Allstate Boosts Its Hurricane Loss Figure to $1.73 Billion

NORTHBROOK, Ill. — Allstate Insurance Co. on Tuesday raised its estimate for damage that it must cover from Hurricane Andrew to $1.73 billion from $1 billion.

The higher figure means that the hurricane’s impact on third-quarter earnings will rise to $1.15 billion from $700 million, the unit of Sears, Roebuck & Co. said.

Allstate, which insures more property in storm-struck Florida and Louisiana than any company but State Farm, said homeowner claims have been costlier than expected.

While the company correctly anticipated about 159,000 claims, it did not expect the losses to homes and interior property to be so high, spokesman Bob Lapinski said.

The company’s original estimate Sept. 1 was based on hurricane modeling techniques and assessments from previous storms.

About 10% of the damage is covered by the company’s own insurance, Lapinski said. Allstate will write off more than 25% of the remainder, he said. The company has $8 billion in reserves, he added.

“We feel very confident that we’re a solid company and that we have the financial strength to handle the losses,” he said.

Lapinski said Allstate will consider next year whether to raise premiums.

“You won’t see dramatic increases from us as a result of the hurricane,” he said. “Obviously, these numbers will go into the equation. But we take a 15- to 20-year snapshot, rather than just a one- or two-year look.”

Steven Kernkraut, an analyst with Bear Stearns & Co., said the new estimate will have little effect on Sears’ long-term stock price. “Investors had already been looking for down earnings for the third quarter,” he said. “Over the long run, this gives the company ammunition for higher premiums.”

Sears said a week ago that it will make an initial public offering next year of 20% of Allstate’s shares as part of a plan to spin off its financial services operations.

The insurance industry initially estimated insured property damage from the hurricane at $7.3 billion. Revisions by Allstate and Prudential Insurance Co. of America alone have pushed the figure to $8.8 billion, and experts said it could approach $10 billion.

A spokesman for State Farm Insurance put its damage estimate at $1.5 billion.