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Can High Catastrophe Losses Hurt Allstate's (ALL) Q3 Earnings?
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The Allstate Corporation (ALL - Free Report) is scheduled to release third-quarter 2022 results on Nov 2, after the closing bell.
Q3 Estimates
The Zacks Consensus Estimate for Allstate’s third-quarter earnings per share is pegged at a loss of $1.67 against the prior-year quarter’s earnings of 73 cents.
The consensus mark for revenues stands at $12.7 billion, suggesting 2.6% growth 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 5.61%. This is depicted in the chart below:
Revenues of Allstate are likely to have suffered lower net investment income, which in turn, is expected to have been hampered by a lower performance-based investment income in the third quarter. Net investment income within Allstate’s Property-Liability segment might have witnessed a drop.
The Zacks Consensus Estimate for Allstate’s net investment income is pegged at $563 million, lower than management’s expectation of $690 million but higher than our estimate of $434.9 million. The consensus mark for net investment income in the Property-Liability segment stands at $449 million, indicating a 36.8% plunge from the prior-year quarter’s reported figure.
ALL’s underwriting results are expected to have been affected by elevated catastrophe losses in the to-be-reported quarter, mainly stemming from Hurricane Ian, the deadly storm that wreaked havoc in Florida. Allstate anticipates pretax catastrophe losses, net of reinsurance, to be $763 million in the third quarter.
Additionally, the underwriting results of the auto insurance business are likely to have borne the brunt of increasing loss costs due to ongoing inflationary pressure in the to-be-reported quarter.
Weaker underwriting results might have deteriorated the combined ratio of the insurer and depressed Allstate’s margins. The Zacks Consensus Estimate for third-quarter combined ratio of the Property-Liability segment is pegged at 108%, indicating a deterioration of 300 basis points from the year-ago quarter’s reading. However, the same is pegged lower than management’s expectation of 111.6% and our estimate of 110.6%.
Nevertheless, the softness in margins is likely to have been partly offset by improved premiums earned within the Property-Liability and Protection Services segments. While premiums in the Property-Liability segment are expected to have been driven by prudent rate increases and strong policy retention rates, the same within the Protection Services unit is likely to have received an impetus from well-devised Allstate Protection Plans.
The consensus mark for third-quarter net premiums earned in Property-Liability and Protection Services segments suggests increases of 8.6% and 25.2%, respectively, from their prior-year quarter’s corresponding reported figures.
The performance of Allstate Health and Benefits segment is likely to have been driven by strong performances of the group and individual health businesses.
However, the insurer’s pursuit of claim-operating actions to manage escalating loss costs amid the ongoing inflationary strain is likely to have acted as a drag on policy growth in the third quarter. A rise in property and casualty insurance claims and claims expenses, and other operating costs might have dented the bottom-line results of Allstate in the to-be-reported quarter.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Allstate this season. 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 is not the case here, as elaborated below.
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.
While an earnings beat looks uncertain for Allstate, here are some companies worth considering from the insurance space, as our model shows that these have the right combination of elements to beat on earnings this time around:
Hippo Holdings Inc. (HIPO - Free Report) has an Earnings ESP of +15.87% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for HIPO’s third-quarter 2022 earnings is pegged at a loss of $2.81 per share. The prior-year quarter’s loss per share was reported as $2.00.
The consensus mark for Hippo Holdings’ third-quarter revenues is pegged at $32.8 million, indicating 54.1% growth from the year-ago quarter’s reported figure.
Trean Insurance Group, Inc. has an Earnings ESP of +11.11% and is Zacks #3 Ranked, currently. The Zacks Consensus Estimate for TIG’s third-quarter 2022 earnings is pegged at 9 cents per share, suggesting a decrease of 40% from the prior-year quarter’s reported number.
The bottom line of Trean Insurance beat estimates in two of the trailing four quarters, met the same once and missed the mark on the remaining occasion, the average surprise being 11.25%.
Trupanion, Inc. (TRUP - Free Report) has an Earnings ESP of +3.51% and a Zacks Rank #3, currently. The Zacks Consensus Estimate for TRUP’s third-quarter 2022 earnings is pegged at a loss of 29 cents per share. The prior-year quarter’s loss was reported as 4 cents per share.
Trupanion’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 44.79%.
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Can High Catastrophe Losses Hurt Allstate's (ALL) Q3 Earnings?
The Allstate Corporation (ALL - Free Report) is scheduled to release third-quarter 2022 results on Nov 2, after the closing bell.
Q3 Estimates
The Zacks Consensus Estimate for Allstate’s third-quarter earnings per share is pegged at a loss of $1.67 against the prior-year quarter’s earnings of 73 cents.
The consensus mark for revenues stands at $12.7 billion, suggesting 2.6% growth 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 5.61%. This is depicted in the chart below:
The Allstate Corporation Price and EPS Surprise
The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote
Factors to Note
Revenues of Allstate are likely to have suffered lower net investment income, which in turn, is expected to have been hampered by a lower performance-based investment income in the third quarter. Net investment income within Allstate’s Property-Liability segment might have witnessed a drop.
The Zacks Consensus Estimate for Allstate’s net investment income is pegged at $563 million, lower than management’s expectation of $690 million but higher than our estimate of $434.9 million. The consensus mark for net investment income in the Property-Liability segment stands at $449 million, indicating a 36.8% plunge from the prior-year quarter’s reported figure.
ALL’s underwriting results are expected to have been affected by elevated catastrophe losses in the to-be-reported quarter, mainly stemming from Hurricane Ian, the deadly storm that wreaked havoc in Florida. Allstate anticipates pretax catastrophe losses, net of reinsurance, to be $763 million in the third quarter.
Additionally, the underwriting results of the auto insurance business are likely to have borne the brunt of increasing loss costs due to ongoing inflationary pressure in the to-be-reported quarter.
Weaker underwriting results might have deteriorated the combined ratio of the insurer and depressed Allstate’s margins. The Zacks Consensus Estimate for third-quarter combined ratio of the Property-Liability segment is pegged at 108%, indicating a deterioration of 300 basis points from the year-ago quarter’s reading. However, the same is pegged lower than management’s expectation of 111.6% and our estimate of 110.6%.
Nevertheless, the softness in margins is likely to have been partly offset by improved premiums earned within the Property-Liability and Protection Services segments. While premiums in the Property-Liability segment are expected to have been driven by prudent rate increases and strong policy retention rates, the same within the Protection Services unit is likely to have received an impetus from well-devised Allstate Protection Plans.
The consensus mark for third-quarter net premiums earned in Property-Liability and Protection Services segments suggests increases of 8.6% and 25.2%, respectively, from their prior-year quarter’s corresponding reported figures.
The performance of Allstate Health and Benefits segment is likely to have been driven by strong performances of the group and individual health businesses.
However, the insurer’s pursuit of claim-operating actions to manage escalating loss costs amid the ongoing inflationary strain is likely to have acted as a drag on policy growth in the third quarter. A rise in property and casualty insurance claims and claims expenses, and other operating costs might have dented the bottom-line results of Allstate in the to-be-reported quarter.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Allstate this season. 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 is not the case here, as elaborated below.
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: Allstate 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 worth considering from the insurance space, as our model shows that these have the right combination of elements to beat on earnings this time around:
Hippo Holdings Inc. (HIPO - Free Report) has an Earnings ESP of +15.87% and a Zacks Rank #2, currently. The Zacks Consensus Estimate for HIPO’s third-quarter 2022 earnings is pegged at a loss of $2.81 per share. The prior-year quarter’s loss per share was reported as $2.00.
The consensus mark for Hippo Holdings’ third-quarter revenues is pegged at $32.8 million, indicating 54.1% growth from the year-ago quarter’s reported figure.
Trean Insurance Group, Inc. has an Earnings ESP of +11.11% and is Zacks #3 Ranked, currently. The Zacks Consensus Estimate for TIG’s third-quarter 2022 earnings is pegged at 9 cents per share, suggesting a decrease of 40% from the prior-year quarter’s reported number.
The bottom line of Trean Insurance beat estimates in two of the trailing four quarters, met the same once and missed the mark on the remaining occasion, the average surprise being 11.25%.
Trupanion, Inc. (TRUP - Free Report) has an Earnings ESP of +3.51% and a Zacks Rank #3, currently. The Zacks Consensus Estimate for TRUP’s third-quarter 2022 earnings is pegged at a loss of 29 cents per share. The prior-year quarter’s loss was reported as 4 cents per share.
Trupanion’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 44.79%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.