(Bloomberg) -- Allstate Corp., the largest publicly traded U.S. auto and home insurer, said second-quarter profit plunged 45 percent on a surge in claims from automobile coverage.
Net income declined to $355 million, or 79 cents a share, from $645 million, or $1.39, a year earlier, the Northbrook, Illinois-based company said Monday in a statement. Operating income, which excludes some investment results, was 63 cents a share, missing the 96-cent average estimate of 22 analysts surveyed by Bloomberg.
“The increase in auto accidents is broad-based by state, risk class, rating plans and the maturity of the business, and consequently appears to be driven by external factors,” Chief Executive Officer Tom Wilson said in the statement.
Property-damage frequency for Allstate brand auto coverage rose 6.9 percent in the quarter from a year earlier. Wilson said in May that Allstate would raise rates for drivers, following competitor Geico’s announcement of increases. Auto insurers have faced pressure from mounting claims as more drivers take to the road amid an improving economy.
The insurer fell to $66.50 at 5:01 p.m. in extended New York trading after the announcement. It gained less than 1 percent to $69.38 in regular trading and had declined 1.2 percent this year.
The firm boosted rates for its Allstate brand auto coverage 1.5 percent in the second quarter in 34 states. “We anticipate increasing the level of rate increases being pursued,” Allstate said in the statement.
Repricing effort
“It’s all about auto frequency versus pricing,” Robert Glasspiegel, an analyst at Janney Montgomery Scott, said in an interview before results were announced. “They indicated that frequency’s elevated and they need to reprice. I’ve got a lot of conviction they know how to do that.”
Book value, a measure of assets minus liabilities, fell to $47.96 a share from $49.19 at the end of March. Premium revenue in the property and liability business rose to $7.5 billion from $7.2 billion a year earlier.
Distance traveled on U.S. roads in May was up 2.7 percent, or 7.3 billion vehicle miles, compared with a year earlier, according to the most recent monthly report from the Federal Highway Administration.
Catastrophes cost the company $797 million before taxes in the period, the firm said in a July 16 statement. That’s down from $936 million a year earlier.
Progressive Corp. said in July that second-quarter profit rose 24 percent after the acquisition of ARX Holding Corp. helped the company push into home insurance.
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