A month has gone by since the last earnings report for Allstate (ALL Quick QuoteALL - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the S&P 500.

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

Allstate Q3 Earnings Miss Estimates, Revenues Up Y/Y

Allstate reported third-quarter 2021 adjusted earnings of 73 cents per share, which missed the Zacks Consensus Estimate by 54.9%. The bottom line plunged 74.6% year over year.

The company’s results were hurt by escalating costs, elevated non-catastrophe losses in auto and homeowners insurance, and higher catastrophe losses. However, the downside was partly offset by improved earned premiums.

Revenues of $12.5 billion advanced 16.9% year over year in the third quarter driven by an uptick in earned premiums stemming from National General, premium growth in Allstate brand homeowners, increased performance-based investment income and higher Protection Services revenues.

Total costs and expenses increased 33.9% year over year to $12.3 billion due to higher property and casualty (P&C) insurance claims and claims expenses, accident and health insurance policy benefits, amortization of deferred policy acquisition costs, operating costs and expenses, and amortization of purchased intangibles.

As of Sep 30, 2021, total policies in force amounted to 191.9 million, up 12.3% from the prior-year comparable period.

Net investment income surged 64.7% year over year to $764 million in the third quarter, attributable to improved performance-based income.

The company incurred $1.3 billion of catastrophe losses in the quarter under review, which increased 28.2% year over year.

Solid Segmental Performances

Property-Liability insurance premiums written totaled $11 billion, which advanced 16.7% year over year aided by contributions from National General inclusion and Allstate brand homeowners. The segment incurred an underwriting loss of $534 million, which compares unfavorably with the year-ago quarter’s underwriting income of $752 million. Elevated non-catastrophe losses in auto and homeowners insurance coupled with higher catastrophe losses dampened the segment’s underwriting results, partly offset by improved premiums. Combined ratio deteriorated 1,370 basis points (bps) year over year to 105.3%.

Protection Services' revenues climbed 23.3% year over year to $597 million in the third quarter, courtesy of strong performance at Allstate Protection Plans.

Allstate Health and Benefits’ total premium and contract charges surged 60.3% year over year to $460 million. The substantial rise was due to the National General buyout leading to inclusion of group health and individual accident and health businesses.

Financial Update (as of Sep 30, 2021)

The company exited the third quarter with a cash balance of $690 million, which more than doubled from the 2020-end level. Total assets of $133.4 billion increased 5.9% from the figure as on Dec 31, 2020.

Long-term debt during the quarter amounted to $8 billion, up 2% from the level at 2020 end. Total shareholders’ equity declined 11.5% from the 2020-end figure to $26.7 billion.

Capital Position (as of Sep 30, 2021)

Adjusted net income return on equity came in at 21.2%, which improved 330 bps year over year. Book value per share increased 2.7% from the prior-year quarter to $84.62 at the third-quarter end. Debt-to-capital ratio of 23x deteriorated 340 bps year over year.

Prudent Capital Deployment

During the quarter under review, the company rewarded shareholders to the tune of around $1.5 billion via share buybacks and dividends.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -21.35% due to these changes.

VGM Scores

Currently, Allstate has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Allstate has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.