A month has gone by since the last earnings report for Allstate (ALL). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Allstate due for a breakout? 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's Q1 Loss Narrower Than Expected, Revenues Rise
Allstate incurred a first-quarter 2023 adjusted loss of $1.30 per share, narrower than the Zacks Consensus Estimate of a loss of $1.94 per share. Notably, earnings of $2.59 per share were reported in the prior-year quarter.
The quarterly results took a hit from significant catastrophe losses, escalating expenses and lower contributions from the Protection Services, and Health and Benefits segments.
ALL’s operating revenues increased 9.3% year over year to $13,772 million in the quarter under review. The top line outpaced the consensus mark by 7.4%. This was mainly due to rate increases in auto and home insurance leading to 10.8% year-over-year growth in property and casualty (P&C) insurance premiums.
Q1 Operations
Net investment income of $575 million fell 3.2% year over year due to a significant plunge of 58.8% in performance-based investment income. The figure, however, surpassed our estimate of $501.9 million. Market-based investment income soared 57% year over year in the first quarter.
Total costs and expenses of $14,192 million escalated 23% year over year mainly due to higher P&C insurance claims and claim expenses, and the amortization of deferred policy acquisition costs.
Allstate incurred a pretax loss of $406 million in the quarter under review against the prior-year quarter’s pretax income of $801 million.
Total policies in force fell 1.9% year over year to 186.7 million as of Mar 31, 2023.
ALL’s catastrophe losses were $1,691 million, which increased nearly four-fold year over year.
Segmental Performances
The Property-Liability segment’s premiums grew 10.8% year over year to $11,635 million in the first quarter, thanks to higher average premiums from Allstate and National General brands. The reported figure beat the Zacks Consensus Estimate of $11,508 million.
The segment incurred an underwriting loss of $1,001 million against the prior-year quarter’s underwriting income of $280 million. The underwriting loss stemmed from an elevated catastrophe loss level. The underlying combined ratio of 93.3% deteriorated 240 basis points (bps) year over year in the quarter under review.
The Protection Services segment reported revenues of $671 million, which rose 7% year over year in the first quarter on the back of higher revenues derived from Allstate Protection Plans and Allstate Dealer Services. Adjusted net income dropped 19% year over year to $34 million, lower than the consensus mark of $46.2 million and our estimate of $42 million.
The Allstate Health and Benefits segment’s total premium and contract charges of $463 million dipped 1.1% year over year in the quarter under review but outpaced the Zacks Consensus Estimate of $460 million. Softness in individual health and employer voluntary benefits exerted a strain on the metric. Adjusted net income of $56 million slid 1.8% year over year and matched the consensus mark.
Financial Update (as of Mar 31, 2023)
Allstate exited the first quarter with a cash balance of $662 million, which tumbled 10.1% from the 2022-end level. Total assets of $99.6 billion increased 1.7% from the figure at 2022 end.
Debt amounted to $8,452 million, up 6.1% from the figure as of Dec 31, 2022. Total shareholders’ equity of $17,494 million inched up marginally from the 2022-end level.
Book value per common share came in at $58.65, which plunged 22.3% year over year.
The adjusted net income return on equity in the trailing 12-month period came in at a negative figure of 6.7%. The metric was recorded at 13% in the prior-year quarter.
Capital Deployment
In the reported quarter, Allstate rewarded its shareholders with $377 million, which included share buybacks worth $153 million and dividends of $224 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
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