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Wilma Cuts Allstate's Net

The insurer's fourth-quarter profit drops as it absorbs $330 million in hurricane losses.
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fourth-quarter profit dropped amid heavy catastrophe losses from Hurricane Wilma, and the insurance giant offered a 2006 guidance below Wall Street's expectation.

Allstate earned $1.04 billion, or $1.59 a share, in the fourth quarter, down from $1.14 billion, or $1.42 a share, a year earlier. The latest quarter's results included total aftertax catastrophe losses of $427 million, including $330 million from Hurricane Wilma. Allstate said the hurricane, which struck southern Florida in late October, will be one of the 10 most costly catastrophes in U.S. history.

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Operating earnings, which exclude realized capital gains and losses, were $975 million, or $1.49 a share. Analysts polled by Thomson First Call expected operating earnings of $1.52 a share. A year earlier, operating earnings were $986 million, or $1.42 a share.

Allstate's fourth-quarter revenue, meanwhile, rose to $8.95 billion from $8.88 billion a year earlier.

Last year's hurricanes hit Allstate hard. For the third quarter, the company recorded $1.55 billion loss -- the largest loss in its history as a public company -- due to hurricanes Katrina and Rita.

Allstate said Tuesday that it signed a new catastrophe reinsurance agreement that will help reduce its exposure to earthquakes and hurricanes. The agreement covers the entire country except Florida and has a $2 billion limit on losses in excess of $2 billion. The company also said it is intentionally slowing the writing of new property insurance business in certain markets to limit its exposure to catastrophe losses caused by hurricanes and earthquakes.

For 2006, Allstate forecast operating earnings of $5.60 to $6 a share, shy of analysts' forecast of $6.02.