Allstate accomplished something in the third quarter it hasn’t done since 2006: grow the number of homeowners’ policies on its books.
After Hurricane Katrina in 2005, the Northbrook, Ill.-based home and auto insurer reduced its exposure to such catastrophe-prone areas as Florida and Louisiana. Allstate historically also has shown a willingness to cede market share to maintain its profit margins.
As a result, the number of homeowners’ policies on its books has fallen for years. In recent quarters, however, that decline has slowed, and, in the quarter ended Sept. 30, Allstate grew its homeowners’ policies count, to 6.082 million from 6.077 million. Its peak was 7.8 million.
"While it is by a small number of policies, it is pretty widespread; widespread geographically and widespread in terms of being both favorable new business and retention," Matt Winter, head of Allstate’s personal insurance lines, told analysts during a Thursday earnings call. "We now have 21 states that are growing year-over-year" in the number of homeowners.
Allstate’s Esurance arm continues to lose money. Allstate bought the online seller of coverage in 2011 for $1 billion to better take on Geico and Progressive. Esurance had policy growth of 14 percent in the quarter, but that growth rate has slowed from a 32 percent policy growth rate in the same period a year ago as Allstate tries to improve the unit’s profits, including by charging higher prices for coverage.
"We like the deal," Allstate Chief Executive Tom Wilson said in response to an analyst question about Esurance. "We’re glad we paid a lot of money for it, and we are even happier that it has turned out to be growing, and we’re going to make money on it."
One analyst asked about Allstate’s spending on stock buybacks and dividends.
In the third quarter, it paid $122 million in common stock dividends and bought back $926 million in common stock.
For perspective, it had operating income of nearly $600 million in the third quarter.
"We have plenty of capital and are feeling good about our returns," CEO Wilson replied.
Another analyst asked why Allstate — which has driver-monitoring programs, including mobile apps and devices that plug into cars, that offer potential discounts — doesn’t strike a deal with an automaker to work on connected cars.
"The average age of the fleet is 11 years old," Wilson said. "So there are a whole bunch of people out there driving that we would like to offer them the opportunity to get more sophisticated pricing as opposed to waiting until they buy a new car."
But Wilson said Allstate is "actively in conversations with everybody," including automakers and telecommunications companies, about driver-monitoring programs, commonly called "telematics."
After the market closed Wednesday, Allstate reported higher-than-expected third-quarter profits as it generated more in premiums.
At midday Thursday, Allstate shares were up 1.4 percent to $63.89, beating the wider market.