Allstate Loss Raises Questions Around Its Capital Adequacy
May 08 2009 - 1:15PM
Dow Jones News
Investment losses and rising policy claims pushed Allstate Corp.
(ALL) to a first-quarter loss and raised the question of whether
the company will need to raise capital in the next year.
"We think we're in good shape" to maintain adequate capital
"over and above" what will be required, even if the downturn
continues throughout the year, Chairman and Chief Executive Thomas
J. Wilson said during a conference call Friday to discuss the
results.
Still, shares of the biggest publicly traded auto and homeowners
insurer sank Friday, trading recently at $24.60, down 10.1%, as
share prices rose for most other large insurers.
Analysts were mixed in their views.
Raymond James analyst David O. Lewis said in a note Friday that
he saw higher homeowners claims as driving Allstate's earnings miss
but maintained his strong buy rating on the expectation that "the
stock will trade higher as unrealized losses contract and investors
become more confident in Allstate's capital adequacy."
Sandler O'Neill analyst Paul Newsome said Allstate's reported
book value per share dropped more than he expected, and was brought
down by market-value losses of $590 million in Allstate's
investment portfolio.
Allstate reported a first-quarter loss of $274 million, or 51
cents a share, compared with year-earlier earnings of $348 million,
or 62 cents a share. Operating earnings, which exclude investment
gains and losses, fell to 84 cents a share from $1.33.
Revenue dropped 2.5% to $7.88 billion, reflecting a 23% decline
in net investment income and lower property-liability premiums.
Analysts surveyed by Thomson Reuters expected operating earnings
of $1.23 a share on revenue of $8.16 billion. as investment losses
hit the bottom line and the company suffered a small revenue
decline.
CEO Wilson said customer loyalty remained high, but, because of
the recession, customers were shopping their insurance coverage
more than usual, and customers were switching insurers to find
lower rates.
Claims in its homeowners business rose in the quarter largely
because of a large number of storm-related events which weren't big
enough to qualify as catastrophes but which drove up losses over
the quarter, Wilson said.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141;
lavonne.kuykendall@dowjones.com
(Jay Miller contributed to this report.)