Allstate Declines Most Since October After Lacher Departs
July 18, 2011, 5:31 PM EDTBy Andrew Frye and Brooke Sutherland
(Updates with earnings estimates in seventh paragraph.)
July 18 (Bloomberg) -- Allstate Corp., the second-largest U.S. home and auto insurer, fell the most since October in New York trading after the departure of Joseph Lacher, president of the company’s main businesses.
Allstate dropped $1.46, or 5 percent, to $28.01 at 4:01 p.m. in New York Stock Exchange composite trading. Lacher, who oversaw residential and car coverage businesses, is leaving the company, effective immediately, the Northbrook, Illinois-based insurer said in a statement today.
“This comes as a complete shock, and it’s a very significant disappointment,” Meyer Shields, an analyst with Stifel Nicolaus & Co., said in an interview. “They’re losing somebody who has been held in reasonably high regard by investors,” said Shields, who cut his rating on Allstate to “hold” from “buy.”
Allstate, led by Chief Executive Officer Thomas Wilson, said last month that returns at the homeowners business were “inadequate” as it seeks to compete with No. 1 State Farm Mutual Automobile Insurance Co. At the car-insurance operation, Allstate is seeking to defend market share from Progressive Corp. and Berkshire Hathaway Inc.’s Geico unit, which have been adding customers through Internet sales. Presidents at Lacher’s former operation will report to Wilson.
“Investors will interpret this as a problem at Allstate,” said Paul Newsome, an analyst with Sandler O’Neill & Partners LP. “Joe was one of the more visible, well liked people at Allstate by investors. So him leaving, for whatever reason, I believe will be viewed negatively.”
Performance This Year
Allstate has declined 12 percent this year, compared with the 8.7 percent drop of the 24-company KBW Insurance index. The company doesn’t comment on personnel matters, said Maryellen Thielen, a spokeswoman for Allstate.
The insurer is scheduled to report second-quarter results on Aug. 1 and may post a loss of about $831 million, the worst three-month period in more than two years, according to 12 analysts surveyed by Bloomberg. Catastrophes including the April tornadoes that leveled parts of Tuscaloosa, Alabama, cost Allstate about $2.3 billion in the three months ended June 30, according to company statements.
Allstate’s overall standard auto policy count has dropped for most of the last three years. Progressive said this month that total personal auto insurance policies rose to 8.38 million on June 30 from 7.97 million a year earlier.
Wilson hired Don Civgin, formerly of OfficeMax Inc., as chief financial officer in 2008 as the company booked investment losses at its life unit. The same year, Judith Greffin was promoted to chief investment officer. Former American International Group Inc. Vice Chairman Matthew Winter was named head of the Allstate’s life insurance unit in 2009.
“Wilson is under a lot of pressure,” said Mark Dwelle, an RBC Capital Markets analyst. “Investors haven’t been pleased.”
Lacher joined Allstate in 2009 from Travelers Cos., where he oversaw units that accounted for about 45 percent of the company’s premiums.
--With assistance from Noah Buhayar in Los Angeles. Editors: Dan Reichl, Dan Kraut
To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Brooke Sutherland in New York at bsutherland5@bloomberg.net.
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
