This excerpt taken from the ALL 8-K filed Feb 1, 2006.
details about some of the important assumptions on which this guidance is based see the Consolidated Highlights section of this press release.
Allstate finished the year with a solid performance in the quarter. Operating income was $975 million despite the sizeable influence on our results from catastrophe losses, said Edward M. Liddy, chairman and chief executive officer, The Allstate Corporation. Hurricane Wilma, which struck south Florida as a category 3 hurricane in late October 2005, cost Allstate more than $500 million and will be one of the ten most costly catastrophes in U.S. history. Catastrophe losses in the quarter exceeded the average expected catastrophe losses we use in pricing by $0.30 per diluted share. Our book value per share increased by a strong 4.6 percent over the third quarter of 2005.
Overall, our property-liability written premium grew 2.4 percent in the fourth quarter compared to the fourth quarter of 2004. Allstate brand standard auto and homeowners written premium grew 3.5 percent and 6.3 percent, respectively in the quarter compared to the prior years quarter. Excluding the effects of catastrophe losses the combined ratio of 79.4 was an exceptional result.
In particular, our auto insurance business generated very good profitability helped by the favorable trends we continue to see in the frequency and severity of automobile accidents. Our superior claim handling practices over the long term are an important differentiator between Allstate and the rest of the industry and the principal reason why our severity experience is better than our competitors.
For the year, we were able to earn a profit after being hit by three of the ten most costly natural disasters in U.S. history. Our ability to be profitable in such a difficult year is a testament to the effectiveness of our strategy, our focus on superior execution and the diversity of our product offerings. In the quarter, we continued to make great progress in rolling out the companys newest generation of our sophisticated underwriting and pricing process for automobile and homeowners insurance. Allstate® Your Choice Auto insurance is continuing its introduction into more states.
I am especially proud of how our employees and agency owners responded to our customers during the 2005 hurricane season and their dedication to the difficult job they faced. The hurricane season of 2005 tested our companys ability to respond to those in need and deliver on our promise. We received hundreds of thousands of claims from customers and dispatched thousands of employees to help those who suffered losses from these terrible storms. Agency owners, many of whom were personally affected, also did tremendous work on behalf of their customers during this difficult time. To date, weve made significant progress in helping our customers impacted by Hurricanes Katrina, Rita, and Wilma. We have closed approximately 75 percent of the property claims and 97 percent of the auto claims filed from these three huge storms. I am pleased to say that we are once again able to demonstrate how well we deliver on the simple notion expressed by our slogan. Allstate customers are most certainly in Good Hands®.
We have made great progress on our property catastrophe management strategy by completing the placement of a new catastrophe aggregate excess of loss reinsurance agreement for our personal lines property and auto insurance business. This agreement covers the entire country, excluding Florida, and has a $2 billion limit on losses in excess of $2 billion, with a retention of 5 percent. This will significantly reduce our exposure to hurricanes and earthquakes as well as the probability of experiencing a loss in excess of $2 billion.
We are also intentionally slowing the writing of new property insurance business in certain markets to help limit our exposure to catastrophe losses caused by hurricanes and earthquakes. Written premium for our homeowners line of business has slowed and may turn negative as we accelerate our implementation of the companys property catastrophe management strategy.
While we manage down our exposure to property insurance in areas that are highly susceptible to significant catastrophe loss, we are continuing our call for public policy change and a more rational approach to how Americans prepare for and protect themselves against the devastating and highly unpredictable effects of catastrophes.
Allstate Financial generated operating income in the quarter of $139 million compared to $142 million in the fourth quarter of 2004. For the full year, operating income increased 5 percent to $581 million from $551 million in 2004. Total premiums and deposits were down slightly in the fourth quarter of 2005 to $4.01 billion from $4.16 billion in the fourth quarter of 2004. The reduced retail sales are a reflection of lower industry-wide fixed annuity sales and our continued discipline in pricing. Overall, we remain focused on our strategy of improving returns at Allstate Financial. We are making progress and will continue our efforts to improve returns and drive profitable growth.
Allstates annual operating income per diluted share guidance for 2006 is in the range of $5.60 to $6.00. This guidance is based on several important assumptions, which you will find in the Consolidated Highlights section of this press release.