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Allstate (ALL) Q3 Earnings Beat on Expanding Auto Premiums

The Allstate Corporation ALL reported a third-quarter 2023 adjusted net income of 81 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 107.7%. A loss of $1.53 per share was reported in the prior-year quarter.

Operating revenues improved 9% year over year to $14,583 million in the quarter under review, attributable to a 10% rise in property and casualty (P&C) insurance premiums. The top line missed the consensus mark by a whisker.

The quarterly results benefited on the back of continued rate hikes, strong underwriting results and sound contribution from the Protection Services unit. However, the upside was partly offset by continued incidence of auto insurance loss costs, significant increase in catastrophe losses and an elevated expense level.

The Allstate Corporation Price, Consensus and EPS Surprise

 

The Allstate Corporation Price, Consensus and EPS Surprise
The Allstate Corporation Price, Consensus and EPS Surprise

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

 

Q3 Operations

Net investment income of $689 million dipped 1% year over year in third quarter and beat the Zacks Consensus Estimate of $640 million as well as our estimate of $678.3 million. The metric suffered a blow due to a 44.5% year-over-year decline in performance-based investment income. Market-based investment income climbed 41% year over year.

Total costs and expenses increased 2.8% year over year to $14,518 million but came lower than our estimate of $14,731.6 million. The year-over-year increase was due to an elevated P&C insurance claims and claim expense level.

Allstate incurred a pretax loss of $21 million in the quarter under review, way narrower than the prior-year quarter’s loss of $910 million.

Total policies in force were 190.1 million as of Sep 30, 2023, which increased 2.7% year over year.

Catastrophe losses of $1,181 million soared 54.8% year over year in the third quarter but came lower than our estimate of $1,421.4 million.

Segmental Performances

The Property-Liability segment’s premiums earned improved 10% year over year to $12,270 million in the third quarter, which lagged the Zacks Consensus Estimate of $12,282 million but surpassed our estimate of $12,266.7 million. The metric was aided by rate increases resulting in improved average premiums. While the Allstate brand gained from growth in auto and homeowners average premium, an increase in the number of policies contributed to the results of National General.

The unit incurred an underwriting loss of $414 million in the quarter under review, narrower than the prior-year quarter’s loss of $1,292 million and our estimate of $843.2 million. The loss narrowed on the back of higher premiums earned and a decline in unfavorable prior-year reserve reestimates. The combined ratio improved 820 basis points (bps) year over year to 103.4% in the quarter under review but came lower than the consensus mark of 104%.

The Protection Services segment recorded revenues of $697 million, which rose 8.9% year over year in the third quarter, attributable to strength in Allstate Protection Plans. However, the metric lagged our estimate of $780.4 million. Adjusted net income dropped 22.9% year over year to $27 million due to increased severity of claims at Allstate Protection Plans. The figure also missed the consensus mark of $58 million.

The Allstate Health and Benefits segment’s premium and contract charges remained flat year over year at $463 million in the third quarter, higher than the Zacks Consensus Estimate of $449 million. Favorable group health results were partly offset by weakness in individual health. Adjusted net income of $69 million rose 9.5% year over year, which outpaced the consensus mark of $57 million and our estimate of $47.4 million. The metric benefited on the back of strength in group and individual health coupled with reduced operating expenses.

Financial Update (as of Sep 30, 2023)

Allstate exited the third quarter with a cash balance of $860 million, which grew 16.8% from the 2022-end level. Total assets of $101.2 billion increased 3.3% from the figure at 2022 end.

Debt amounted to $7,946 million, down 0.2% from the figure as of Dec 31, 2022.

Total shareholders’ equity of $14,593 million fell 16.6% from the 2022-end figure.

Book value per common share was $47.79 as of Sep 30, 2023, which tumbled 18.2% from the prior-year comparable period.

The adjusted net income return on ALL’s common shareholders’ equity in the trailing 12-month period was a negative figure of 9.7%. The metric was recorded at 4.4% in the prior-year comparable period.

Business Update

Allstate is eyeing the divestiture of the Health and Benefits businesses and the sale is likely to be completed next year.

Zacks Rank

Allstate currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Some Other Insurers

Of the insurance industry players that have reported third-quarter results so far, Chubb Limited CB, Assurant, Inc. AIZ and Unum Group UNM beat the respective Zacks Consensus Estimate for earnings.

Chubb reported third-quarter 2023 core operating income of $4.95 per share, which outpaced the Zacks Consensus Estimate by 17.6%. The bottom line improved 58.1% from the year-ago quarter. Net premiums written improved 9.1% year over year to $13.1 billion in the quarter, which matched the consensus estimate. Net premiums earned rose 9.9% to $12.7 billion. Net investment income was $1.3 billion, up 34.2% year over year. P&C underwriting income of CB was $1.31 billion, which increased 83.8% from the year-ago quarter. The P&C combined ratio improved 470 bps on a year-over-year basis to 88.4%. The North America Commercial P&C Insurance unit generated net premiums written of $5.1 billion, which increased 8.7% year over year.

Assurant’s third-quarter 2023 net operating income of $4.29 per share beat the Zacks Consensus Estimate by 73%. The bottom line surged more than fourfold from the year-ago quarter. Total revenues of AIZ increased 8.5% year over year to $2.8 billion. The top line beat the consensus estimate by 4.5%. Net investment income was up 50.2% year over year to $125.5 million. Revenues at Global Housing increased 24.7% year over year to $584.8 million. The unit’s adjusted EBITDA was $165.1 million against the year-ago quarter’s adjusted EBITDA loss of $38.5 million. Meanwhile, revenues at Global Lifestyle increased 5.3% year over year to $2.2 billion while its adjusted EBITDA of $191.8 million increased 7% year over year.

Unum delivered third-quarter 2023 operating net income of $1.94 per share, which beat the Zacks Consensus Estimate by 1%. The bottom line increased 17.6% year over year. UNM’s operating revenues were $3.1 billion, up 5.4% year over year. The top line beat the consensus estimate by 0.7%. Premium income in the Unum U.S. segment was $1.6 billion, up 6.5% year over year. Adjusted operating income of the unit rose 27.4% year over year to $357.8 million. Meanwhile, Unum International’s premium income of $210.6 million increased 21.5% year over year.  Adjusted operating income was $36.8 million, up 47.8% year over year.

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