Allstate Corp. said Wednesday that first-quarter net income dropped 77 percent, hurt by write-downs in its investments and larger-than-expected catastrophe losses.
The insurer said it had to write down the value of fixed-income securities by $347 million because of turmoil in the global capital markets.
Allstate, which sells insurance to 17 million American households, said net income fell to $348 million, or 62 cents a share, from about $1.5 billion, or $2.41 a share, in the year-ago quarter.
The Northbrook, Ill., insurer said operating earnings fell about 38 percent to $747 million, or $1.33 a share, as claims from catastrophes took a bite out of earnings.
Catastrophe losses for the quarter were $568 million, fueled by unusual tornado activity in the Southern U.S. earlier this year, an increase of $407 million over the same period a year ago.
Analysts, on average, expected profit of $1.62 a share on an operating basis, according to Reuters estimates.
Analysts use operating earnings to measure performance because it excludes investment gains or losses.
In the last 12 months, Allstate shares have fallen roughly 20 percent, in keeping with an about equal decline in the Standard & Poor’s insurance index.
Allstate said its standard brand auto policies were up by about 0.6 percent in the first quarter, and homeowner policies fell about 2.3 percent.
Allstate said its “combined ratio” — a measures of premiums earned against payouts and expenses — for the quarter was 94 percent, up from 84.6 percent in the first quarter of 2007. A lower number means the insurer makes more money.
For full-year 2008, Allstate said it sees a combined ratio of between 87 and 89 percent.
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