Auto and home insurer Allstate Corp. said Wednesday that its net income surged 66 percent in the third quarter as investment losses eased.
The performance nevertheless missed Wall Street expectations and the company's stock fell in after-hours trading.
Allstate said premiums earned in the quarter slipped to $6.5 million, from $6.54 million. Auto premiums, which account for the lion's share of the company's business, slipped as retention fell.
"That's one of the areas I'm not happy with," CEO Thomas Wilson said in an interview.
It's a concern because Allstate is focusing on expanding its auto insurance segment. The company recently launched a new ad campaign called "Mayhem" featuring Dean Winters to go after a younger market. That, along with other moves to improve customer service, should lead to better segment results in the future, Wilson said.
He also noted that higher rates in select states could have contributed to the lower retention rates.
Along with auto insurance, Wilson said Allstate is focusing on growing its financial services segment and other types of insurance such as for condos, boats and motorcycles.
Homeowners insurance, however, does not deliver adequate returns and is not a focus area for the company, Wilson said. Homeowners premium accounted for about 25 percent of total written premiums in the quarter.
For the three months ended Sept. 30, the company earned $367 million, or 68 cents per share. That's compared with $221 million, or 41 cents per share, in the year-ago period.
Not including one-time charges, the company said it earned 83 cents per share in the quarter. By that measure, analysts polled by Thomson Reuters on average expected a profit of 98 cents per share.
Allstate stock was down $1.53, or 4.7 percent, at $30.95 in after-hours trading. The shares had already closed down 19 cents in the regular session.
More than offsetting the slip in premiums, the company's net investment losses in the quarter eased to $144 million, from $519 million a year ago. Higher gains on investment sales and a drop in derivative losses drove the improvement.
The company, based in Northbrook, Ill., also benefited from a drop in catastrophe losses, which fell to $386 million from $407 million.
Total revenue was $7.91 billion, up 4.3 percent from $7.58 billion a year ago.
The combined ratio, which measures an insurance company's losses and expenses, worsened to 95.9 percent, from 94.7 percent in the year-ago quarter.
A ratio above 100 means that for every premium dollar taken in, more than a dollar went to cover claims and expenses. A figure below 100 means the company made a profit on its insurance operations.
(This version CORRECTS information about new ad campaign and percentage homeowners premiums account for.)