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Allstate (ALL) Q4 Earnings Beat on Health & Benefits Performance

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The Allstate Corporation (ALL - Free Report) reported fourth-quarter 2021 adjusted earnings of $2.75 per share, which beat the Zacks Consensus Estimate by a penny. Yet, the bottom line plunged 46.9% year over year.

Fourth-quarter revenues of $13,011 million advanced 18.7% year over year and beat the Zacks Consensus Estimate of $11,006 million.

The better-than-expected fourth-quarter results were driven by an uptick in earned premiums stemming from National General and growth in the Allstate brand. Increased policies in force in Allstate Protection Plans and higher performance-based investment income from private equity investment were also major positives, partially offset by escalating costs and higher non-catastrophe losses in auto and homeowners insurance.

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

Operations

Total costs and expenses increased to $11,618 million from $8,098 million a year ago, primarily due to higher property and casualty insurance claims and claims expenses, accident and health insurance policy benefits, amortization of deferred policy acquisition costs, and operating costs and expenses.

Pre-tax income declined to $1,393 million from $2,864 million in the prior-year quarter.

As of Dec 31, 2021, total policies in force amounted to 191.9 million, up 9.8% from the prior-year comparable period.

Net investment income surged to $847 million for the fourth quarter from $660 million a year ago, attributable to improved performance-based income, thanks to gains from sales and private equity investment valuations.

Allstate incurred $528 million of catastrophe losses in the quarter under review, which increased 24.5% year over year.

Segmental Performances

Property-Liability insurance premiums written totaled $10,301 million, which advanced 19.7% year over year aided by contributions from National General inclusion and growth in the Allstate brand.

The segment generated an underwriting income of $113 million, which compares unfavorably with the year-ago quarter’s underwriting income of $1,423 million. Elevated non-catastrophe losses in auto and homeowners insurance coupled with higher prior-year non-catastrophe reserve re-estimates dampened the segment’s underwriting results, partly offset by improved premiums earned. The combined ratio deteriorated 1,490 basis points (bps) year over year to 98.9%.

Protection Services' revenues climbed 21.9% year over year to $606 million for the fourth quarter, courtesy of strong performance of Allstate Protection Plans, thanks to increased policies in force. Yet, adjusted net income declined 9% from the prior-year quarter to $29 million due to higher severity at Allstate Roadside.

Allstate Health and Benefits’ total premium and contract charges surged 75.2% year over year to $459 million. The substantial rise was due to the National General buyout, which led to the inclusion of group and individual health businesses. Adjusted net income jumped 41.2% year over year to $48 million for the fourth quarter.

Financial Update (as of Dec 31, 2021)

Allstate exited the fourth quarter with a cash balance of $763 million, which more than doubled from the 2020-end level of $311 million. Total assets of $99,440 million decreased 21.1% from the figure on Dec 31, 2020.

Long-term debt at quarter-end amounted to $7,976 million, up from the $7,825 million level at 2020-end. Total shareholders’ equity declined 16.7% from the 2020-end figure to $25,179 million. Long-term debt to capitalization was 24.1% at fourth quarter-end.

Capital Position (as of Dec 31, 2021)

Adjusted net income return on equity came in at 16.9%, which declined from 19.2% in 2020. Book value per share increased 10.9% from the prior-year quarter to $81.52 at fourth quarter-end.

Prudent Capital Deployment

Throughout 2021, the company rewarded shareholders to the tune of around $4.1 billion via share buybacks ($3.3 billion) and dividends ($885 million). The divestment of life and annuity businesses enabled Allstate to boost shareholder value. 

Outlook

The advancement made by the personal property-liability business model is expected to help ALL generate higher growth on the back of lower expenses and extending customer access. The utilization of technology will likely enable the company to provide affordable, simple and connected protection to clients. Its strategic initiatives are likely to position the company to withstand the effect of inflation on auto insurance prices and returns.

Zacks Rank & Key Picks

Allstate currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the Finance space include Atlas Corp. (ATCO - Free Report) , Enact Holdings, Inc. (ACT - Free Report) and Veritex Holdings, Inc. (VBTX - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in London, Atlas Corp. is a global asset management company. The Zacks Consensus Estimate for ATCO’s bottom line for 2021 indicates a 77.3% increase from the year-ago level. Atlas Corp. beat earnings estimates thrice in the past four quarters and missed once, with the average surprise being 25.7%.

Enact Holdings — headquartered in Raleigh, NC — provides private mortgage insurance products in the United States. The Zacks Consensus Estimate for ACT’s bottom line for the current year indicates a 5.3% increase from the year-ago level. Enact Holdings’ bottom line for the current year has witnessed one upside revision and no downward movement in the past 30 days.

Based in Dallas, TX, Veritex provides multiple commercial banking products and services to different businesses. The Zacks Consensus Estimate for VBTX’s bottom line for 2021 indicates an 11.9% increase from the year-ago level. Veritex beat earnings estimates thrice in the past four quarters and met once, with the average surprise being 10.3%.