Allstate Corp. on Wednesday reported that quarterly operating income fell 16 percent, missing analysts’ forecasts, as the largest publicly traded U.S. home and auto insurer lost existing customers and ramped up spending to try to attract new ones.
Allstate’s chief executive said the company had missed opportunities to improve its relative position against competitors and had work to do to improve growth in its autos business and profits in the homeowners’ segment.
Allstate said retention, a measure of how many existing customers it keeps, dipped in both automotive and homeowners insurance, in part on rate increases in some states. Measures of customer loyalty also declined.
“The challenge for us in growth this quarter was on the retention side,” Allstate Chairman and Chief Executive Tom Wilson said in a phone interview.
Allstate reported a net profit of $367 million, or 68 cents per share, compared with a year-earlier profit of $221 million or 41 cents per share.
But operating earnings, excluding investment gains and losses, fell to $452 million, or 83 cents per share, from $538 million a year ago. Analysts polled by Thomson Reuters I/B/E/S expected 98 cents per share on that basis.
Wilson said Allstate’s declines in customer loyalty were in line with others in the industry, but he was not satisfied with the result.
“I see it as a missed opportunity to improve our relative position,” he said. “When you look at our customer service levels, they’ve held steady but they haven’t gone up and they need to go up.”
Marketing spending rose in the quarter, as Allstate moved to attract younger customers in the period. Wilson said the company also wanted to diversify its message, as people could tire of its ads, which have run for years, featuring actor Dennis Haysbert.
[The insurer reported a 95.9 combined ratio for the quarter, compared to 94.7 for the same period last year.
Allstate said property and liability premiums written declined 0.6 percent in the third quarter of 2010 compared to the prior year quarter. Allstate brand growth of 0.2 percent was more than offset by a 16.7 percent decline in the Encompass brand, which the company said reflectied “actions to improve profitability.”
The insurer said its homeowners premiums written for the third quarter of 2010 increased 2.4 percent compared to the same period a year ago, as a 7.2 percent increase in average premium was partly offset by a 4.1 percent decline in policies in force. The company said it had homeowners rate increases averaging 4.2 percent approved in 15 states during the third quarter. The homeowners combined ratio was 104.7 in the third quarter of 2010 compared to 98.3 in the third quarter a year ago.]
(Reporting by Ben Berkowitz; Editing by Richard Chang, Gary Hill)