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Allstate warns about profit
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September 24, 1999: 10:48 a.m. ET
Insurance stocks fall after Allstate lowers second-half forecast
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NEW YORK (CNNfn) - Shares of Allstate Corp. sank nearly 19 percent early Friday, and helped drag down other insurance stocks as well, after the company warned that second-half earnings likely will fall well below 1998 results, citing losses from Hurricane Floyd and higher expenses.
Allstate (ALL) stock dropped 6 to 25-3/4, a 52-week low, when trading opened. Shares of other insurers also lost ground. Hartford Financial Services Group Inc. (HIG) slipped 1-7/16 to 44, Travelers Property Casualty Corp. (TAP) lost 7/8 to 32-7/16, Progressive Corp. fell 3-5/16 to 88-9/16, and Chubb Corp. (CB) dropped 1-9/16 to 51-13/16.
Allstate, one of the nation's biggest insurers, said operating earnings are expected to fall in the range of 50 cents to 55 cents per diluted share in the third quarter, down from 76 cents per share in the year-earlier quarter. Analysts had projected earnings of 78 cents per share for the July-September period, according to the consensus forecast compiled by First Call Corp.
Third-quarter results are expected to be announced Oct. 20.
The company said fourth-quarter profit also may be hit by weather-related factors. Allstate said operating earnings may fall within the range of 65 cents to 73 cents per diluted share, down from 78 cents a year earlier and analysts' expectations of an 81-cent per share profit.
Besides claims stemming from Hurricane Floyd, Allstate cited costs associated with a new marketing campaign, investments in technology, lower margins, and a drop in average premiums. The company also said a review of its core businesses should be completed in the fourth quarter and it plans to announce a new business strategy.
Equity analyst Cathy Seifert of S&P Equity Group said that besides the effects of the recent hurricane, Allstate is also facing high costs to deal with restructuring and growth initiatives.
"The stock has been beaten down already. The question is how much lower it can go," she said. She has placed her "accumulate" rating on Allstate stock under review.
Analyst Michael Lewis of Warburg Dillon Read said Allstate's problems go beyond Floyd, and many investors are using the news to cash out of the property and casualty insurance sector entirely.
"The market is basically looking at the group, which has been a horrendous performer anyway," he said. Lewis has cut his rating on Allstate stock to a "hold" from a "strong buy." 
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Allstate
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