A month has gone by since the last earnings report for Allstate (
ALL Quick Quote ALL - Free Report) . Shares have added about 2% in that time frame, outperforming 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 catalysts.
Allstate Q1 Earnings Miss on Steep Operating Expenses
The Allstate Corporation 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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -18.02% due to these changes.
At this time, Allstate has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 Quick Quote KNSL - Free Report) , a stock from the same industry, has gained 7.6%. The company reported its results for the quarter ended March 2022 more than a month ago.
Kinsale Capital Group, Inc. reported revenues of $180.32 million in the last reported quarter, representing a year-over-year change of +30.4%. EPS of $1.63 for the same period compares with $1.11 a year ago.
For the current quarter, Kinsale Capital Group, Inc. is expected to post earnings of $1.65 per share, indicating a change of +28.9% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Kinsale Capital Group, Inc. has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.