Higher auto and homeowners insurance rates have helped Allstate Corporation greatly improve its bottom line.

Allstate reported a 69 percent increase in fourth quarter net income for 2002.

Net earnings were $447 million, or 63 cents per share, compared to $265 million, or 37 cents per share, during the fourth quarter in 2001.

For all of 2002, Allstate reported net income of $1.13 billion, compared to $1.16 billion for 2001. Operating income was $2.08 billion for 2002, compared to $1.49 billion in 2001. Revenues were $29.57 billion, a 2.5 percent increase from $28.86 billion in 2001.

Allstate chief executive Edward Liddy says the company experienced higher catastrophe costs in 2002.  Even so, losses related to mold and water damage continue to decline as Allstate policies are renewed to limit coverage for those problems.

Liddy says mold and medical inflation, as well as adverse developments in asbestos, environmental, and other mass torts, prompted Allstate to strengthen reserves.

Future rate hikes

Liddy admits Allstate might have to raise homeowners and auto insurance rates again in 2003, but he hopes the increases will be smaller than in the previous year. 

Liddy says in the past, insurers were able to hold the line on insurance rate increases because of gains in the stock market.  As those investments have lost money, Liddy says Allstate has been forced to increasingly turn to higher insurance rates. 

Liddy admits higher premiums are one reason why Allstate has seen a decline in the number of auto and homeowners policies it has in force.  Allstate’s CEO predicts as rates stabilize, the company will see the number of policies rise again.