Allstate's All Right

Let's face it: Nobody enjoys paying car insurance premiums, or any other insurance premiums for that matter. Somehow the systematic depletion of our hard-earned dollars to cover a contingency we hope to avoid seems wasteful (except to those who've been forced to file a claim). However, each of those payments benefit someone's bottom line, whether it's a giant such as State Farm (which receives my reluctant checks every quarter), a fast-growing discounter such as Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) Geico, or somewhere in between -- such as Allstate (NYSE: ALL), which yesterday posted outstanding second-quarter numbers.

Earnings at the nation's second-largest property-casualty insurer soared 76% to $1.03 billion, handily outpacing forecasts of $1.15 per share by $0.32 on revenues of $8.3 billion. Underwriting income skyrocketed to $888 million from $181 million the year before, aided in part by catastrophe losses that were more than halved to $248 million.

Allstate's combined ratio, or expenses and claims divided by premiums, fell from 97.1% to 86.3%.

Not only were claims favorable, but also Allstate's vast agent sales force (which totals more than 90,000 through all distribution channels) ensured that auto and home policies-in-force grew by 4.9% and 5.7% respectively, and retention ratios of both lines of business increased by more than 100 basis points to 91% and 88%.

Years ago the barriers that once separated different financial sectors came crashing down, allowing one-stop financial shopping at a wide variety of companies. Now brokerage firms such as Merrill Lynch (NYSE: MER) are happy to offer a full suite of insurance products, U.S. Bancorp (NYSE: USB) and other commercial banking institutions are quick to refer customers to their in-house investment advisors, and insurance companies such as State Farm are providing assistance with certificates of deposit (CDs) and 401(k) rollovers.

Allstate has capitalized on this sweeping trend, complementing its core insurance business with traditional banking services through Allstate Bank, as well as life insurance, mutual funds, annuities, and financial planning through Allstate Financial.

Like most companies, Allstate has potential concerns that may come into play, not the least of which are questionable corporate governance, continued asbestos-related claims, and the ever-present threat of tornadoes, hurricanes, and other destructive temper tantrums thrown by Mother Nature. However, management just significantly lifted full-year earnings guidance from $4.80-$5.10 to a new range of $5.40-$5.65, which even at the low end would equate to a forward multiple of less than 9 -- a level seldom seen for a blue-chip industry leader like Allstate.

For answers to all the insurance questions you ever wanted to know but were afraid to ask, consult the Fool's Insurance Center.

Fool contributor Nathan Slaughter owns none of the companies mentioned.