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After coming through a rough economic downturn, Allstate Corp. (ALL) is in good shape and ready to grow its businesses again, the company's chief executive said Wednesday.
After holding back to maintain profitability, now is the time to start growing in its auto insurance and financial products segments, though it will continue to hold back in its homeowners insurance segment to reduce exposure to catastrophes, said Thomas J. Wilson, chairman, president and chief executive officer, in an interview Wednesday.
"We didn't think it would be as bad as it was" over the last year or so, but now "we have positioned ourselves well" to begin adding customers, he said.
Some of the changes the company has made is in its investment portfolio, where it has reduced its exposure to commercial real estate and municipal bonds, two sectors where Wilson believes the downturn has not completely played out.
Commercial real estate will see more losses to come, and "we think state and local governments are still facing the headwinds of large deficits," he said.
One area where Allstate is bullish is in corporate credit. The company has also been actively hedging to reduce the impact of higher interest rates. They haven't come yet, but Wilson wants the company to be prepared.
"If you could buy insurance a minute before an accident you would," he said.
The challenge now is to begin growing its auto insurance business and to reposition its Allstate Financial unit more to middle market and away from spread-based products, he said.
For the latest quarter, Allstate reported a profit of $518 million, or 96 cents a share, compared with a year-earlier loss of $1.13 billion, or $2.10 a share. Operating earnings, which exclude investment gains and losses, rose to $1.09 a share from 96 cents. Analysts estimated operating earnings per share of $1.01, according to a poll by Thomson Reuters.
Lavonne Kuykendall
Source: WSJ.com February 2010
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