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Letter to the Editor

Allstate Posts 64.9 Percent Drop in Net

NORTHBROOK, Ill. -- Allstate Corp. posted a 64.9 percent decrease in third-quarter net income, primarily reflecting higher homeowners losses, as well as catastrophe losses compounded by the Sept. 11 terrorist attacks.

The nation's second-largest automobile and homeowners insurer said net income for the quarter fell to $226 million, or 32 cents a share, from $644 million, or 87 cents a share, a year earlier. Operating income was $401 million, or 56 cents a share, compared with $525 million, or 71 cents a share, in the third quarter of 2000. Revenue was $7.17 billion, down from $7.45 billion a year earlier, the result of realized capital losses that outweighed increased premiums and contract charges.

For the third quarter, Allstate said its property-liability written premiums increased 3.6 percent to $5.85 billion, compared with $5.64 billion during the same period of 2000. In standard auto alone, the growth rate in written premium was 6.4 percent, up from the previous quarter's growth rate of 4.8 percent. The company credited rate actions over the past year, as well as positive production and retention trends.

The relatively small impact of the September catastrophe on Allstate--compared with the sizable losses sustained by many other carriers--"clearly shows the wisdom of our decision several years ago to exit large commercial and reinsurance to concentrate on personal lines," said Edward M. Liddy, chairman, president and chief executive officer.

Allstate continued a major reorganization that began in November 1999. The company said its "Good Hands Network" was rolled out to nine additional states and was on schedule to reach most of the United States by year end. The new multi-access plan, with call center and Internet capabilities, now reaches into 27 states and Washington, D.C.

During the third quarter, Allstate finalized the sale of its subsidiaries in Germany and Italy for a $34 million after-tax loss. Related to the sale, the company realized a $47 million tax benefit for inception-to-date operating losses of those units.

The company also acquired 11 million shares of its stock at a cost of $380 million. This action completed the $2 billion buy-back program that began in 2000 and started the current $500 million stock repurchase program slated to run to the end of 2002.

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