UPDATE:Allstate: $1.5 Billion Improvement In Unrealized Losses This Qtr
May 28 2009 - 11:32AM
Dow Jones News
Allstate Corp.'s (ALL) unrealized losses in its investment
portfolio improved by $1.5 billion so far in the second quarter,
the company's chief executive said Thursday.
Allstate had been hit harder than many property/casualty
insurers by unrealized or market-value losses on mortgage-related
securities it held in its investment portfolio. That position
improved by $1.5 billion this quarter, Thomas Wilson said during a
presentation at an investors conference sponsored by Sanford
Bernstein.
The increase boosted the company's book value by 8%, Wilson
said.
Wilson also said the company reduced its commercial real estate
holdings by $1 billion in the quarter, for a total of more than $3
billion in reductions so far in 2009.
Allstate reported a first-quarter loss of $274 million.
Wilson said the company's capital and liquidity position made it
strong enough to forego the Treasury Department's TARP program and
the company wouldn't apply for the money.
Part of the problem with TARP, Wilson said, is that it has the
potential to "expose risk decisions to government
intervention."
Wilson said the company has no plans to sell off Allstate
Financial, its life insurance operation, because the company's
"middle America" customer base is interested in the fixed annuity
and other products it sells.
"Even if I want to, this would be the worst time to do it,"
Wilson said. "Why would you want to lock in your credit losses at
this time?"
Wilson said the company would "reinvent" its fixed annuity
offering to reduce commissions.
"Fixed annuities won't exist in our world the way they have in
the past, "Wilson said. He said customers for fixed annuities were
more concerned with managing their cash flow than maximizing tax
deferrals. "There are a whole bunch of things that need to be
changed" in Allstate's fixed annuity offerings, Wilson said.
Another initiative for Allstate is a focus on customer
retention, which had fallen to its lowest level since 2002, partly
due to price shopping, Wilson said. "We are losing too many
customers because they are not happy," he said.
He said Allstate "trades share" with the big auto insurers. The
largest auto insurers are State Farm Mutual Automobile Insurance
Co., Allstate, Progressive Corp. (PGR) and the Geico unit of
Berkshire Hathaway Inc. (BRKA BRKB)
Wilson said Allstate gains most new marketshare from smaller
insurers. "We get more share from them than from the big
players."
Shares of Allstate recently traded up 1.3% to $25.19.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141;
lavonne.kuykendall@dowjones.com