Travelers soothes investors; Allstate posts loss

By Lilla Zuill

NEW YORK (Reuters) - Property insurer Travelers Cos Inc (TRV.N) and Allstate Corp (ALL.N), the largest publicly traded U.S. home insurer, reported weaker results, hurt by higher catastrophe losses.

But investor reaction to the two was different as Travelers, which saw an 82 percent slide in earnings, said it is trying to exploit opportunities from troubles at its rival American International Group Inc (AIG.N), which may allow it to firm up pricing.

That helped boost its shares as the broader market tanked.

Allstate, which reported after its stock fell 11.6 percent in the regular trading session, posted a surprise loss, hurt both by catastrophe losses and losses on its investment portfolio. Allstate shares were unchanged in extended trading.

Travelers Chief Executive Jay Fishman, in a post-earnings call with investors, said there had been an increase in requests for quotations on business from current AIG customers.

He added that the company was in a good position to respond to requests from midsized companies -- an area where Travelers specializes.

The company is also seeing signs that insurance rates, which have dropped sharply in recent years, could be heading higher after large catastrophe losses and investment losses from the credit crisis, and restrained capacity after large mortgage losses pushed AIG near the brink of bankruptcy last month.

SHARE BUYBACK SUSPENDED

Since January, Travelers' stock has fallen 31 percent, compared with a drop of 62 percent in the Standard & Poor's insurance index .GSPINSC.

Allstate, which is down 46 percent over the same period, was hit by the second highest catastrophe losses in its 77-year history in 2008.

That helped cause an operating loss of $190 million, or 35 cents a share, far short of analysts earnings forecast of 66 cents a share, according to Reuters Estimates.

Allstate was hit on at least two fronts -- catastrophe payouts were high, and its investment portfolio dropped by about $8.6 billion to about $105 billion. The portfolio was hurt by $4.6 billion in writedowns from widening credit spreads and equity market value declines.

Allstate suspended its share buyback plan to preserve capital and ahead of 2009, which could hold more economic turmoil.

A rise in catastrophe claims from hurricanes Dolly, Gustav and Ike also took its toll on Travelers, as did investment losses.

Amid $682 million in catastrophe losses from hurricane damage earlier this year, Travelers cut its operating income forecast for 2008 to a range of $4.90 to $5.10 per share, from $5.50 to $5.85 previously.