It has been about a month since the last earnings report for Allstate (ALL). Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allstate due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Allstate Q3 Earnings Beat on Strong Premium and Investment Income
Allstate reported third-quarter 2024 adjusted net income of $3.91 per share, which outpaced the Zacks Consensus Estimate by a whopping 77.7%. The bottom line increased nearly five-fold year over year.
Operating revenues advanced 12.3% year over year to $16.4 billion on the back of higher earned premiums from Property-Liability unit. The top line beat the consensus mark by 0.9%.
The quarterly results benefited from strong growth in earned premiums, improved underwriting income and robust market-based investment income due to higher yields. However, the upside was partly offset by elevated catastrophe losses, increased insurance claims and claims expenses and softer real estate investment performance.
Key Takeaways From Allstate’s Results
Consolidated premiums written of $15.9 billion improved 10% year over year.
Net investment income was $783 million, which rose 13.6% year over year, resulting from increased market-based income, partly offset by reduced performance-based income. The metric surpassed the Zacks Consensus Estimate of $733.4 million and our model estimate of $690 million. Market-based investment income climbed 24.9% year over year on the back of increased yields and asset balances in the market-based portfolio. However, performance-based investment income was affected by softer real estate investment results.
Total costs and expenses escalated 4.8% year over year to $15.2 billion, higher than our estimate of $15 billion. The year-over-year rise was due to increased property and casualty insurance claims and claims expenses, and operating costs and expenses.
Allstate’s pretax income was $1.4 billion in the third quarter against the year-ago quarter’s pretax loss of $21 million.
As of Sept. 30, 2024, total policies in force were 205.5 million, which grew 8.1% year over year. Catastrophe losses escalated 44.2% year over year to $1.7 billion.
ALL’ s Segmental Performances
The Property-Liability segment’s premiums earned advanced 11.6% year over year to $13.7 billion, attributable to improved premiums derived from the Allstate and General National brands. Yet, the metric fell short of the Zacks Consensus Estimate of $13.8 billion but beat our estimate of $13.6 billion.
Underwriting income in the unit amounted to $495 million against the prior-year quarter’s loss of $414 million. The metric benefited on the back of improved average earned premiums and favorable underlying loss experience. The underlying combined ratio improved 870 basis points year over year to 83.2%.
The Protection Services segment recorded revenues of $822 million, which advanced 17.9% year over year. The metric, which was aided by an expanding North America and international business, surpassed the consensus mark of $753.2 million, as well as our estimate of $781.4 million. Adjusted net income more than doubled year over year to $58 million on the back of Allstate Protection Plans.
The Allstate Health and Benefits segment’s premium and contract charges improved 5.2% year over year to $487 million, thanks to well-performing individual health and group health businesses. The metric beat the Zacks Consensus Estimate of $474.9 million and our estimate of $465.3 million. Adjusted net income of $37 million dropped 46.4% year over year but outpaced our estimate of $22.7 million.
Financial Update (as of Sept. 30, 2024)
Allstate exited the third quarter with a cash balance of $816 million, which grew 13% from the 2023-end level.
Total assets of $113.7 billion increased 10% from the figure at 2023-end.
Debt amounted to $8.1 billion, which inched up 1.8% from the figure as of Dec. 31, 2023.
Total shareholders’ equity of $20.9 billion advanced 17.5% from the 2023-end level.
Book value per common share was $70.35 as of Sept. 30, 2024, which climbed 47.2% year over year.
The adjusted net income return on equity in the trailing 12-month period was 26.1%. The metric was recorded at a negative figure of 9.7% in the prior-year period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 8.45% due to these changes.
VGM Scores
At this time, Allstate has a nice Growth Score of B, however its Momentum Score is doing a bit 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Allstate has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Allstate belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, W.R. Berkley (WRB), has gained 13.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
W.R. Berkley reported revenues of $3.41 billion in the last reported quarter, representing a year-over-year change of +10.9%. EPS of $0.93 for the same period compares with $0.90 a year ago.
W.R. Berkley is expected to post earnings of $0.93 per share for the current quarter, representing a year-over-year change of -4.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for W.R. Berkley. Also, the stock has a VGM Score of B.
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