Oct. 22 (Bloomberg) -- Allstate Corp., the largest publicly traded U.S. home and auto insurer, suspended share repurchases after investment losses and claims from Hurricane Ike caused the first money-losing quarter since Katrina in 2005. The stock declined in extended trading.

The third-quarter net loss of $923 million, or $1.71 a share, compares with a profit of $978 million a year earlier, the Northbrook, Illinois-based company said in a statement today. The loss excluding declines in the value of some holdings was 35 cents a share, missing by $1.03 the average estimate of 19 analysts surveyed by Bloomberg.

Chief Executive Officer Thomas Wilson has pared back the number of homes Allstate covers in coastal regions to limit losses from storms. Hurricane Ike and a smaller storm, Gustav, cost insurers a combined $10 billion when they struck the Gulf Coast in September, making this year's hurricanes the most expensive since Katrina contributed to a record $58.7 billion of claims in 2005, according to preliminary data from Insurance Services Office Inc.

``When you have big storms, catastrophe losses are going to play a big role in the results,'' said Jim Ryan, an analyst at Morningstar Inc. in Chicago. ``Allstate has made some pretty substantial efforts to rein in their costs, but given the size of the storms the results are understandable.''

Allstate declined 4.4 percent to $27 at 4:17 p.m. in New York. The insurer has fallen about 45 percent this year in New York Stock Exchange composite trading, compared with the 52 percent decline in the 24-company KBW Insurance Index.

Catastrophe Costs

Allstate's catastrophe costs in the third quarter increased fivefold to $1.82 billion. The record number of tornadoes this year through June and greater-than-usual damage from wildfires last year weighed on Allstate's results in prior quarters after an uneventful storm season in 2006.

Allstate said today it suspended its $2 billion share buyback program this month after purchasing $449 million of stock through the authorization.

``It made sense to suspend that program until there was more stability in the marketplace,'' Wilson said in an interview. ``We're very strong both from a capital standpoint and liquidity.''

`Vulnerable' Securities

Allstate had a $1.3 billion realized investment loss, and sold $1.1 billion of holdings in the quarter that it deemed ``vulnerable to significant additional credit and pricing pressures.'' Book value per share, the measure of Allstate's assets minus liabilities, fell 16 percent over 12 months to $31.44.

The firm's board of directors this month voted to allow Allstate to inject as much as $1.25 billion in additional capital into its life insurance company because of declines in the value of the unit's fixed-income investments.

Allstate's holdings declined by $8.6 billion in the three months ended Sept. 30. The portfolio was worth about $105 billion on that date.

Allstate had securities of at least 12 financial companies, including bankrupt investment bank Lehman Brothers Holdings Inc., failed lender Washington Mutual Inc., and mortgage lenders Fannie Mae and Freddie Mac, which declined in value since June 30, the company said Sept. 23. The investments totaled about 2 percent of holdings, Allstate said.

Fannie, Freddie

``We lost $50 million when other people were losing hundreds of millions of dollars,'' on Fannie and Freddie, Wilson said. ``We will continue to go about aggressively reducing our exposure in real estate and financials.''

Allstate posted a $19 million investment loss from private equity, hedge funds and real estate funds in its property- casualty and life insurance units in the quarter, compared with income of $47 million a year earlier. The units made up most of the company's $2.96 billion in so-called ``partnership'' holdings, or 2.8 percent of its total investments, as of Sept. 30, compared with $2.89 billion on June 30.

Insurers reaching for higher returns than from bonds and stocks increased private equity and hedge fund assets by 48 percent last year to $49.8 billion, according to the National Association of Insurance Commissioners in Kansas City, Missouri, which compiles data from companies' U.S. units. In 2006, the holdings rose 34 percent.

Allstate spent $1.13 for every dollar it collected in premiums at its property-casualty units, compared with 91 cents - - a 9 cent profit -- on every dollar a year earlier.

Profit Margin

Excluding the effects of catastrophes and changes to reserves for claims from prior quarters, the company kept 14.1 cents per premium dollar in the third quarter, compared with 14 cents a year earlier. The insurer reiterated guidance it gave investors when it released second-quarter results, when it said that, by that measure, it expects to earn between 12 cents and 14 cents for all of 2008.

Wilson and his predecessor, Edward Liddy, bought protection from reinsurers, sought price increases and stopped selling new coverage in some catastrophe-prone regions after Katrina contributed to a $1.55 billion third-quarter loss in 2005. The insurer now covers 20 percent fewer homes in coastal areas than it did before that storm hit, Wilson said.

Hurricanes Gustav and Ike were the first substantial tests of those efforts. Gustav struck Louisiana on Sept. 1, sparing New Orleans a direct hit. Ike smashed into Galveston, Texas, two weeks later.

Shelter From the Storm

``When you look at Gustav and Ike, which we believe were two of the 10 most costly hurricanes ever in the United States, our losses are about half of what they would have been had we not done that,'' Wilson said. ``We've made a lot of progress. We'll continue to do what we have been doing.''

Catastrophe costs and investment losses contributed to an estimated $4.8 billion loss in the third quarter for all U.S. property and casualty insurers, according to a report by consulting firm Towers Perrin this week. Travelers Cos., the second-largest U.S. commercial insurer, said today that profit fell 82 percent to $214 million on losses from Ike.

Allstate, which gets about two-thirds of its revenue from its auto unit, has been raising the price of its car coverage in some states. Rivals including Bloomington, Illinois-based State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer, and No. 3 Progressive Corp. are following suit to counter the increasing cost of medical claims and repair costs.

Accident Rate

With gasoline selling for $4 a gallon in July and unemployment rising, Americans have been driving less for the first time since 1979, a trend that has resulted in fewer car crashes, Wilson said.

Allstate's rate of crash claims at its flagship auto unit declined 11.8 percent, the steepest slide in the three consecutive quarters that accidents fell. A drop in truck traffic amid the slowing economy may have contributed to the reduction in both the frequency and severity of claims, he said.

Still, higher oil costs also push up the cost of replacement car parts. The effect on driving may be temporary, as the price of regular unleaded slipped below $3 last week, said Paul Newsome, an analyst at Sandler O'Neill & Partners in Chicago.

Progressive, the first of the 10 largest auto insurers to report complete third-quarter results, lost $684.2 million, the company said Oct. 10. The net loss, its first in eight years, was caused by a writedown in the value of investments, including holdings of Fannie Mae and Freddie Mac.

Allstate is the second-largest home and auto insurer in the U.S. by policy sales, behind State Farm, according to 2007 data compiled by the National Association of Insurance Commissioners. State Farm is owned by its policyholders and doesn't report quarterly figures.

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