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Allstate (ALL) Q2 Loss Wider Than Expected on High Cat Losses
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The Allstate Corporation (ALL - Free Report) incurred a second-quarter 2023 adjusted loss of $4.42 per share, wider than the Zacks Consensus Estimate of a loss of $3.83 per share. The figure was also wider than the prior-year quarter’s loss of 75 cents per share.
Operating revenues of $14,130 million advanced 9.1% year over year in the quarter under review on the back of 9.8% growth in property and casualty (P&C) insurance premiums. The top line missed the consensus mark by a whisker.
The quarterly results suffered a blow due to elevated catastrophe losses, inducing weakness in its underwriting results. Higher claim frequency and an increased expense level also dampened Allstate’s performance in the second quarter. Nevertheless, the downside is partly offset by rate increases in auto and homeowners insurance businesses.
The Allstate Corporation Price, Consensus and EPS Surprise
Net investment income rose 8.5% year over year to $610 million, higher than our estimate of $519.3 million. The growth came on the back of increased yields from fixed income portfolio. Market-based investment income soared 45.7% year over year in the quarter under review while performance-based investment income plunged 46.2% year over year.
Total costs and expenses came in at $15,727 million, which escalated 16.2% year over year mainly due to higher P&C insurance claims and claim expenses.
Allstate incurred a pretax loss of $1,748 million in the second quarter, wider than the prior-year quarter’s loss of $1,311 million.
As of Jun 30, 2023, total policies in force of 188 million inched up 0.2% year over year.
Catastrophe losses more than doubled year over year to $2,696 million in the second quarter.
Segmental Performances
The Property-Liability segment recorded premiums written of $12,620 million, which improved 9.7% year over year in the second quarter and came higher than our estimate of $11,572.2 million. The year-over-year improvement can be attributed to strength in the Allstate brand and National General. While the Allstate brand benefited on the back of expanding auto and homeowners average premiums, growth of policies in force provided an impetus to National General.
The unit incurred an underwriting loss of $2,094 million, wider than the prior-year quarter’s loss of $864 million. The underwriting results took a hit from elevated catastrophe losses and higher personal auto injury coverages. The underlying combined ratio improved 50 basis points (bps) year over year to 92.9% in the quarter under review.
The Protection Services segment’s revenues grew 9.1% year over year to $686 million in the second quarter, thanks to an expanding product suite, international growth and rate increases. Adjusted net income of $41 million slid 2% year over year and also missed our estimate of $53.7 million.
The Allstate Health and Benefits segment reported total premium and contract charges of $453 million, which tumbled 2.6% year over year in the quarter under review due to softness in individual health and employer voluntary benefits. Adjusted net income fell 14.9% year over year to $57 million and fell short of our estimate of $61.3 million.
Financial Update (as of Jun 30, 2023)
Allstate exited the second quarter with a cash balance of $699 million, which slipped 5% from the 2022-end level. Total assets of $100.5 billion increased 2.6% from the figure at 2022 end.
Debt amounted to $7,949 million, which dipped 0.2% from the figure as of Dec 31, 2022.
Total shareholders’ equity declined 11.3% from the 2022-end level to $15,517 million.
Book value per common share came in at $51.29, which dropped 22.2% year over year.
The adjusted net income return on ALL’s common shareholders’ equity in the trailing 12-month period came in at a negative figure of 12.7%. The metric was recorded at 7.1% in the prior-year comparable period.
Capital Deployment Update
Due to underwriting losses and subsequent net loss reported by Allstate in the second quarter of 2023, share repurchases pursuant to the $5 billion authorization were temporarily put on hold in July.
Zacks Rank
Allstate currently has a Zacks Rank #5 (Strong Sell).
Of the other insurance industry players that have reported second-quarter 2023 results so far, the bottom-line results of Cincinnati Financial Corporation (CINF - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and First American Financial Corporation (FAF - Free Report) beat the respective Zacks Consensus Estimate.
Cincinnati Financial reported second-quarter 2023 operating income of $1.21 per share, which surpassed the Zacks Consensus Estimate by 68%. The bottom line doubled year over year. Total operating revenues in the quarter under review were $2.1 billion, which improved 9.9% year over year. Yet, the top line missed the consensus mark by 0.7%. Net written premiums of CINF climbed 9% year over year to $2.1 billion. In its P&C insurance business, CINF witnessed an underwriting income of $47 million against an underwriting loss of $52 million in the year-earlier period. Total revenues in the Commercial Lines Insurance segment amounted to $1 billion, which increased 7% year over year.
Kinsale Capital’s second-quarter 2023 net operating earnings of $2.88 per share outpaced the Zacks Consensus Estimate by 14.7%. The bottom line improved 50% year over year. Total revenues rose about 60.8% year over year to about $295.7 million. Net written premiums of KNSL climbed 41% year over year to $242.3 million in the quarter. Net investment income more than doubled year over year to $24.2 million in the quarter and beat our estimate of $14.9 million. The combined ratio improved 70 bps to 76.7 in the quarter under review.
First American reported second-quarter 2023 operating income per share of $1.35, which beat the Zacks Consensus Estimate by 40.6%. The bottom line decreased 31.4% year over year. Operating revenues of $1.6 billion decreased 20% year over year. The top line however beat the consensus estimate by 9.5%. Investment income was $150.3 million in the second quarter, up nearly three-fold year over year. The Title Insurance and Services segment reported total revenues, excluding net investment gains and losses, of $1.5 billion, which decreased 25% year over year.
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Allstate (ALL) Q2 Loss Wider Than Expected on High Cat Losses
The Allstate Corporation (ALL - Free Report) incurred a second-quarter 2023 adjusted loss of $4.42 per share, wider than the Zacks Consensus Estimate of a loss of $3.83 per share. The figure was also wider than the prior-year quarter’s loss of 75 cents per share.
Operating revenues of $14,130 million advanced 9.1% year over year in the quarter under review on the back of 9.8% growth in property and casualty (P&C) insurance premiums. The top line missed the consensus mark by a whisker.
The quarterly results suffered a blow due to elevated catastrophe losses, inducing weakness in its underwriting results. Higher claim frequency and an increased expense level also dampened Allstate’s performance in the second quarter. Nevertheless, the downside is partly offset by rate increases in auto and homeowners insurance businesses.
The Allstate Corporation Price, Consensus and EPS Surprise
The Allstate Corporation price-consensus-eps-surprise-chart | The Allstate Corporation Quote
Q2 Operations
Net investment income rose 8.5% year over year to $610 million, higher than our estimate of $519.3 million. The growth came on the back of increased yields from fixed income portfolio. Market-based investment income soared 45.7% year over year in the quarter under review while performance-based investment income plunged 46.2% year over year.
Total costs and expenses came in at $15,727 million, which escalated 16.2% year over year mainly due to higher P&C insurance claims and claim expenses.
Allstate incurred a pretax loss of $1,748 million in the second quarter, wider than the prior-year quarter’s loss of $1,311 million.
As of Jun 30, 2023, total policies in force of 188 million inched up 0.2% year over year.
Catastrophe losses more than doubled year over year to $2,696 million in the second quarter.
Segmental Performances
The Property-Liability segment recorded premiums written of $12,620 million, which improved 9.7% year over year in the second quarter and came higher than our estimate of $11,572.2 million. The year-over-year improvement can be attributed to strength in the Allstate brand and National General. While the Allstate brand benefited on the back of expanding auto and homeowners average premiums, growth of policies in force provided an impetus to National General.
The unit incurred an underwriting loss of $2,094 million, wider than the prior-year quarter’s loss of $864 million. The underwriting results took a hit from elevated catastrophe losses and higher personal auto injury coverages. The underlying combined ratio improved 50 basis points (bps) year over year to 92.9% in the quarter under review.
The Protection Services segment’s revenues grew 9.1% year over year to $686 million in the second quarter, thanks to an expanding product suite, international growth and rate increases. Adjusted net income of $41 million slid 2% year over year and also missed our estimate of $53.7 million.
The Allstate Health and Benefits segment reported total premium and contract charges of $453 million, which tumbled 2.6% year over year in the quarter under review due to softness in individual health and employer voluntary benefits. Adjusted net income fell 14.9% year over year to $57 million and fell short of our estimate of $61.3 million.
Financial Update (as of Jun 30, 2023)
Allstate exited the second quarter with a cash balance of $699 million, which slipped 5% from the 2022-end level. Total assets of $100.5 billion increased 2.6% from the figure at 2022 end.
Debt amounted to $7,949 million, which dipped 0.2% from the figure as of Dec 31, 2022.
Total shareholders’ equity declined 11.3% from the 2022-end level to $15,517 million.
Book value per common share came in at $51.29, which dropped 22.2% year over year.
The adjusted net income return on ALL’s common shareholders’ equity in the trailing 12-month period came in at a negative figure of 12.7%. The metric was recorded at 7.1% in the prior-year comparable period.
Capital Deployment Update
Due to underwriting losses and subsequent net loss reported by Allstate in the second quarter of 2023, share repurchases pursuant to the $5 billion authorization were temporarily put on hold in July.
Zacks Rank
Allstate currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Of the other insurance industry players that have reported second-quarter 2023 results so far, the bottom-line results of Cincinnati Financial Corporation (CINF - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and First American Financial Corporation (FAF - Free Report) beat the respective Zacks Consensus Estimate.
Cincinnati Financial reported second-quarter 2023 operating income of $1.21 per share, which surpassed the Zacks Consensus Estimate by 68%. The bottom line doubled year over year. Total operating revenues in the quarter under review were $2.1 billion, which improved 9.9% year over year. Yet, the top line missed the consensus mark by 0.7%. Net written premiums of CINF climbed 9% year over year to $2.1 billion. In its P&C insurance business, CINF witnessed an underwriting income of $47 million against an underwriting loss of $52 million in the year-earlier period. Total revenues in the Commercial Lines Insurance segment amounted to $1 billion, which increased 7% year over year.
Kinsale Capital’s second-quarter 2023 net operating earnings of $2.88 per share outpaced the Zacks Consensus Estimate by 14.7%. The bottom line improved 50% year over year. Total revenues rose about 60.8% year over year to about $295.7 million. Net written premiums of KNSL climbed 41% year over year to $242.3 million in the quarter. Net investment income more than doubled year over year to $24.2 million in the quarter and beat our estimate of $14.9 million. The combined ratio improved 70 bps to 76.7 in the quarter under review.
First American reported second-quarter 2023 operating income per share of $1.35, which beat the Zacks Consensus Estimate by 40.6%. The bottom line decreased 31.4% year over year. Operating revenues of $1.6 billion decreased 20% year over year. The top line however beat the consensus estimate by 9.5%. Investment income was $150.3 million in the second quarter, up nearly three-fold year over year. The Title Insurance and Services segment reported total revenues, excluding net investment gains and losses, of $1.5 billion, which decreased 25% year over year.