Vinay Saqi, equity analyst at New York-based Morgan Stanley said in his report, "The quality of the upside was good--all from better than anticipated underwriting results. Homeowners accounted for the bulk of the upside with non-standard auto also improving." Mr. Saqi added that written premium growth also exceeded his expectations.

The company's revenue increased by six percent to $7.9 billion in the second quarter, compared to $7.46 billion from the 2002 second quarter.

"We have accomplished these results despite exceptionally large catastrophic losses in the second quarter," said Allstate Chief Executive Officer Edward Liddy in this morning's conference call. The company, he pointed out, suffered catastrophic losses of $566 million from tornadoes in the second quarter, nearly twice the loss amount of $288 million from one year ago.

"The quarter saw a large number of tornadoes with resulting damage to properties in many parts of the country," Mr. Liddy said. "We are in the business of restoring people's lives when events like this occur, and that's what thousands of Allstate agents and claim adjusters have been doing this quarter."

Still, these losses were not enough to offset Allstate's increasing profit level from higher rates. The company's property-liability premiums written jumped 6.3 percent to $6.42 billion compared to one year ago, with Allstate-branded auto-insurance written premiums rising nearly seven percent to $3.36 billion and homeowners insurance premiums written increasing some 13 percent to $1.37 billion.

The property-liability combined ratio also improved, to 97.1 from 100.4 one year ago. The company's property-liability underwriting income jumped by $202 million to $181 million in the second quarter, from an underwriting loss of $21 million in the 2002 second quarter.

Other positive factors that helped Allstate's bottom line were the continuing improvement in auto and homeowners loss frequencies and lower prior year reserve strengthening, the company said.

"Despite a tornado-plagued spring in many parts of the central and southern United States, our property-liability business generated much better than expected results," Mr. Liddy said.

He also acknowledged that rate increases approved in previous quarters "continue to flow through financial results. We will continue to file rate increases as necessary." And just as important, he added, "we are seeing signs of positive, sustainable unit growth in both our core standard auto and homeowners insurance lines."

Mr. Liddy said his company will "continue to be disciplined and take rate increases that support our projected loss cost trends and return targets."

Mr. Saqi from Morgan Stanley suggested, however, that Allstate's robust quarterly results might not be quite as bright as presented. "The positive results were good, but the consistency does not appear to be as strong as the headlines may indicate," he said.

"The homeowners results can be quickly reflected in earnings estimates, and we do not anticipate they can be sustained for an extended period of time."

Further, the pace of rate increases appears to be slowing down, he added: "Auto appears to be settling in the upper-middle single digits and homeowners looks to be dipping into the high single digits."