It has been about a month since the last earnings report for Allstate Corporation (The) (NYSE:ALL) . Shares have added about 5.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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 drivers.
Allstate Q4 Earnings Beat Estimates on High Premiums
Allstate's fourth-quarter 2016 operating earnings per share of $2.17 beat the Zacks Consensus Estimate of $1.61. Earnings also soared 85% year over year on higher revenues.
However, operating income per diluted share was $4.87 in 2016, down 4.2% year over year. An increase of $853 million in pre-tax catastrophe losses during the year is likely to have contributed to the overall earnings decline.
Allstate generated total revenue of $9.3 billion in the fourth quarter. The top line surpassed the Zacks Consensus Estimate of $8.5 billion and also increased 6.8% year over year. The upside was mainly driven by premium growth as well as a decent increase in net investment income.
In 2016, the company’s total revenue of $36.5 billion grew 2.5% year over year, mainly due to a rise in property-liability insurance premiums.
Quarter in Detail
Property-liability insurance premiums amounted $7.9 billion in the fourth quarter, up 2.8% year over year. Net income of $761 million displayed 54.4% year-over-year growth on the back of a lower loss ratio. The underlying combined ratio of 87.7 grew 30 basis points over the last-year quarter due to increased expense ratio.
The net written premium of Allstate brand – Encompass – declined 10.2% and policies in force were 13.4% lower in the fourth quarter on a year-over-year basis.
The Esurance brandrecorded net written premium growth of 5.6% from the prior-year quarter. The upside was driven by a 5.5% increase in auto average premiums and modest growth in policies in force.
Allstate brand – Auto – reported net written premium growth of 3.9% in the fourth quarter. The improvement can be attributed to a 7.0% increase in average premiums.
Allstate brand – Homeowners – saw its net written premiums increasing slightly in the fourth quarter as average premiums increased by 1.5%. However, policies in force of this brand declined by 1.2%.
Allstate brand – Other Personal Lines – recorded net written premium increase of 4.5% in the fourth quarter. Policies in force declined 0.1%.
Allstate Financial’s operating income of $130 million was 33% higher than the prior-year quarter due to performance-based investment returns in excess of long-term expectations.
Net investment income of $801 million increased 12.8% year over year. This upside reflects strong performance-based results, partially offset by lower interest income on market-based investments.
In the fourth quarter, realized capital gains were $2 million. This compared favorably with losses of $250 million in the prior-year quarter.
In the fourth quarter, operating expenses increased 13.3% year over year to $1.06 billion. In 2016, the same grew 0.6% to $4.1 billion.
In the quarter, the company incurred catastrophe losses of $303. The reported figure is 15% wider than the year-ago quarter. In 2016, the company’s catastrophe losses widened almost 50% year over year to $2.6 billion.
Capital Position
As of Dec 31, 2016, total shareholders’ equity increased to $20.6 billion from $20 billion at year-end 2015. Total assets increased to $108.6 billion from $104.7 billion from the end of 2015. Long-term debt also rose 24% to $6.35 billion from the 2015-end level.
Stock Repurchase and Dividend Update
Allstate returned $369 million of capital to shareholders in the fourth quarter through a combination of $122 million in common stock dividends and repurchase of $247 million of outstanding shares.
In 2016, the company returned a total of $1.8 billion to its shareholders. As of Dec 31, 2016, the company had $691 million remaining under the $1.5 billion authorization.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four upward revisions for the current quarter.
Allstate Corporation (The) Price and Consensus
Allstate Corporation (The) Price and Consensus | Allstate Corporation (The) Quote
VGM Scores
At this time, Allstate's stock has an average Growth Score of 'C', however its Momentum is doing a lot better with an 'A'. Following the exact same course, 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.
Our style scores indicate that the stock is more suitable for value and momentum investors than growth investors.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
Allstate Corporation (The) (ALL): Free Stock Analysis Report
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