Allstate (ALL) Q3 Earnings Miss Estimates, Revenues Beat

Allstate Corporation’s (NYSE:ALL) third-quarter 2018 earnings of $1.93 per share missed the Zacks Consensus Estimate by 11.1% but increased 20.6% on a year-over-year basis.

The earnings growth was driven by higher premiums earned, lower catastrophe losses and a lower effective tax rate, partially offset by higher Property-Liability non-catastrophe losses.

Revenues came in at $10.29 billion, outpacing the Zacks Consensus Estimate by 20.2%. The top line was up 5.8% year over year, reflecting higher average premiums and increased policies in force.
In the quarter under review, total expenses increased 5.7% year over year to $9.43 billion on higher property and casualty insurance claims, and claims expense and operating costs.

The Allstate Corporation Price, Consensus and EPS Surprise

The company incurred catastrophe loss of $625 million, which was down 27.4% year over year.

Total policies in force as of Sep 30, 2018 were 96.2 million, up 23.9% year over year.

Net investment income of $844 million remained unchanged year over year.

Solid Segmental Performance

Property-Liability insurance premiums written were $9.2 billion, up 6.7% year over year. Underwriting income of $473 million, declined 2.3% year over year, due to higher claim severity, increased expenses and unfavorable prior-year reserve reestimates. Combined ratio deteriorated 40 basis points year over year to 94.3%.

Service Businesses’ total revenues totaled $329 million, up 21% year over year. This upside was primarily driven by a 64% increase in revenues from Square (NYSE:SQ) Trade, followed by growth from Arity and Allstate Dealer Services.

Allstate Life’s premium and contract charges of $322 million increased 1.9% year over year, driven by growth in traditional life insurance and lower levels of reinsurance premiums ceded. Adjusted net income of $74 million remained unchanged year over year, a lower effective tax rate, higher premiums and increased net investment income were primarily offset by higher contract benefits.

Allstate Benefits’ premium and contract charges of $285 million were up 4.4% backed by 5.1% growth in policies in force. Adjusted net income of $32 million was 14% higher year over year on the back of higher premiums, reflecting a lower effective tax rate. This was partially offset by higher contract benefits and expenses.

Allstate Annuities’ premium and contract charges of $5 million increased 25% year over year. Adjusted net income of $20 million declined 42.9%, due to lower performance-based investment income.

Share Buyback and Dividend

Allstate returned $160 million to shareholders in common stock dividends and repurchased $225 million of outstanding common shares in the third quarter. A new $3 billion share repurchase authorization was approved and will start following the completion of its current program and is expected to conclude by April 2020.

Capital Position (As of Sep 30, 2018)

Total shareholders’ equity was $23.6 billion, up 6.8% year over year.

Total assets were $114.5 billion, up 0.8% year over year.

Long-term debt of $6.45 billion increased 1.6% year over year.

Ratio of debt-to-equity was 27.3%, down 140 basis points year over year.

Adjusted return on equity of 15.9% expanded 200 basis points year over year.

Zacks Rank and Performance of Other Insurers

Allstate carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other insurers that have reported third-quarter earnings so far, the bottom line of AXIS Capital Holdings Limited (NYSE:AXS) , The Progressive Corporation (NYSE:PGR) and American Financial Group Inc. (NYSE:AFG) surpassed the Zacks Consensus Estimate by 32%, 37.7% and 19.7%, respectively.

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