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Higher Catastrophe Losses to Hurt Allstate's (ALL) Q2 Earnings

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The Allstate Corporation (ALL - Free Report) is scheduled to release second-quarter 2022 results on Aug 3, after the market closes.

Q2 Estimates

The Zacks Consensus Estimate for Allstate’s second-quarter earnings is pegged at a loss of $1.26 per share, which compares unfavorably with the prior-year quarter’s earnings of $3.79.

The consensus mark for revenues stands at $12.2 billion, suggesting a decline of 1.6% from the year-ago quarter’s reported number.

Earnings Surprise History

Allstate’s earnings beat estimates in two of the trailing four quarters and missed the same twice, the average negative surprise being 8.84%. This is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise

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

Factors to Note

In the second quarter, revenues of Allstate are likely to reflect the negative impact of lower net investment income due to a decline in reinvestment rates and softer performance-based investment income. Consequently, the net investment income across Allstate’s Property-Liability and Protection Services segments might have witnessed a downfall in the to-be-reported quarter.

The Zacks Consensus Estimate for net investment income of the Property-Liability segment is pegged at $563 million, indicating a 39.5% plunge from the prior-year quarter’s reported figure. The same for the Protection Services segment stands at $11.24 million, suggesting a 6.3% decline from the year-ago quarter’s reported number.

Improved premiums stemming from the Property-Liability and Protection Services segments may have benefited the second-quarter top line of Allstate. Premiums are expected to have gained from continuous rate increases undertaken by ALL to mitigate the ongoing inflationary pressure. The consensus mark for second-quarter net premiums earned in Property-Liability and Protection Services segments suggests increases of 6% and 18.6%, respectively, from their prior-year quarter’s reported figure.

However, the bottom line of Allstate might have taken a hit from pre-tax catastrophe losses of $1.11 billion in the second quarter. Elevated catastrophe losses may have hampered the underwriting results of a company and led to deterioration in the combined ratio. The Zacks Consensus Estimate for ALL’s second-quarter combined ratio of its Property-Liability segment is pegged at 102%, indicating a deterioration of 600 basis points year over year.

The Personal auto insurance results of Allstate might have been impacted by elevated loss costs in the second quarter due to increasing vehicle values, parts prices and labor rates experienced in 2022, which might be a cause of concern for the insurer to settle claims reported last year but settled in the to-be-reported quarter.

Meanwhile, continued investments in data and analytics with an aim to upgrade digital capabilities and organization efficiencies are likely to have weighed on the margins of Allstate in the second quarter. Elevated expenses arising from higher property and casualty insurance claims and claims expenses coupled with other operating costs might have impacted bottom-line results in the to-be-reported quarter.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Allstate this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here.

Earnings ESP: Allstate has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ALL currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

While an earnings beat looks uncertain for Allstate, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:

Hersha Hospitality Trust (HT - Free Report) has an Earnings ESP of +18.85% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for Hersha Hospitality Trust’s second-quarter 2022 earnings is pegged at $1.18 per share, which compares favorably against the prior-year quarter’s loss of 8 cents.

HT beat earnings estimates in each of the trailing four quarters.

Armada Hoffler Properties, Inc. (AHH - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for Armada Hoffler’s second-quarter 2022 earnings is pegged at $1.17 per share, which indicates a 9.4% increase from the prior-year quarter’s reported figure.

AHH beat earnings estimates in three of the trailing four quarters and met once.

RPT Realty (RPT - Free Report) has an Earnings ESP of +0.78% and a Zacks Rank #3, currently. The Zacks Consensus Estimate for RPT Realty’s second-quarter 2022 earnings is pegged at $1.05 per share, which indicates an 10.5% increase from the prior-year quarter’s reported figure.

RPT beat earnings estimates in each of the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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