It has been about a month since the last earnings report for Allstate (ALL - Free Report) . Shares have added about 2.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Allstate Q2 Earnings Top Estimates on Higher Premiums
Allstate Corporation’s second-quarter 2018 earnings of $1.90 per share surpassed the Zacks Consensus Estimate by 31.03% and increased 37.7% on a year-over-year basis.
Revenues came in at $10.1 billion, outpacing the Zacks Consensus Estimate by 21.31%. The same was up 2.9% year over year, reflecting higher average premiums and increased policies in force.
In the quarter under review, total expenses increased 3.1% year over year to $9.3 billion on higher property and casualty insurance claims, and claims expense and operating costs.
The company incurred catastrophe loss of $906 million, which was down 8.8% year over year.
Total policies in force as of Jun 30, 2018 were 88.4 million up 18% year over year, driven by increased policies from Square Trade.
Net investment income of $824 million was down 8.1% year over year.
Solid Segmental Performance
Property-Liability insurance premiums written were $8.5 billion, up 6.3% year over year. Underwriting income of $416 million, surged 57% year over year driven by increased premiums earned. Combined ratio improved 170 basis points year over year to 94.9%.
Service Businesses’ total revenues totaled $320 million, up 23.1% year over year. This upside was primarily driven by a 74% increase in revenues from Square Trade, followed by growth from Allstate Dealer Services, and Arity businesses.
Allstate Life’s premium and contract charges of $326 million increased 2.2% year over year, driven by growth in traditional life insurance and lower levels of reinsurance premiums ceded. Adjusted net income of $78 million improved 23.8% year over year owing to a lower effective tax rate, higher premiums and increased net investment income, partially offset by higher contract benefits.
Allstate Benefits’ premium and contract charges of $283 million were up 5.2%, backed by 6.1% growth in policies in force. Adjusted net income of $34 million was 36% higher year over year on the back of higher premiums, improved benefit ratio on selected products and a lower effective tax rate. The metric was partially offset by higher expenses related to technology investments.
Allstate Annuities’ premium and contract charges of $3 million remained flat year over year. Adjusted net income of $44 million declined 32.3%.
Share Buyback and Dividend
Allstate returned $722 million of capital to its shareholders during the second quarter through a combination of $163 million in common stock dividends and repurchase of outstanding shares worth $559 million.
Capital Position (As of Jun 30, 2018)
Total shareholders’ equity was $23.1 billion, up 7.4% year over year.
Total assets were $113.4 billion, up 2.2 year over year.
Long-term debt of $6.45 billion was down 1.6% year over year.
Ratio of debt to equity was 27.9 at the end of the second quarter down 160 basis points year over year.
Net cash provided by operating activities totaled $1.5 billion at the end of the second quarter compared with $491 million in the year-ago quarter.
Return on equity of 15.8% expanded 230 basis points year over year.
Cash inflow from operating activities amounted to $626 billion, down nearly 27 8% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 8.07% due to these changes.
At this time, Allstate has an average Growth Score of C, a grade with the same score on the momentum front. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Allstate has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.