Allstate Q1 profits plummet in wake of tornadoes

The Allstate Corporation (NYSE: ALL) reported a 76.7% drop in its 2008 Q1 profits over 2007 Q1.
The company’s Q1 profits tumbled from US$1.495 billion in 2007 to US$348 million, an Allstate release says. Catastrophe losses climbed from US$161 million to US$568 million, and the property-liability combined ratio went from 84.6% to 94.0%.
“Catastrophe losses offset the solid underlying performance of our insurance operations, where profitability exceeded the full year outlook we provided in January,” said Thomas J. Wilson, president, CEO and chairman-elect of Allstate, noting that the quarter saw an unusually high number of tornadoes.
Property-liability premiums written declined 1.4%. Standard auto premiums written increased by 0.6%, but this growth was offset by a decline in homeowners’ premium written due to catastrophe management actions, including the increased cost of the catastrophe reinsurance program, the release says.
Underwriting income dropped 61% from 2007 Q1’s US$1.046 billion to 2008 Q1’s US$408 million.
Although auto frequency was lower in the first quarter, Allstate is maintaining its expectation that its property-liability combined ratio, excluding the effect of catastrophes and prior year reserve re-estimates, will be within the range of 87.0 and 89.0 for the full year 2008, the statement says.
“We believe this environment, while challenging, plays to Allstate’s strengths,” Wilson added.