Allstate (ALL) Incurs Q3 Loss Due to Weak Underwriting Results

The Allstate Corporation ALL incurred a third-quarter 2022 adjusted loss of $1.56 per share, narrower than the Zacks Consensus Estimate of a loss of $1.57. ALL reported earnings of 73 cents per share in the prior-year quarter.

Quarterly results were dampened by softer underwriting results, a decline in equity valuation, lower net investment income, and elevated costs and expenses.

Operating revenues improved 8.1% year over year to $13,375 million and beat our estimate of $12,227.6 million. Revenue growth came on the back of 9.8% year-over-year growth in earned premiums within its Property-Liability business. Earned premiums were aided by better average premiums in auto and home insurance business coupled with higher Protection Services revenues.

The Allstate Corporation Price, Consensus and EPS Surprise

The Allstate Corporation Price, Consensus and EPS Surprise

The Allstate Corporation price-consensus-eps-surprise-chart | The Allstate Corporation Quote

Q3 Operations

Total costs and expenses of $14,128 million escalated 15.3% year over year in the third quarter and came above our estimate of $12,983.3 million. The increase was due to higher property and casualty (P&C) insurance claims and claims expenses, and amortization of deferred policy acquisition costs and interest expenses.

Allstate incurred a pretax loss of $920 million against pretax income of $226 million in the prior-year quarter. Our estimate suggests a pretax loss of $918.1 million.

Total policies in force came in at 185 million as of Sep 30, 2022, slipping 3.6% year over year.

Net investment income dropped 9.7% year over year to $690 million, mainly due to a 23.3% decline in performance-based investment income. Yet, market-based investment income rose 14.2% year over year in the quarter under review.

Allstate incurred catastrophe losses of $763 million in the quarter under review, which plunged 39.9% year over year.

Book value per common share came in at $58.35 as of Sep 30, 2022, down 31% year over year.

Adjusted net income return on equity in the trailing 12-month period deteriorated 1,690 basis points (bps) year over year to 4.3%.

Segmental Performances

Property-Liability insurance premiums improved 9.8% year over year to $11,157 million. The reported figure beat the Zacks Consensus Estimate of $11,029 million.

The segment recorded an underwriting loss of $1,292 million in the third quarter, wider than the prior-year quarter’s loss of $534 million. The underwriting loss was mainly due to adverse prior-year reserve re-estimates, primarily in auto insurance pertaining to physical injury coverage and higher current report year claim severities across injury and physical damage coverages. The underlying combined ratio of 96.4% deteriorated 600 bps year over year.

Protection Services' revenues amounted to $640 million, which grew 7.2% year over year in the quarter under review. Strength in Allstate Protection Plans and Allstate Dealer Services contributed to the sound segmental performance. Adjusted net income of $35 million dropped 10% year over year. The figure lagged the consensus mark of $38.2 million but outpaced our estimate of $27.4 million.

Allstate Health and Benefits’ total premium and contract charges inched up 0.7% year over year to $463 million. Growth came on the back of a rise in group health and employer voluntary benefits. The reported figure fell short of the consensus mark of $468 million. Adjusted net income of $54 million soared 63.6% year over year in the quarter under review and missed our estimate of $66.4 million

Financial Update (as of Sep 30, 2022)

Allstate exited the third quarter with a cash balance of $786 million, up 3% from the 2021-end level. Total assets of $97.7 billion slid 1.8% from the figure at the end of 2021.

Long-term debt amounted to $7,967 million, marginally down from $7,976 million at 2021 end. Total shareholders’ equity of $17,673 million declined 29.8% from the figure as of Dec 31, 2021.

Capital Deployment

Allstate rewarded its shareholders with $897 million in the form of share buybacks of $665 million and dividends worth $232 million. ALL has $1.2 billion left under its $5-billion buyback authorization.

Outlook

Management remains optimistic about the broad rate increases within ALL’s auto insurance business next year.

The $5 billon-share repurchase program is expected to be exhausted post the first quarter of 2023.

Zacks Rank

Allstate currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Some Other P&C Insurers

Of the P&C insurance industry players that have reported third-quarter results so far, the bottom-line results of W. R. Berkley Corporation WRB, Kinsale Capital Group, Inc. KNSL and Cincinnati Financial Corporation CINF beat the respective Zacks Consensus Estimate

W.R. Berkley reported a third-quarter 2022 operating income of $1.01 per share beat the Zacks Consensus Estimate of 82 cents by 23.2%. The bottom line improved 14.8% year over year. Operating revenues came in at $2.8 billion, up 16.7% year over year. The top line beat the consensus estimate by 2.7%. WRB’s net premiums written were a record $2.6 billion, up 10.8% year over year.

Kinsale Capital’s third-quarter 2022 net operating earnings of $1.64 per share outpaced the Zacks Consensus Estimate by 15.5%. The bottom line improved 3.1% year over year. Total revenues rose 31.5% year over year to about $217 million. The top line, however, missed the Zacks Consensus Estimate by 1.4%. KNSL’s gross written premiums of $284.1 million rose 43.8% year over year. Net written premiums climbed 38.2% year over year to $235.9 million in the quarter.

Cincinnati Financial reported third-quarter 2022 operating income of 73 cents per share, which beat the Zacks Consensus Estimate by 2.8%. The bottom line decreased 43% year over year. Total operating revenues in the quarter under review were $2.1 billion, which improved 12.2% year over year. The top line missed the consensus mark by 0.09%. CINF’s net written premiums climbed 14% year over year to $1.7 billion, attributable to premium growth initiatives, price increases and a higher level of insured exposures.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
 
The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research