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Allstate (ALL) to Report Q4 Earnings: What's in the Cards?

The Allstate Corporation ALL is slated to report fourth-quarter 2022 results on Feb 1, after market close.

Q4 Estimates

The Zacks Consensus Estimate for Allstate’s fourth-quarter earnings is pegged at a loss of $1.37 per share. Notably, earnings of $2.75 per share was reported in the prior-year quarter.

The consensus estimate for revenues is pegged at $12,489 million, suggesting a 2% fall from the year-ago quarter’s reported number. The consensus mark matches our estimate.

Earnings Surprise History

Allstate’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.29%. This is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

 

The Allstate Corporation Price and EPS Surprise
The Allstate Corporation Price and EPS Surprise

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

Factors to Note

Reduced net investment income, resulting from lower performance-based investment income, is expected to have dampened the top line of Allstate in the fourth quarter. The Zacks Consensus Estimate for net investment income is pegged at $578 million for the to-be-reported quarter, higher than the management’s expectation of $557 million but lower than our estimate of $590.7 million.

The net investment income of ALL’s Property-Liability segment is anticipated to have witnessed a drop in the to-be-reported quarter. The consensus estimate for the segment’s net investment income is pegged at $501 million, which indicates a decline of 37.7% from the prior-year quarter’s reported number. The consensus mark is lower than our estimate of $536.1 million.

In the to-be-reported quarter, catastrophe losses, a majority of which is likely to have stemmed from Winter Storm Elliott, are expected to have dampened the underwriting performance of Allstate. Management estimates pretax catastrophe losses of $779 million for the fourth quarter.

The auto insurance business is likely to have grappled with softer underwriting performance due to elevated loss costs arising from continued inflationary pressure in the to-be-reported quarter. Nevertheless, ALL has been steady with upgraded claims operating processes and prudent rate increases to mitigate headwinds stemming from high loss costs.

Additionally, the homeowners’ insurance business of Allstate is expected to have borne the brunt of inflation paving the way for elevated labor and material costs.

Feeble underwriting performance is expected to have deteriorated the combined ratio of the insurer and, simultaneously, acted as a drag on its margins in the fourth quarter. The Zacks Consensus Estimate for the combined ratio of the Property-Liability segment is pegged at 100%, indicating a deterioration of 10 basis points from the year-ago quarter’s actual. However, the same is pegged lower than management’s estimate of 109.1% and our estimate of 104.5%.

Bringing in a ray of hope, the downside to the top line is expected to have been partly offset by growing premiums earned in the Property-Liability and Protection Services segments in the to-be-reported quarter. Improved average premiums and policy growth might have benefited the Property-Liability segment, while the Protection Services unit is likely to have gained on strength in Allstate Protection Plans.  

The consensus mark for fourth-quarter net premiums earned in Property-Liability and Protection Services segments implies increases of 7.7% and 12.1%, respectively, from their prior-year quarter’s reported figures.

The Allstate Health and Benefits segment is likely to have received an impetus from growing premiums from group health and employer voluntary benefits. A lower benefit ratio and reduced restructuring charges might have also benefited the segmental performance in the to-be-reported quarter.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Allstate this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here, as elaborated below.

Earnings ESP: Allstate has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

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Zacks Rank: Allstate currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

While an earnings beat looks uncertain for Allstate, here are some companies from the insurance space, which, according to our model, have the right combination of elements to beat on earnings this time around:

Prudential Financial, Inc. PRU has an Earnings ESP of +0.46% and is currently Zacks #2 Ranked. The Zacks Consensus Estimate for PRU’s fourth-quarter 2022 earnings is pegged at $2.57 per share, which indicates a fall of 19.2% from the prior-year quarter’s reported number.

The bottom line of Prudential Financial beat estimates in two of the trailing four quarters and missed the same twice, the average surprise being 3.64%.

Arch Capital Group Ltd. ACGL currently has an Earnings ESP of +5.42% and a Zacks Rank of 3. The Zacks Consensus Estimate for ACGL’s fourth-quarter 2022 earnings is pegged at $1.34 per share, suggesting 5.5% growth from the year-ago quarter’s reported figure.

Arch Capital’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 15.37%.

NMI Holdings, Inc. NMIH currently has an Earnings ESP of +2.33% and a Zacks Rank of 3. The Zacks Consensus Estimate for NMIH’s fourth-quarter 2022 earnings is pegged at 86 cents per share, indicating an improvement of 17.8% from the prior-year quarter’s reported number.

The bottom line of NMI Holdings beat estimates in each of the trailing four quarters, the average surprise being 6.38%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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

Prudential Financial, Inc. (PRU) : Free Stock Analysis Report

The Allstate Corporation (ALL) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

NMI Holdings Inc (NMIH) : Free Stock Analysis Report

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