Allstate Corporation ALL reported third-quarter 2015 operating earnings per share of $1.52 per share, comfortably beating the Zacks Consensus Estimate of $1.32. Also, reported earnings were up 9.3% on a year-over-year basis.
Earnings reflected superior performance at the company’s homeowners business along with lower catastrophe loss.
Allstate’s total revenue climbed 1% year over year to $9.03 billion. The top line also exceeded the Zacks Consensus Estimate of $7.98 billion. The revenue increase was driven by a 4.7% year-over-year rise in property-liability insurance premium and a 5.1% improvement in Allstate Financial premium and contract charges, which were partially offset by lower investment income and capital gains.
Property-Liability insurance claims and claim expenses increased 7% year over year to $5.3 billion, while operating expenses decreased 7.1% to $992 million.
The company reported net investment income of $807 million, down 1.9% year over year due to lower average investment balances and a decline in interest-bearing portfolio yields, primarily in the Allstate Financial portfolio.
During the quarter, the company incurred catastrophe loss of $270 million, reflecting a 47.8% improvement from the year-ago loss.
Quarter in Detail
Property-Liability net premiums were $8.1 billion, up 4.2% from the prior-year quarter, primarily driven by a 4.7% increase in Allstate brand premium, followed by a 3.7% increase in net premium written from Esurance brand and partly offset by a 3.5% decline in premium written from the Encompass brand.
The segment’s combined ratio deteriorated by 320 basis points year over year to 89.3% due to higher underlying auto losses. The segment reported underwriting income of $491 million, up 3.6% year over year.
On the other hand, operating income for Allstate Financial increased 9.4% year over year to $138 million. The increase was driven by strong performance-based investment income, which was partially offset by higher life insurance mortality and a lower yield on the interest-bearing portfolio.
Investment and Capital Position
As of Sep 30, 2015, Allstate’s total investment portfolio contracted to $78.3 billion from $81.1 billion at 2014-end.
Book value of $45.49 per share increased 1.8% year over year.
Total equity declined to $20.5 billion from $22.3 billion at 2014 end, while total assets declined to $105.8 billion at the end of Sep 2015 from $108.5 billion at 2014 end. Long-term debt remained unchanged from the 2014-end level at $5.2 billion.
Stock Repurchase and Dividend Update
Overall, Allstate returned $920 million worth of capital through share buybacks and dividend payouts.
Stocks to Consider
While Allstate carries a Zacks Rank #3 (Hold), players like The Chubb Corp. CB, RLI Corp. RLI and Selective Insurance Group Inc. SIGI are all better placed with a Zacks Rank #1 (Strong Buy).
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