By SHAILA DANI

AP Business Writer

NEW YORK (AP) - A milder hurricane season this year helped Allstate Corp. turn a third-quarter profit as its losses for storms and other catastrophes dropped sharply.

ALLSTATE CORP  NYSE:ALL  Updated: 16:01 ET  29.12  +0.25

The property and casualty insurer said Wednesday its net income rose to $221 million, or 41 cents per share, from a loss of $923 million, or $1.70 a share, in the year-ago period.

During the third quarter, Allstate posted catastrophe losses of $407 million, down about 78 percent from the $1.82 billion it recorded in the year-ago period, which included $1.4 billion in losses from Hurricanes Ike and Gustav.

Operating income, which excludes investment gains and losses, rose to $538 million, or 99 cents per share, from a loss of $190 million, or 35 cents per share a year ago.

Analysts polled by Thomson Reuters were expecting earnings of $1.01 per share from the Northbrook, Ill. company. Analysts typically exclude investment gains and losses from their estimates.

Revenue rose 3.6 percent to $7.58 billion from $7.32 billion a year ago, despite a decrease in net investment income and property-liability premiums.

With the third-quarter falling short of analysts' forecasts, Allstate's shares slipped 62 cents, or 2 percent, to $29 in afterhours trading. They closed the regular session down 12 cents, almost flat for the past year at $29.62.

The company's consolidated investment portfolio rose $4.2 billion during the three months ended Sept. 30 to $100.6 billion. Gains on credit and stock investments more than offset some losses due to interest-rate hedging, said Allstate Chairman, President and Chief Executive Tom Wilson in an interview with The Associated Press.

Investment income fell $271 million from a year ago to $1.1 billion due to lower balances, lower yields and other investment actions. The company shifted to shorter-duration, low-yielding fixed-income securities to mitigate risk and increase availability of cash.

Allstate incurred $519 million in net realized capital losses for the quarter, before taxes, partly due to write-downs on real estate and other securities issued by European financial institutions.

Property and liability premiums written, or new and renewed insurance contracts, fell 3.6 percent to $6.54 billion.

Operating income in Allstate's financial business rose to $95 million from $88 million a year ago, partly due to a drop in mortality-related payments, Wilson said. The business unit is moving ahead with restructuring plans announced earlier this year, including 1,000 job cuts aimed at generating annual cost savings of $90 million by 2011.

Allstate's quarterly property-liability combined ratio, a measure of profitability, fell to 94.7 from 112.7 in the third quarter of 2008.

A ratio above 100 means that for every premium dollar taken in, more than a dollar went to cover claims and other expenses. A figure below 100 means the company made a profit on its insurance operations.

As of Sept. 30, Allstate held $17.5 billion in equity.

``We've got plenty of capital and plenty of cash and high liquidity,'' Wilson said.

11/04/09 18:41 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.