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Investing: Allstate regrouping after mortgage crisis, tornadoes

Question: What are the prospects for my shares of Allstate Corp.? Are its television commercials helping or hurting the company?

Answer: Losses from tornadoes and mortgage-backed securities are of much greater concern to Allstate than is the response to its commercials about potential mayhem.

Tornadoes in the South, for example, were a primary contributor to the company’s estimated $1.4 billion in catastrophic losses in April. That nearly equals its total catastrophic losses for all of last year.

Allstate, the largest publicly traded U.S. home and auto insurer, has said it will seek rate increases in several states because weather-pattern changes have increased the number of hurricanes, floods and hailstorms in those areas.

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The insurer also has sued some major banks over mortgage-backed securities that suffered steep losses. It has sold its riskiest investments and is restructuring its financial business, which hurt its bottom line in the recent economic debacle.

The company’s enormous size lets it spread its fixed costs over a large base, while its network of agents helps keep a customer’s home, car and leisure-craft policies in one place.

In 2010, the insurer earned $928 million, up 8.7% from the year before, as its revenue slipped 1.9% to $31.4 billion. In the first quarter of 2011, profit more than quadrupled from a year earlier to $519 million.

Allstate’s stock is down 3.8% this year after climbing 6.1% in 2010. Analyst ratings on the shares consist of seven “strong buys,” five “buys” and 12 “holds,” according to Thomson Reuters.

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As for Allstate’s TV ads in recent years warning of “mayhem,” they lately have featured actor Dean Winters more than Dennis Haysbert, the reassuring voice of Allstate since 2003. Personifying mayhem to car owners, Winters has portrayed a falling tree, a crashing satellite TV dish and a distracted motorist.

Calamos Growth & Income fund has been smooth and steady

Question: What is your opinion of the Calamos Growth & Income fund?

Answer: This fund’s inventive mix of assets has meant smooth sailing for investors.

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Stocks and convertible securities — bonds or preferred stock that can be converted into common stock — each represent more than 40% of the portfolio, with conventional bonds accounting for about 10%.

The $4.7-billion portfolio — run by Calamos Asset Management founder John Calamos and his nephew Nick Calamos — is up 22% in the last 12 months, beating four-fifths of its peer category of so-called balanced funds with relatively aggressive asset allocations. Its three-year and five-year annualized total returns, both topping 5%, are each at the top of the category.

Calamos Growth & Income “is for an investor who wants a fund without a lot of volatility, since its equities are high quality and its fixed-income stake offers some ballast,” said Courtney Goethals Dobrow, mutual fund analyst at Morningstar Inc. “We see it as a supporting player, but I can see it functioning as a core holding too.”

The fund imposes a 4.75% sales charge, or “load,” on purchases of its shares and requires a $2,500 minimum initial investment. Its last reported annual expense ratio is 1.09% of fund assets.

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Andrew Leckey answers questions only through the column. Write to him at yourmoney@tribune.com.


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