Allstate Corp. posted its largest quarterly profit since 2007, largely due to declining catastrophe costs, as well as higher policy sales from the acquisition of Esurance, an online insurance company.
Allstate, the market's biggest publicly traded insurance company, advanced a net income of $766 million, or about $1.53 per share. One year earlier, their income was $524 million, or about 98 cents, according to the Northbrook, Illinois insurer said in a statement on Wednesday.
Before results were released, Cliff Gallant, an analyst at KBW Inc., owed the company's profit to less catastrophes, which can be a huge loss for insurance companies. He stated that:
"It was a pretty mild winter across the country...except for a few isolated areas in the Midwest that got hit."
Another way that the company sustained profit gain is by budgeting for a higher catastrophe cost. According to a statement on April 19th, the company set aside much more money than necessary for claims in prior quarters.
They also acquired Esurance, a wise investment on their part, considering before the sale they lost a significant market share to competitors Progressive Corp. and Berkshire Hathaway Inc's Geico unit, as younger customers turned away from agents and more toward using online services to purchase insurance.
In contrast, Prudential, America's second-largest life insurer, said its loss was due to charges for value changes in derivatives, which were tied to the weakening of the Japanese Yen. They reported a loss of $988 million, or $2.09 per share, compared with a 2011 profit of $539 million. This loss for Prudential spells out a bigger gain for Allstate, who now has an even wider cushion as America's most publicly traded insurance company.