Allstate CEO says share buyback can wait until economy improves

Published: 12/8/2009 9:35 AM | Updated: 12/8/2009 12:34 PM

Allstate Corp. Chief Executive Officer Thomas Wilson said he doesn't plan to restart the insurer's share repurchase program because of concerns about the U.S. economy.

"I am not yet comfortable" with the economic climate, Wilson said today at a Goldman Sachs Group Inc. conference in New York. "When I feel comfortable with it, we'll do what we've always done, which is: it's shareholders' money, we should give it back to them."

Wilson halted Allstate's share repurchase program last year and cut the dividend by 51 percent in February after losing $1.7 billion in 2008 on investment losses and storm-related costs. Allstate, the largest publicly traded U.S. home and auto insurer, has paid $23 billion to shareholders in the last 10 years, Wilson said today. The Northbrook-based company had increased its dividend for the previous 14 years.

"We didn't have earnings, so we cut the dividend," Wilson said. "When earnings get up and are at more sustainable levels, I suspect we'll go back to payout ratios and yields we've had in the past."

The insurer's third-quarter profit of $221 million reversed a $923 million net loss a year earlier. No hurricanes made landfall in the U.S. this year, making 2009 the calmest storm season in 12 years. In 2008, catastrophes including Hurricanes Ike and Gustav cost insurers $27 billion, according to the Insurance Information Institute.

Allstate joined insurers including Travelers Cos. and Prudential Financial Inc. in scaling back repurchase programs last year amid the financial crisis. Travelers has since resumed buybacks, authorizing a $6 billion buyback in October and repurchasing $1 billion in shares in the third quarter. Prudential increased its annual dividend 21 percent after posting a third straight quarterly profit.

Chubb Corp., which boosted its dividend six percent in February and repurchased 12.78 million shares in the first nine months of 2009, approved a buyback program of 25 million shares last week after ending a streak of six quarterly profit declines.

Allstate fell 31 cents, or 1.1 percent, to $27.97 at 10:28 a.m. in New York Stock Exchange composite trading. The insurer has dropped 47 percent in the past two years.

Allstate's stock has "significant upside potential," Wilson said, adding that shares are trading at 90 percent of book value, a measure of assets minus liabilities.