Allstate pushed to loss, CEO says curbing risks

NEW YORK (Reuters) - Allstate Corp (ALL.N), the largest publicly-traded U.S. auto and home insurer, posted a surprise quarterly loss on Wednesday, with steep write-downs on investments and huge catastrophe losses, but the company's top executive said it could have been worse.

Chief Executive Tom Wilson told Reuters the company curbed losses by taking steps to reduce potential catastrophes claims, as well as risks in its investment portfolio.

The insurer also suspended its share buyback plan. It does not expect to repurchase $900 million in stock it had planned over the next five months under a $2 billion authorization.

"We thought that it was prudent to preserve capital, and prudent to look ahead to 2009," said Wilson, who said he sees more dark clouds on the economic horizon next year.

The company wrote down investments by $4.6 billion -- even those that were performing in keeping with expectations, said Wilson.

Its investment portfolio fell to $105 billion at the end of September, an $8.6 billion decline.

"We are trying to get ahead of the curve," said Wilson. Over the last year and a half, Allstate cut its holding of financial company investments by more than a quarter, he added.

Financial stocks have been badly battered over the last year, as mortgage losses and the wider credit crisis roiled markets.

Last month, Allstate said it expected to record at least $152 million in write-downs on investments in financial services companies hit by the credit crisis, including American International Group Inc (AIG.N), Lehman Bros (LEHMQ.PK), and mortgage funding-giants Fannie Mae (FNM.N),and Freddie Mac (FRE.N).

The company has trimmed its exposure to catastrophe-prone areas over the past several years.

Disaster losses during the first nine months of 2008 -- from tornadoes and hailstorms in the first two quarters, and hurricanes in the third quarter -- make it the second most expensive year in Allstate's 77-year history. Only losses from Hurricane Katrina in 2005 cost it more.

The insurer posted a quarterly operating loss of $190 million, or 35 cents a share -- far short of Wall Street expectations of profit of 66 cents a share, according to Reuters Estimates.

Its net loss was $923 million, or $1.71 a diluted share, compared with profit of $978 million, or $1.70 a share, in the year-ago quarter.

Wilson said lawmakers right now are tied up trying to fix the credit crisis, but Allstate will push over the next few years for a federal catastrophe insurance fund to spread the cost of rising disasters between public and private sectors.

AIG SUITOR?

Allstate has been floated as a potential buyer for AIG's U.S. personal lines business, up on the sales block as part of a large sale undertaken by AIG to pay off a hefty federal loan that kept it out of bankruptcy.

Wilson declined to comment on any speculation that Allstate would buy any of AIG's assets.

The company has close ties with AIG's new CEO, Edward Liddy, who was formerly Allstate's chairman and chief executive.

Allstate rival Travelers Cos Inc (TRV.N) earlier on Wednesday said it was seeing potential business from AIG customers shopping around for new coverage.

Wilson said the two areas where Allstate overlaps with AIG -- personal lines and fixed annuities -- had not seen a "huge rush out of AIG."

(Reporting by Lilla Zuill; Editing by Bernard Orr)