Hit on both fronts -- by hurricanes and the securities markets -- Allstate ( ALL) posted $923 million in third-quarter losses Thursday. With 35 catastrophes in the third quarter alone, the insurance company suffered $1.8 billion in catastrophe losses, primarily from Hurricanes Ike (responsible for $459 million) and Gustav (responsible for $944 million). In its earnings report and conference call this morning, Allstate was quick to put a spin on the losses, by saying that if not for its "catastrophe exposure management actions" the losses would have been twice as high. This is a fancy way of saying that the company has cancelled policies in coastal regions, bought more reinsurance and increased homeowners' policy deductibles. To pile on even more losses, net pre-tax realized losses on investments totaled a hefty $1.3 billion made up of $137 million in losses on sales, $666 million on impairment writedowns and $453 million on changes in intent writedowns, which means the company no longer plans to hold the securities until their value recovers, even if it hasn't sold them yet. Holdings in AIG ( AIG), Fannie Mae ( FNM), Freddie Mac ( FRE) and Lehman Brothers total $500 million at Sept. 30 compared to $1 billion at June 30. The company also holds fixed-income and equity securities in Bank of America ( BAC), Goldman Sachs ( GS), JPMorgan Chase ( JPM) (including Bear Stearns and Washington Mutual), Merrill Lynch ( MER), Morgan Stanley ( MS) and Wachovia ( WB) totaling a combined $1.1 billion at Sept. 30 compared to $1.6 billion at June 30.
With a total portfolio of invested assets of $105 billion at Sept. 30, these holdings represent just 1.5%. The $923 billion loss translated to $1.71 a share, far below the consensus earnings estimate of positive $1.16. Unrealized net capital losses increased $3.3 billion, representing a dollar-for-dollar decline in capital. This was attributed to $848 million for municipal bonds, $1.3 billion for corporate bonds, $375 million for commercial mortgage-backed securities, $225 million for asset-backed securities and $391 million for equity securities. Looking at Allstate's property-liability sector separate from the reported catastrophe losses, premiums written were down 1.5% to $6.966 billion from $7.075 billion for the second quarter of 2007. This decline occurred for both auto and homeowners premiums and was attributed to a decrease in the number of cars insured as a result of the economic downturn as well as the intentional decrease in the issuance of new homeowners policies. Interestingly, the frequency of auto property damage claims was down 11.8% during the quarter as well as the frequency of bodily injury claims, down 13.7%. These declines are most likely due to fewer miles being driven as a result of the economic downturn and the high price of gas during the quarter. The company stated on the conference call that it did not expect this to increase in the coming year. Allstate Life Insurance Company, the holding company's largest life affiliate with $76 billion in assets and a TheStreet.com Financial Strength Rating of A- (Excellent), makes up nearly all of the Allstate Financial sector. It is primarily a fixed annuity writer which, as indicated on the conference call, is considered underperforming.
The company retired $2.2 billion of institutional deposits as investors elected not to extend their contracts. This was partially offset by an increase in retail deposits on fixed deferred annuities of $94 million. Allstate shares were sliding $1.13, or 4%, to $27.10 in recent trading Thursday. TheStreet.com Ratings issues financial strength ratings on each of the nation's 8,600 banks and savings and loans which are available at no charge on the Banks & Thrifts Screener. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the Insurers & HMOs Screener. For our take on Travelers' (ALL) earnings, check out Storm Losses Pummel Travelers' Earnings. And for more coverage from TheStreet.com Ratings team, check out TheStreet.com Ratings section.