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Why Is Allstate (ALL) Up 5% Since Last Earnings Report?

A month has gone by since the last earnings report for Allstate (ALL). Shares have added about 5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Allstate due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Allstate Q3 Earnings Beat on Expanding Auto Premiums

The Allstate Corporation reported a third-quarter 2023 adjusted net income of 81 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 107.7%. A loss of $1.53 per share was reported in the prior-year quarter.

Operating revenues improved 9% year over year to $14,583 million in the quarter under review, attributable to a 10% rise in property and casualty (P&C) insurance premiums. The top line missed the consensus mark by a whisker.

The quarterly results benefited on the back of continued rate hikes, strong underwriting results and sound contribution from the Protection Services unit. However, the upside was partly offset by continued incidence of auto insurance loss costs, significant increase in catastrophe losses and an elevated expense level.

Q3 Operations

Net investment income of $689 million dipped 1% year over year in third quarter and beat the Zacks Consensus Estimate of $640 million as well as our estimate of $678.3 million. The metric suffered a blow due to a 44.5% year-over-year decline in performance-based investment income. Market-based investment income climbed 41% year over year.

Total costs and expenses increased 2.8% year over year to $14,518 million but came lower than our estimate of $14,731.6 million. The year-over-year increase was due to an elevated P&C insurance claims and claim expense level.

Allstate incurred a pretax loss of $21 million in the quarter under review, way narrower than the prior-year quarter’s loss of $910 million.

Total policies in force were 190.1 million as of Sep 30, 2023, which increased 2.7% year over year.

Catastrophe losses of $1,181 million soared 54.8% year over year in the third quarter but came lower than our estimate of $1,421.4 million.

Segmental Performances

The Property-Liability segment’s premiums earned improved 10% year over year to $12,270 million in the third quarter, which lagged the Zacks Consensus Estimate of $12,282 million but surpassed our estimate of $12,266.7 million. The metric was aided by rate increases resulting in improved average premiums. While the Allstate brand gained from growth in auto and homeowners average premium, an increase in the number of policies contributed to the results of National General.

The unit incurred an underwriting loss of $414 million in the quarter under review, narrower than the prior-year quarter’s loss of $1,292 million and our estimate of $843.2 million. The loss narrowed on the back of higher premiums earned and a decline in unfavorable prior-year reserve reestimates. The combined ratio improved 820 basis points (bps) year over year to 103.4% in the quarter under review but came lower than the consensus mark of 104%.

The Protection Services segment recorded revenues of $697 million, which rose 8.9% year over year in the third quarter, attributable to strength in Allstate Protection Plans. However, the metric lagged our estimate of $780.4 million. Adjusted net income dropped 22.9% year over year to $27 million due to increased severity of claims at Allstate Protection Plans. The figure also missed the consensus mark of $58 million.

The Allstate Health and Benefits segment’s premium and contract charges remained flat year over year at $463 million in the third quarter, higher than the Zacks Consensus Estimate of $449 million. Favorable group health results were partly offset by weakness in individual health. Adjusted net income of $69 million rose 9.5% year over year, which outpaced the consensus mark of $57 million and our estimate of $47.4 million. The metric benefited on the back of strength in group and individual health coupled with reduced operating expenses.

Financial Update (as of Sep 30, 2023)

Allstate exited the third quarter with a cash balance of $860 million, which grew 16.8% from the 2022-end level. Total assets of $101.2 billion increased 3.3% from the figure at 2022 end.

Debt amounted to $7,946 million, down 0.2% from the figure as of Dec 31, 2022.

Total shareholders’ equity of $14,593 million fell 16.6% from the 2022-end figure.

Book value per common share was $47.79 as of Sep 30, 2023, which tumbled 18.2% from the prior-year comparable period.

The adjusted net income return on ALL’s common shareholders’ equity in the trailing 12-month period was a negative figure of 9.7%. The metric was recorded at 4.4% in the prior-year comparable period.

Business Update

Allstate is eyeing the divestiture of the Health and Benefits businesses and the sale is likely to be completed next year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Allstate has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Allstate has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Allstate is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Kinsale Capital Group, Inc. (KNSL), a stock from the same industry, has gained 1.7%. The company reported its results for the quarter ended September 2023 more than a month ago.

Kinsale Capital Group, Inc. reported revenues of $314.37 million in the last reported quarter, representing a year-over-year change of +44.9%. EPS of $3.31 for the same period compares with $1.64 a year ago.

For the current quarter, Kinsale Capital Group, Inc. is expected to post earnings of $3.44 per share, indicating a change of +32.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

Kinsale Capital Group, Inc. has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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The Allstate Corporation (ALL) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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