Bear Stearns property-casualty analyst David Small said the primary reason for the earnings shortfall was the greater than expected catastrophe losses and unfavorable development from the 2004-2005 storms.

But the insurer reported solid results in its core business, Mr. Small noted, as it showed greater pricing discipline than some of its competitors.

"Frequency trends remained relatively benign in the quarter, even in the face of difficult comparisons," Mr. Small noted.

Morgan Stanley analyst William Wilt said the fact that Allstate showed flat year-over-year premium-per-policy numbers was an "impressive feat against a backdrop of declining prices."

"Moreover, auto unit growth was up 2 percent, a sign the company is still winning share, albeit barely, without lowering prices significantly," he said.

In general, Allstate customers are less price sensitive than those of Progressive or Safeco, he added.

On the downside, Mr. Wilt noted that while frequency trends remained broadly favorable, "we suspect the favorable tailwinds will diminish."

Other second-quarter highlights:

o Net investment income rose 5.6 percent in the quarter compared with 2006, generating $545 million of capital gains.

o Property-liability premiums written declined 1.9 percent from the second quarter of last year, reflecting the increased cost of the catastrophe reinsurance program, which was $231 million compared with $114 in the second quarter of last year.