“We have accomplished these results despite exceptionally large catastrophic losses in the second quarter,” said Allstate Chief Executive Officer Edward Liddy during a 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.

These losses were not enough to offset Allstate's increasing profit level from higher rates. The company's property-casualty premiums written jumped 6.3 percent to $6.4 billion compared to one year ago, with Allstate-branded auto-insurance premiums rising nearly 7 percent to $3.5 billion and homeowners premiums increasing some 13 percent to $1.4 billion.

The p-c combined ratio also improved, to 97.1 from 100.4 one year ago. The company's p-c 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.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 4, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.