By Senad Karaahmetovic
Allstate (NYSE:ALL) shares are down about 11% on Thursday after the insurance company reported disappointing preliminary Q3 results.
Allstate said it expects to incur a Q3 loss between $675 million and $725 million, and between $400 million and $450 million on an adjusted basis. Preliminary net premiums written are expected at $12 billion "due to higher average auto and home insurance premiums and policies," and higher than the $11.64 billion estimate.
Preliminary net investment income should be $690 million, much higher than the Bloomberg consensus of $402.8 million. Catastrophe losses for this period came in at $763 million pretax.
MKM Partners analysts cut the price target to $145 per share from $165.
"While the announcement was not what we wanted to see, we continue to believe the company will remain very aggressive with repricing its auto business to restore underwriting profitability with a combined ratio in the mid-90s from the estimated 117.4% level in the third quarter," the analysts wrote.
Wells Fargo analysts also cut the price target as they went to $100 from $112 per share on the Underweight-rated ALL stock.
"The ALL preannouncement (combined with TRV results today and PGR's September results) shows things continue to get worse for the personal auto sector. ALL also took a current accident year true-up in homeowners' (of 2.4 points) and adverse development in home (we calculate at $49 million). The previewed underlying margins in auto, home, and the consolidated property liability margin all fell short of us, and we are reducing forward EPS following the preannouncement," the analysts told clients.