Property and casualty insurer Allstate Corp. said Wednesday that its net income fell sharply in the second quarter as a result of investment losses.

But the Northbrook, Ill., company noted that the performance of both its insurance and financial services businesses showed improvements.

For the three months ended June 30, Allstate earned $145 million, or 27 cents per share. That compares with a profit of $389 million, or 72 cents per share, in the year-ago period.

Excluding one-time investment gains and losses, the company earned 81 cents per share. By that measure, analysts surveyed by Thomson Reuters expected Allstate to post a net income of 69 cents per share.

The investment losses pushed Allstate's quarterly revenue down to $7.66 billion, from $8.49 billion in the second quarter of 2009. The losses stemmed primarily from derivatives, which Allstate uses to hedge against risks such as interest-rate fluctuations.

The company booked $451 million in total realized capital losses, compared with a gain of $328 million in the year-ago quarter.

Excluding the impact of investment losses, the company's operating income rose to $441 million, from $297 million in the year-ago period.

In the company's insurance business, catastrophe losses for the quarter eased to $636 million, compared with a record $818 million in the same quarter last year.

The combined ratio, which measures an insurance company's losses and expenses, improved to 96.8 percent, from 100 percent in the year-ago quarter.

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

Meanwhile, the company's financial arm reported an operating income of $125 million, compared with $65 million last year.

When factoring in investment losses and other one-time costs, however, Allstate Financial had a net loss of $107 million for the quarter.