It used to be that a company could outperform analyst projections for the quarter but still get hammered because it didn't exceed "whisper numbers." Taking a trip to those bygone days, shares of Allstate (NYSE:ALL) are trading down after releasing earnings Wednesday that beat expectations but weren't as strong as investors had hoped.

Allstate reported operating income of $1.88 per diluted share and net income of $1.83 for the third quarter, up from a loss in the same period last year. That beat analyst consensus estimates of $1.78, which increased quickly, as it has become apparent that insurers are likely to weather this year's hurricane season (set to end November 30) unscathed. Just 90 days ago, analysts were expecting $1.28. But it looks like they were hoping the company would report higher numbers, since the stock has fallen a couple of points since the earnings release Wednesday evening.

In any case, insurers have performed well since the devastating hurricane trio of Katrina, Rita, and Wilma hit shore. Since that time, investors expected premium rates to rise and benefit underwriting trends going forward. While that hasn't necessarily materialized, the more benign hurricane season so far this year means less catastrophe losses and insurers that are more careful about writing and selling insurance policies in areas prone to natural disasters.

The question for current or prospective investors is, where do we go from here? In the earnings press release, Allstate also increased guidance for diluted operating income for 2006 to $7.35-$7.50, up from $6.70-$7.00 guided previously. Based on a current stock price of $61.64, the valuation is definitely reasonable at under 9 times forward earnings, plus the company has a dividend yield of 2.2%.

However, the shares are currently trading near their 52-week highs, are up nearly 23% over the past year, and are up over 50% since October 2004. Allstate is among the largest property/casualty (or P&C) insurers in the nation, but the industry is slowly growing, with intense competition from the likes of AIG (NYSE:AIG), Chubb (NYSE:CB), Progressive (NYSE:PGR), St. Paul Travelers (NYSE:STA), and even Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B).

I'm not saying Allstate won't continue to dominate, but the industry is cyclical and also subject to the whims of mother nature and future hurricanes, earthquakes, and other calamities. As a contrarian investor, I'll wait on the sidelines until a better entry point materializes, but I can't argue with the beneficial safety net insurers provide society.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to emailhim with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy .