1. News Articles
  2. Related News Articles
News Article Details

Allstate Posts Fourth-Quarter Losses, Plans Job Cuts

Source: Allstate, Chicago Tribune

Posted on 29 Jan 2009

Facebook LinkedIn Twitter Google

Allstate Corp. announced fourth-quarter losses of $1.13 billion and also plans to cut about 1,000 jobs in its financial arm through a combination of attrition and job cuts over the next two years.

Allstate has roughly 38,000 full-time workers company-wide, including about 3,800 at Allstate Financial, which provides such products as life insurance, supplemental accident and health insurance, and annuities. Allstate, best known for selling car and homeowners insurance, is based in the Chicago area.

In an interview Wednesday, Allstate Corp. Chief Executive Tom Wilson said he couldn't immediately give a breakdown of how many of cuts would be achieved by not filling open positions and by laying off workers.

It's the second shakeup for Allstate Financial in less than two months.

In early December, it announced the departure of James Hohmann, Allstate Financial chief executive. George Ruebenson, president of Allstate Protection, the car and home insurance unit, is overseeing the financial unit while it searches for a new leader.

For years, some Allstate watchers have wondered why the company is committed to the financial business, thinking it might do better as a pure-play insurance company.

Wilson has maintained that Allstate is well positioned to provide retirement products to consumers.

The job-cut news coincided with Allstate reporting a $1.13 billion fourth quarter loss, as it wrote down the value of certain investments that have scorched financial markets in recent months.

The company emphasized that its core property/casualty insurance underwriting operation "continued to produce strong underlying profitability," and in fact Allstate's losses from catastrophe-related claims dropped significantly from the year-ago quarter's larger-than-normal catastrophe payouts.

But while earnings from underwriting slipped only modestly in the latest quarter, to $243 million from $276 million, Allstate's investment portfolio came under heavy pressure from the stock market's plunge, and the fallout from those investments did the damage to the company's earnings.

Like most major insurers, Allstate's earnings hinge to a large extent on the fortunes of its investing portfolio. Net investment income, from sources such as dividend payments and interest on Allstate's large bond portfolio, declined 18 percent in the latest quarter, to $1.33 billion.

What pushed the company deep into a deficit was $1.93 billion in "realized" capital losses -- losses from selling securities at a loss, or from asset write-downs.