Allstate reported a 16.5 percent rise in net income for the fourth quarter of last year compared to the same period in 2005.
The Northbrook, Ill.-based carrier reported fourth-quarter income of $1.2 billion compared with $1 billion in 2005.
Bear Stearns analyst David Small said the carrier missed the consensus estimate by six cents per share due to higher than anticipated catastrophe losses and a higher accident-year loss ratio for auto excluding catastrophe.
“While an earnings miss is always disappointing, we would highlight that for the fifth straight quarter Allstate posted an ROE in excess of 20 percent,” Mr. Small wrote.
In the auto line, Mr. Small noted that bodily injury severity increased 5.5 percent in the quarter and for the first time was not offset by declines in frequency.
“This is the likely factor that led to the higher than anticipated accident-year loss ratio for the auto business,” he wrote.
For the entire year, the company reported a 182 percent rise for income in 2006 compared to the catastrophe-scarred previous year.
Consolidated revenues for the fourth quarter rose 1.8 percent last year to come in at $9.1 billion.
The combined ratio improved three points last quarter to come in at 85.7 and 18.8 points for the entire year to 83.6.
Catastrophe losses for the fourth quarter declined 57.5 percent to come in at $279 million and 85.7 percent for the year overall to come in at $810 million.
Thomas Wilson, president and chief executive officer, said the company's great year was reflected in a return on equity of 24 percent for 2006.
In a conference call this morning, Mr. Wilson said he supported Florida's plan to increase its hurricane catastrophe fund. The carrier has been one of the main proponents behind a catastrophe fund on the federal level, and state funds such as Florida are an important component of that proposal.
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