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Allstate (ALL) Q1 Earnings Miss on Steep Operating Expenses
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The Allstate Corporation (ALL - Free Report) reported first-quarter 2022 adjusted earnings of $2.58 per share, which missed the Zacks Consensus Estimate of $2.79. Also, the bottom line plunged 57.8% year over year. Higher auto accident frequency, group and individual health claims, surging operating expenses and increased inflation affected the bottom line in the first quarter.
Operating revenues of $12,604 million advanced 4.8% year over year and beat the Zacks Consensus Estimate of $11,626 million. An uptick in earned premiums from National General and growth in the Allstate brand aided its top line. Increased policies in force in Allstate Protection Plans also contributed to this upside.
The Allstate Corporation Price, Consensus and EPS Surprise
Total costs and expenses increased to $11,540 million from $9,419 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 plunged to $797 million from $3,032 million in the prior-year quarter, primarily due to higher expenses.
As of Mar 31, 2022, total policies in force amounted to 190.3 million, up 4% from the prior-year comparable period’s figure. Net investment income dipped to $594 million for the first quarter from $708 million a year ago. While market-based investment income declined 31% year over year, performance-based investment income fell 72% from the year-ago level. Allstate incurred $462 million of catastrophe loss in the quarter under review, which decreased 21.7% year over year.
In the March quarter, book value per common share declined 6.3% year over year to $75.95. The underlying combined ratio deteriorated to 90.9% from 77.1% a year ago. Adjusted net income return on equity came in at 12.8%, which declined from 23.2% a year ago.
Segmental Performances
Property-Liability insurance premiums written totaled $10,498 million, which advanced 6.1% year over year, aided by contributions from National General inclusion and growth in the Allstate brand.
The segment generated an underwriting income of $280 million, which compares unfavorably with the year-ago quarter’s underwriting income of $1,657 million. Elevated auto insurance accident frequency and decreased auto insurance margins affected the underwriting results, partially offset by improved premiums earned and lower catastrophe losses. Inflationary hurdles took a toll on the auto insurance margins. The combined ratio deteriorated 1,400 basis points (bps) year over year to 97.3%.
Protection Services' revenues climbed 13.6% year over year to $627 million for the first quarter, courtesy of a strong performance of Allstate Protection Plans, thanks to increased policies in force. Adjusted net income increased 8.2% from the prior-year quarter’s level to $53 million owing to the lack of restructuring costs incurred in the year-ago quarter.
Allstate Health and Benefits’ total premium and contract charges increased 3.1% year over year to $469 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 declined 18.5% year over year to $53 million for the first quarter due to higher group and individual health claims.
Financial Update (as of Mar 31, 2022)
Allstate exited the first quarter with a cash balance of $1,130 million, which surged from the 2021-end level of $763 million. Total assets of $97,150 million decreased from $99,440 million on Dec 31, 2021.
Long-term debt at the quarter-end amounted to $7,973 million, marginally down from $7,976 million at 2021 end. Total shareholders’ equity declined from the 2021-end figure of $25,179 million to $23,212 million. Long-term debt-to-capitalization was 25.6% at the first quarter-end.
Capital Deployment
Throughout the first quarter, Allstate rewarded its shareholders with $1 billion via share buybacks ($794 million) and dividends ($230 million). ALL also hiked dividends by 5% in the first quarter to 85 cents per share. An amount worth $2.5 billion is left under its $5-billion buyback authorization. Management is expected to conclude the repurchase program by early 2023.
Outlook
Allstate plans to fight inflation by changing its investment allocations, lowering costs and raising prices. 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 ALL to provide affordable, simple and connected protection to clients. Its strategic initiatives are likely to equip itself better to withstand the effects of inflation on auto insurance prices and returns. Management targets reducing the Property-Liability adjusted expense ratio to 23 by 2024 end from the current level of 26.
Companies Expected to Beat Estimates
While Allstate, which currently carries a Zacks Rank #3 (Hold), missed on earnings this time around, here are some companies from the Finance space worth considering with the right combination of elements to beat on earnings this season:
Conifer Holdings, Inc. (CNFR - Free Report) has an Earnings ESP of +23.08% and a Zacks Rank #3 at present.
The Zacks Consensus Estimate for Conifer Holdings’ bottom line for the to-be-reported quarter indicates an 81.9% rise from the year-ago quarter’s reported figure.
The consensus mark for CNFR’s revenues is currently pegged at $26.5 million for the first quarter.
BRP Group, Inc. (BRP - Free Report) currently has an Earnings ESP of +3.63% and a Zacks Rank of 3.
The Zacks Consensus Estimate for BRP Group’s bottom line for the to-be-reported quarter indicates a 15.9% rise from the year-ago quarter’s reported figure.
BRP’s earnings beat estimates in three of the last four quarters and met the mark once, the average surprise being 24.1%.
Houlihan Lokey, Inc. (HLI - Free Report) has an Earnings ESP of +0.91% and is a Zacks #3 Ranked player, presently.
The Zacks Consensus Estimate for Houlihan Lokey’s bottom line for the to-be-reported quarter is pegged at $1.10 per share.
HLI’s earnings beat estimates in each of the last four quarters, the average being 28.1%.
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Allstate (ALL) Q1 Earnings Miss on Steep Operating Expenses
The Allstate Corporation (ALL - Free Report) reported first-quarter 2022 adjusted earnings of $2.58 per share, which missed the Zacks Consensus Estimate of $2.79. Also, the bottom line plunged 57.8% year over year. Higher auto accident frequency, group and individual health claims, surging operating expenses and increased inflation affected the bottom line in the first quarter.
Operating revenues of $12,604 million advanced 4.8% year over year and beat the Zacks Consensus Estimate of $11,626 million. An uptick in earned premiums from National General and growth in the Allstate brand aided its top line. Increased policies in force in Allstate Protection Plans also contributed to this upside.
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 $11,540 million from $9,419 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 plunged to $797 million from $3,032 million in the prior-year quarter, primarily due to higher expenses.
As of Mar 31, 2022, total policies in force amounted to 190.3 million, up 4% from the prior-year comparable period’s figure. Net investment income dipped to $594 million for the first quarter from $708 million a year ago. While market-based investment income declined 31% year over year, performance-based investment income fell 72% from the year-ago level. Allstate incurred $462 million of catastrophe loss in the quarter under review, which decreased 21.7% year over year.
In the March quarter, book value per common share declined 6.3% year over year to $75.95. The underlying combined ratio deteriorated to 90.9% from 77.1% a year ago. Adjusted net income return on equity came in at 12.8%, which declined from 23.2% a year ago.
Segmental Performances
Property-Liability insurance premiums written totaled $10,498 million, which advanced 6.1% year over year, aided by contributions from National General inclusion and growth in the Allstate brand.
The segment generated an underwriting income of $280 million, which compares unfavorably with the year-ago quarter’s underwriting income of $1,657 million. Elevated auto insurance accident frequency and decreased auto insurance margins affected the underwriting results, partially offset by improved premiums earned and lower catastrophe losses. Inflationary hurdles took a toll on the auto insurance margins. The combined ratio deteriorated 1,400 basis points (bps) year over year to 97.3%.
Protection Services' revenues climbed 13.6% year over year to $627 million for the first quarter, courtesy of a strong performance of Allstate Protection Plans, thanks to increased policies in force. Adjusted net income increased 8.2% from the prior-year quarter’s level to $53 million owing to the lack of restructuring costs incurred in the year-ago quarter.
Allstate Health and Benefits’ total premium and contract charges increased 3.1% year over year to $469 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 declined 18.5% year over year to $53 million for the first quarter due to higher group and individual health claims.
Financial Update (as of Mar 31, 2022)
Allstate exited the first quarter with a cash balance of $1,130 million, which surged from the 2021-end level of $763 million. Total assets of $97,150 million decreased from $99,440 million on Dec 31, 2021.
Long-term debt at the quarter-end amounted to $7,973 million, marginally down from $7,976 million at 2021 end. Total shareholders’ equity declined from the 2021-end figure of $25,179 million to $23,212 million. Long-term debt-to-capitalization was 25.6% at the first quarter-end.
Capital Deployment
Throughout the first quarter, Allstate rewarded its shareholders with $1 billion via share buybacks ($794 million) and dividends ($230 million). ALL also hiked dividends by 5% in the first quarter to 85 cents per share. An amount worth $2.5 billion is left under its $5-billion buyback authorization. Management is expected to conclude the repurchase program by early 2023.
Outlook
Allstate plans to fight inflation by changing its investment allocations, lowering costs and raising prices. 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 ALL to provide affordable, simple and connected protection to clients. Its strategic initiatives are likely to equip itself better to withstand the effects of inflation on auto insurance prices and returns. Management targets reducing the Property-Liability adjusted expense ratio to 23 by 2024 end from the current level of 26.
Companies Expected to Beat Estimates
While Allstate, which currently carries a Zacks Rank #3 (Hold), missed on earnings this time around, here are some companies from the Finance space worth considering with the right combination of elements to beat on earnings this season:
Conifer Holdings, Inc. (CNFR - Free Report) has an Earnings ESP of +23.08% and a Zacks Rank #3 at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Conifer Holdings’ bottom line for the to-be-reported quarter indicates an 81.9% rise from the year-ago quarter’s reported figure.
The consensus mark for CNFR’s revenues is currently pegged at $26.5 million for the first quarter.
BRP Group, Inc. (BRP - Free Report) currently has an Earnings ESP of +3.63% and a Zacks Rank of 3.
The Zacks Consensus Estimate for BRP Group’s bottom line for the to-be-reported quarter indicates a 15.9% rise from the year-ago quarter’s reported figure.
BRP’s earnings beat estimates in three of the last four quarters and met the mark once, the average surprise being 24.1%.
Houlihan Lokey, Inc. (HLI - Free Report) has an Earnings ESP of +0.91% and is a Zacks #3 Ranked player, presently.
The Zacks Consensus Estimate for Houlihan Lokey’s bottom line for the to-be-reported quarter is pegged at $1.10 per share.
HLI’s earnings beat estimates in each of the last four quarters, the average being 28.1%.