Allstate Corp.'s first-quarter profit jumped 46% to $766 million as improved results in its home-insurance business and lower catastrophe costs gave a boost to the company's results.
Its operating income of $1.42 a share beat the consensus estimate of analysts surveyed by Thomson Reuters by 30 cents.
Underwriting profit at the company's property-liability unit, which includes its home and auto-insurance segments, rose nearly 60% to $523 million as returns from its home insurance operation more than doubled. The result in home insurance was partly due to better weather, which drove down catastrophe costs. But the company also said its efforts to raise rates and tighten underwriting standards had proven effective.
In the latest period, Allstate reported $259 million in catastrophe losses, compared with $333 million a year earlier and $66 million in the fourth quarter.
Allstate and other insurers often urge shareholders to look past the cost of the major natural disasters, which can fluctuate wildly, and concentrate on underlying results. To that end, the company reports an underlying profit margin figure that removes the effects of catastrophes and reserve adjustments. By that measure, Allstate spent 88.1 cents on claims and expenses for every dollar it collected in premiums across its property-casualty segment, an improvement from 89.9 cents in the same period a year earlier, and near the low end of the company's full-year guidance range of 88 cents to 91 cents.
The underwriting picture was less rosy for its auto insurance business, where profit dropped nearly 40% to $131 million, driven by a narrower profit margin for its main Allstate-branded products and a $61 million underwriting loss at newly acquired Esurance, which sells policies online.
Chief Executive Tom Wilson has worked for years to try to combat a decline in the number of drivers with Allstate coverage, battling stiff competition from rivals including Progressive Corp. (PGR) and Berkshire Hathaway Inc.'s Geico Corp.
So far, it's been a losing effort. In the latest quarter, the number of vehicles insured by the company's standard auto policies fell to just over 17 million, the lowest since at least 2005. The percentage of existing policyholders who maintained their coverage was 88.7, the lowest in over a year. But the total value of standard auto policies sold in the quarter dropped only slightly, to $3.94 billion, as customer defections were offset by an increase in the amount each policyholder paid for coverage.