DOW JONES NEWSWIRES
Allstate Corp. (ALL) swung to a loss in the fourth quarter on
$1.9 billion in capital losses and annuity-sales costs recorded
because of the tumbling stock market.
Shares fell 11% in after-hours trading to $26.50, more than
erasing gains recorded during the regular session as part of a
strong rebound in financial stocks. The shares closed Wednesday up
nearly 9% to $29.64.
The insurer said pretax unrealized losses more than doubled
during the quarter to $8.8 billion because of widening credit
spreads in Allstate's fixed-income securities.
The investment losses, which have been plaguing other insurers
and some others such as State Street Corp. (STT) helped result in
last month's ouster of Allstate's life-insurance chief and a
downgrade following third-quarter results from Fitch Ratings.
But Allstate's auto and homeowners operations have generally
done well in a competitive market, which has been subject to some
pricing pressures.
The nation's largest publicly held personal-lines insurer posted
a fourth-quarter net loss of $1.13 billion, or $2.11 a share,
compared with year-earlier net income of $760 million, or $1.36 a
share. Operating earnings, which exclude investment gains and
losses and the annuity costs, fell to 97 cents a share from
$1.24.
Revenue dropped to $6.57 billion from $8.99 billion on the
capital losses, which included $652 million in write-downs, $585
million from the settling and valuation of derivatives and $357
million of losses on sales. Life insurers have been pressured by
the stock market's pummelling, resulting in surging costs for
annuities, with have guaranteed minimum returns no matter market
performance.
Analysts surveyed by Thomson Reuters, on average expected
earnings of $1.35 a share on revenue of $8.46 billion.
The property and liability segment's combined ratio, the
percentage of each dollar the company collects in premiums against
what it pays out on losses and expenses, increased to 96.4% from
95.9%. Excluding catastrophes and prior-year reserve re-estimates,
the ratio climbed to 91.5% from 88.6%.
Overall catastrophe losses dropped 45% while premiums written
dropped 3.9% amid falling new-car sales and ongoing weakness in the
housing market. That, plus "a highly competitive environment"
resulted in policies under force dropping. But Allstate said it
held the line on prices, with average auto premiums rising.
Allstate's investment portfolio fell 8.6% during the quarter to
$96 billion amid the $4.7 billion increase in net unrealized
capital losses during the quarter.
-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;
kevin.kingsbury@dowjones.com
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