Home and auto insurer Allstate Corp. said Wednesday that its profit more than quadrupled in the first quarter as it paid out less money for damage claims.
The performance handily beat Wall Street expectations and shares of the company gained $1.16 to $33.10 in after-hours electronic trading. The stock had closed up 20 cents at $31.94.
In the three months ended March 31, the Northbrook, Ill.-based company said net income climbed to $519 million, or 97 cents per share. That's up from $120 million, or 22 cents per share, in the year-ago period.
Catastrophe losses were $333 million in the quarter, down from the near-record high of $648 million a year ago. The year-ago period reflected severe winter weather in eastern states. The results for the quarter also benefited from total capital gains and losses of $96 million, compared with a loss of $348 million a year ago. The improvement is largely the result of an initiative the company undertook in 2007 to reduce its riskier holdings.
Not including one-time items such as investment gains, the company said it earned 93 cents per share in the latest period. By that measure, analysts on average had expected a profit of 71 cents per share, according to FactSet.
In the homeowners unit, the company said premiums written increased 3 percent, as a decrease of policies in force was more than offset by an increase in average premiums. The company also noted that rate hikes were approved in 12 states during the quarter. Allstate has said that it would work to improve returns in the homeowners unit, as a growing number of weather-related incidents such as hurricanes, wildfires and hailstorms in recent years has eaten into results.
"I believe there's been a permanent change in the incidents of severe weather," CEO Tom Wilson said.
As a result, he said Allstate would likely continue pursuing rate hikes for another couple years. The company has stopped writing new policies in select states such as California, where state regulations prevent the company from making adequate returns, Wilson said. He also noted that the company is also using more sophisticated methods to tailor prices to a homeowner's risk.
In the auto unit, policies in force slipped as a lower rate of renewals more than offset a spike in new business.
Total quarterly revenue rose to $8.1 billion, from $7.75 billion a year ago. Revenue from property-liability insurance premiums slipped to $6.45 billion, from $6.5 billion on lower net investment income. Life and annuity premiums and contract charges rose to $569 million, from $544 million. Total realized capital gains and losses improved to $96 million, from a loss of $348 million a year ago.
Costs and expenses eased to $7.34 billion, from $7.64 billion a year ago.
The company's combined ratio for the quarter improved to 94.9, compared with 98.9 a year ago, primarily due to lower catastrophe losses. A ratio above 100 means the insurer is paying out more in claims and expenses than it takes in from writing new premiums.