Updated with additional comments from Allstate CEO Thomas Wilson, speaking during the company's conference call Thursday morning.
NEW YORK (
(ALL - Get Report)
late on Wednesday reported strong third-quarter results, and CEO Thomas Wilson said that Hurricane Sandy was "not expected to have a material impact" on the company's financial condition.
, Wilson said that Hurricane Sandy was "about twice the size geographically of Katrina," which hit New Orleans in 2005, killed over 1,800 people, and caused $108 billion in damage, according to the National Hurricane Center's
, which was revised in September 2011.
Wilson said that "the good news" was that Hurricane Sandy's "wind speeds were about two-thirds of what Katrina was and that's sort of an exponential impact so there should be a lot less damage but it's much wider spread... this is just a massive storm and there's a lot of work to be done."
After saying on CNBC that the Hurricane Sandy's cost to Allstate "will be significant, but not material," and that "these types of events are in the normal volatility that we and our shareholders expect," Wilson later said in a statement that "it's too early to estimate the impact of Hurricane Sandy on Allstate's fourth quarter earnings... however, this catastrophe is not expected to have a material impact on Allstate's overall financial condition. Allstate is amply well-capitalized to meet its obligations to policyholders."
While again pointing out that it was too early to estimate losses from Hurricane Sandy, Wilson said during Allstate's earnings conference call on Thursday that "the actions we have taken over the last five years in places like New York, New Jersey, all up along the East Coast have reduced the policy counts we have there in the sort of 10% to 30% range. And that will obviously impact what our losses are relative to what they would have been."
When Credit Suisse analyst Mike Zaremski said that "it looks like insurance regulators and at least a few impacted states are saying the storm won't technically be classified as a hurricane," and that "hurricane deductibles won't apply," Wilson explained that "a hurricane is it gets its energy from the water. The winter storm or northeaster get its energy from the temperature differential in the air. And so that is why it has been classified that way. "
Wilson went on to say that "the tropical cyclone deductible probably will not be triggered up in the northeast and we are prepared for that, and that is what is fair and accurate for our customers," and added that in some southern states, the higher hurricane deductibles may apply, but "but the damage is much less severe down there than when where the hurricane turned in."
A Strong Third Quarter
Allstate reported third-quarter net income of $723 million, or $1.48 a share, beating the consensus estimate of $1.13, among analysts polled by Thomson Reuters. Earnings increased from $175 million, or 34 cents a share, during the third quarter of 2011, even though consolidated revenues declined to $8.128 billion from $8.242 billion.
Catastrophe losses declined to $206 million in the third quarter, from $1.077 billion a year earlier. The company's property-liability combined ratio declined to 90.2 in the third quarter, from 104.8 in the third quarter of 2011. The combined ratio is the sum of incurred losses and expenses divided by earned premiums. It measures underwriting profitability, and a combined ratio of over 100% indicates an underwriting loss.
The company's "underlying combined ratio," which excludes "the effect of catastrophes, prior year reserve re-estimates, business combination expenses and the amortization of purchased intangible assets," improved to 87.8 in the third quarter from 89.2 a year earlier, "reflecting favorable margins in the Allstate and Encompass brands."