This excerpt taken from the ALL 8-K filed Apr 18, 2006.
to a range of $6.00 to $6.40, compared to the previously announced range of $5.60 to $6.00.
(1) Measures used in this release that are not based on accounting principles generally accepted in the United States (non-GAAP) are defined and reconciled to the most directly comparable GAAP measure and operating measures are defined in the Definitions of Non-GAAP and Operating Measures section of this document.
This is an excellent start to 2006 with net and operating income per diluted share up 33.5 percent and 20.4 percent, respectively, compared to the first quarter of 2005, said Edward M. Liddy, chairman and chief executive officer, The Allstate Corporation. The profitability of Allstate brand standard auto and homeowners insurance remains very strong as our intense focus on generating consistent, profitable growth continues to serve us well.
Underwriting income for our Property-Liability unit was very strong at $1.24 billion, an increase of 26.6 percent compared to the first quarter of 2005 as positive trends in the frequency of claims in our auto and homeowners insurance lines continued. Though many states were affected by early spring storms, catastrophe losses were relatively light in the first quarter. Nonetheless, our national catastrophe team was rapidly deployed to several states in the southeastern part of the country to begin helping our customers put their lives back together following the recent severe weather that brought tornados, high winds and hail.
Allstate brand homeowners premium written grew 2.4 percent and policies in force grew 2.6 percent. In pursuit of our goal to provide shareholders an acceptable, less volatile rate of return on the risks assumed in our property business, we made good progress on the implementation of key elements of our property catastrophe management strategy in the quarter and we continue to examine a variety of potential future actions. We are intentionally limiting the amount of new property insurance business we add to our books, particularly in parts of New York, Texas, California and certain other states, along with reducing our existing catastrophe exposure in coastal New York and Florida. We have submitted nearly two-thirds of more than 300 property insurance rate filings we plan to make in catastrophe-prone states as we seek to reflect the cost of our new reinsurance program. In most states, we are no longer offering new coverage for damage caused by earthquakes, which is generally an optional coverage on property insurance policies. For our affected customers, we are making every effort so that participating Allstate agents can offer them insurance protection from another insurance carrier.
Allstate brand standard auto premium written grew 4.1 percent and policies in force grew 2.8 percent. Allstate® Your Choice Auto, our innovative new auto insurance product, continues to do well. We have sold more than 770,000 policies since we introduced the product in Oregon in late 2004. In the quarter, we launched the product in 11 states and the District of Columbia and the product is now available in 38 states and D.C. In the first quarter of 2006, approximately two-thirds of standard auto new issued applications were Allstate Your Choice Auto policies and almost half of the Allstate Your Choice Auto policies were in the higher value platinum and gold segments. As this new product rollout continues, it will receive local and national advertising support. We are also making good progress on our initiatives aimed at improving the customer experience and are further refining our Tiered Pricing. While competition remains strong in our auto insurance business, we remain confident in our ability to grow market share profitably over time.
Allstate Financial generated operating income of $144 million compared to $149 million in the first quarter of 2005 with the decrease primarily due to $10 million of after-tax restructuring charges. Premiums and deposits were $2.68 billion, which were down 32.7 percent compared to the first quarter of 2005 principally because of reduced institutional sales. In the quarter, we announced a strategic decision to dispose of substantially all of our variable annuity business through a reinsurance agreement with Prudential Financial, Inc. In addition, Prudential will become the exclusive provider of variable annuities to be sold through our Allstate agencies to ensure that our customers will continue to have this important retirement product available through their Allstate agency. This transaction, expected to be completed in the second quarter of 2006, supports an important strategic objective to further develop and focus on our suite of top-tier products while improving the return on capital invested in this business. Allstate Financial is making great progress toward simplifying its business and will be well-positioned to focus on its core products of fixed and equity-indexed annuities and life insurance.
As we report financial results for the first quarter of 2006 today, we also begin a new chapter in the history of Allstate Insurance Company, which celebrated its 75th anniversary yesterday. What began as an idea conjured up on a commuter train on the way into Chicago is now a thriving, financially strong, independent company. I am pleased to report our next 75 years are off to a great start, continued Liddy. I have no doubt our founders would be proud of what their idea has become, would marvel at our accomplishments, and would agree that our future remains very bright.