UPDATE 2-Allstate profit beats, says under no pressure to hike rates

Wed Oct 30, 2013 6:40pm EDT

* 3rd-quarter operating earnings $1.53/share vs est. $1.39

* Catastrophe losses fall 37 percent to $128 million

By Aman Shah

Oct 30 (Reuters) - Allstate Corp, the largest publicly traded home and auto insurer in the United States, reported a higher-than-expected quarterly operating profit as fewer natural disasters helped it earn more premiums.

The company, which has been aggressively raising rates in its homeowners businesses to offset higher catastrophe losses and low interest rates on its investments, said on Wednesday it did not see the need for dramatic rate hikes.

"We don't have a lot of need to raise our prices dramatically from here, assuming the weather remains the same," Chief Executive Thomas Wilson told Reuters.

Losses from natural disasters such as tornados, hurricanes and floods fell 37 percent to $128 million in the third quarter. Insurers find it difficult to forecast these losses due to their unexpected nature.

Wilson said that the company had raised premium rates at an average of about 4.5 percent over the last four months in the homeowners business, lower than levels in the past few years.

The company was also able to write more premiums in its auto insurance division, in which it faces increasing competition.

Allstate brand standard auto policies in force rose over both the prior year quarter and the last quarter, the company said in an earnings presentation.

"Investors will appreciate the continued sequential improvement in Allstate brand policies in force," Macquarie Equities Research analyst Amit Kumar said in an email.

Wilson said he expected price increases in the auto insurance division to be 'relatively benign' as declining frequency in claims linked to safer cars and drivers would not pressure the prices to go higher.

OPERATING PROFIT BEATS

Allstate's net income fell 57 percent to $310 million, or 66 cents per share, in the third quarter as it took an estimated $475 million after-tax loss on the sale of Lincoln Benefit Life Co.

The company said in July it would sell the business to Resolution Life Holdings for $600 million.

Allstate will be able to free up about $1 billion in capital after the sale, which is expected to close around the end of this year or in the beginning of next year, CEO Wilson said.

On an operating basis, Allstate reported earnings of $1.53 cents per share, easily surpassing the average analyst estimate of $1.39 per share, according to Thomson Reuters I/B/E/S.

Total property-liability insurance premiums rose 4 percent to $6.97 billion.

The Allstate brand homeowners business recorded a combined ratio of 65.3, a 7.6 point improvement, boosted by rate increases and a decline in disasters.

An insurer's combined ratio is the percentage of premium revenue the company has to pay out in claims. A ratio of under 100 indicates an underwriting profit.

The company's shares, which have gained about a third of their value this year, closed at $52.96 on the New York Stock Exchange on Wednesday.

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