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What's in Store for Allstate (ALL) This Earnings Season?

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The Allstate Corp. (ALL - Free Report) is scheduled to report first-quarter earnings on May 5, after market close. The company’s earnings as well as revenues are expected to have risen year over year.

In the previous quarter, the company’s earnings of $5.87 per share beat the Zacks Consensus Estimate by 53.7% and also soared 87.5% year over year, led by growth in revenues.

Q1 Earnings & Revenue Expectations  

The Zacks Consensus Estimate for earnings of $3.85 per share implies an 8.76% increase from the prior-year quarter’s reported number.

Likewise, the consensus estimate for sales of $10.88 billion suggests a 3.24% rise from the year-ago quarter’s reported figure.

Factors to Impact Q1 Results

Allstate is likely to have incurred losses of $1.67 billion for the first quarter of 2021, offset by $1.08 billion of subrogation recoveries and anticipated reinsurance. Thus, on a net basis, catastrophe losses are expected to have been to the tune of $466 million after tax.

This catastrophe loss combined with expenses borne for the company’s multi-year Transformative Growth Plan and low interest rates are likely to hurt the company first-quarter earnings results.    

The company recently executed a cost-reduction plan to streamline its operations and processes across claims, sales, service and support functions to lower costs. The plan will induce a charge of $290 million of which $253 million was recognized in 2020. Part of the remaining cost is likely to have been incurred in the first quarter of 2021.

The company’s property and liability business is likely to report higher premium in Auto, Homeowners and other personal lines, partly offset by lower premium in the commercial line business in the first quarter. The acquisition of National General is expected to increase auto insurance market share by one percentage point in 2021 and has provided another platform for growth in product expansion.

In Auto, growth in premiums written is likely to have slowed down due to lower increases in average premium from fewer approved rate changes and a decline in newly-issued applications, both related to the coronavirus. In the Homeowners line of business, premiums are likely to have increased, primarily on better average premiums including both rate changes and inflation in insured home valuations besides policy growth.

The Zacks Consensus Estimate for net premium earned is pegged at $9.62 billion, indicating 8.33% growth from the year-ago reported figure.
Allstate’s Service Businesses revenues are likely to have improved on higher policies in force, largely owing to growth in Allstate Protection Plans.

The company successfully expanded the total addressable market into appliances, furniture, cellular carriers and international markets with revenue recognition in each of these areas. The combination of attractive unit economics, scalable technology platform and the power of The Allstate brand will lead to continued profitable growth protection plan business.

Share buyback made by the company in the to-be-reported quarter is likely to have aided its bottom line.

Key Developments During the Quarter

In the first quarter of 2021, Allstate completed the acquisition of National General Holdings Corp. It also announced the sale of Allstate Life Insurance Company and certain subsidiaries, and the Allstate Life Insurance Company of New York.

Earnings Surprise History

The company’s earnings beat estimates in all the trailing four quarters, the average being 51.92%.

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise

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

Here is what our quantitative model predicts:

Our proven model does not predict an earnings beat for Allstate this time around. The combination of a positive  Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Allstate has an Earnings ESP of +2.68%.

Zacks Rank: Allstate currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

American International Group Inc. (AIG - Free Report) has an Earnings ESP of +0.24% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Voya Financial Inc. (VOYA - Free Report) has an Earnings ESP of +1.77% and a Zacks Rank #3.

Sun Life Financial Inc. (SLF - Free Report) has an Earnings ESP of +9.26% and a Zacks Rank #2.

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