April 23 (Bloomberg) -- Allstate Corp., the largest publicly traded U.S. home and auto insurer, said profit declined for the third consecutive quarter as catastrophe costs more than tripled. The company declined 2.5 percent in extended trading.

First-quarter net income fell 77 percent to $348 million, or 62 cents a share, from $1.5 billion, or $2.41, in the same period a year earlier, the Northbrook, Illinois-based company said today in a statement. Profit before investment losses was $1.33 a share, compared with the $1.62 average estimate of 21 analysts surveyed by Bloomberg.

Chief Executive Officer Thomas Wilson is scaling back the number of homes Allstate covers in catastrophe-prone areas to reduce losses. Hurricane-force winds battered the U.S. West Coast in January and the number of reported tornadoes rose about 50 percent during the quarter in the U.S. from a year earlier, according to the National Oceanic and Atmospheric Administration.

``There are quarters when the weather's great and they blow up earnings,'' said Cliff Gallant, an analyst at KBW Inc. in New York in an interview. ``Got to take the good with the bad.''

Allstate's catastrophe losses were $568 million in the quarter, compared with $161 million a year earlier, contributing to an underwriting loss at the unit that sells coverage to homeowners.

Storm Damage

The West Coast storms, with winds peaking at 163 miles an hour, caused as much as $600 million in insured losses industrywide. The majority of the damage was in California, according to an estimate from AIR Worldwide, a catastrophe modeling firm based in Boston.

Tornadoes this year killed at least 48 people from Texas to Ohio. Atlanta tornadoes caused $350 million in insured losses, according to the Georgia insurance commissioner's office.

``It appears that Allstate had a higher concentration than the industry average in the states that suffered catastrophes in the first quarter,'' said William Wilt, an analyst at Morgan Stanley in New York, before the earnings were released. Wilt has an ``equal weight'' rating on the shares.

Allstate has fallen 6.9 percent this year in New York Stock Exchange composite trading, compared with the 11 percent decline in the 24-member KBW Insurance Index. The shares fell to $47.40 in extended trading at 4:40 p.m. in New York. The company released results after the close of regular trading.

Premiums and Earnings

The company earned 6 cents for every dollar it collected in premiums for its property-casualty units. Excluding the effects of catastrophes and changes to reserves for claims from prior quarters, the company earned 14.2 cents per premium dollar, compared with 15.9 cents a year earlier.

Allstate repeated the guidance it gave in January, when it said it expects to retain between 11 and 13 cents of every dollar in 2008 excluding catastrophes and reserve changes.

The insurer had a pretax investment loss of $655 million, including writedowns of $347 million on fixed-income securities, primarily because of a decline in the value of holdings tied to residential mortgages.

``It's a concern,'' said Gallant. ``We could see further writeoffs. It could hurt the stock tomorrow.'' Gallant rates the shares ``market perform.''

Allstate, which gets about two-thirds of its revenue from its auto unit, raised prices for car coverage in the quarter by an average of 4.5 percent in 12 states as the cost of providing medical care to accident victims rose.

Moves by Competitors

The rate increases continue a pattern from last year, when the company raised the price of car coverage in about two dozen states last year, while some competitors, including State Farm Mutual Automobile Insurance Co. and Progressive Corp., cut their rates.

Some companies are attempting to reverse course, requesting rate increases from state regulators to offset rising expenses and an increasing number of auto claims.

The number of standard auto policyholders was down less than 1 percent from a year earlier. Medical costs rose 8.6 percent, while a yearlong trend of rising auto accidents -- a measurement called ``frequency'' by insurers -- reversed course and fell 2.4 percent from a year earlier.

``I'm not liking the frequency and severity trends I see, but we're way ahead on price,'' Wilson said at a conference in February. Allstate will have ``more flexibility'' to raise rates and add customers as competitors charge more, he said.

Rising Prices

Analysts including Wilt say hospitals are raising prices, running more tests on emergency-room patients and taking steps to ensure that auto insurers pay full price for the treatment of accident victims.

State Farm, the only U.S. auto insurer larger than Allstate, has raised rates for standard auto coverage in five states this year, while lowering them in six others, spokesman Dick Luedke said this week. The Bloomington, Illinois-based company cut the price of car insurance in 49 states by an average of 4.9 percent in 2007, contributing to an underwriting loss of $659 million in its auto unit for the year.

Allstate is under pressure from California's elected insurance commissioner, Republican Steve Poizner, to reduce rates for drivers in the state. An administrative law judge ruled last month that the insurer must lower rates by an average of 16 percent. Allstate is scheduled to ask a superior court judge for a stay of that rate cut pending its appeal at a hearing tomorrow.

Progressive, the first of the 10 largest U.S. insurers to report first-quarter results, said April 9 that profit fell 34 percent to $239.4 million as claims costs rose and premium revenue declined because of price cuts last year. Progressive CEO Glenn Renwick has stopped dropping rates for car coverage to combat rising claims costs.

Florida Dispute

Allstate's efforts to scale back home coverage in Florida have attracted the attention of that state's insurance commissioner, Kevin McCarty, who is investigating possible collusion in the industry.

He suspended the insurer's licenses to sell new policies in the state in January, saying Allstate defied subpoenas seeking records showing how it sets prices and resolves claims. A Florida court upheld the suspension, prompting Allstate to file an appeal that has postponed its implementation.

Nationwide, Allstate raised the price of homeowner coverage by an average of 11 percent. Premium revenue from covering homes declined 1.3 percent as the number of customers fell and the company increased its spending on reinsurance that helps recoup claims costs after some major catastrophes.

While Allstate no longer wants to add residential customers in Florida because of hurricane risk, the insurer has been trying to attract new auto and life insurance customers in the state.

Allstate ranks behind State Farm as the second-largest home and auto insurer in the U.S. by policy sales, according to 2007 data compiled by the National Association of Insurance Commissioners. Progressive, based in Mayfield Village, Ohio, is the third-largest auto insurer by the same measure.

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