the auto unit, the decline in policyholders has come in part as the company has eliminated some of the smaller, newer insurance agencies that sell Allstate coverage and shifted attention to larger agencies where results have generally been better, Lacher said. The company has also shed drivers in New York and Florida, where auto insurers have complained of rampant fraud. The two states were unprofitable for Allstate last year.

Later in the company's presentation, the head of Allstate's life-insurance and retirement arm, Matt Winter, said his unit was targeting an operating return on equity of 9% to 10% in 2014, and predicted the unit will generate $1 billion of excess capital over the next four years.

-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com

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