Allstate Corporation ALL reported second-quarter 2015 operating earnings per share of 63 cents, which widely missed the Zacks Consensus Estimate of 94 cents. Also, the reported earnings declined from the year-ago quarter figure of $1.01.
Operating net income plunged 41.1% to $262 million. Earnings suffered due to lower auto insurance margins and seasonally high catastrophe losses which drained the bottom line.
Property-liability insurance claims and claim expenses rose 8.7% year over year to $5.59 billion, while operating expenses increased 3.7% to $1.06 billion. Notably, catastrophe losses for the reported quarter fell 14.9% to $797 million.
Allstate’s total revenue climbed 1.4% year over year to $8.98 billion. The top line also exceeded the Zacks Consensus Estimate of $7.88 billion. The revenue increase was driven by a 4.7% year-over-year growth in insurance premium, which was partially offset by lower investment income and capital gains.
Quarter in Detail
Property-Liability’s net premiums were $7.9 billion, up 4.4% from the prior-year quarter, primarily driven by decent performance across the Allstate and Ensurance brands, partially offset by deterioration in Encompass.
Moreover, net written premiums grew 4.9% year over year within the Allstate brand, whereas total policies moved up 3.3% reflecting improvement across auto and homeowner lines. Esurance posted 9.1% growth in net written premiums but a reduction in policy growth to 6.4%. However, the Encompass brand witnessed a fall of 0.9% in net written premiums.
The segment’s combined ratio deteriorated to 100.1% from 97.4% in the year-ago quarter, due to high catastrophe.
Meanwhile, the segment reported underwriting loss of $10 million compared with underwriting income of $189 million in the year-ago quarter due to higher claims and operating expenses, which were offset by higher premiums. However, the Property-Liability expense ratio for the reported quarter was slightly higher at 26.1% from 26.0% in the prior-year quarter.
On the other hand, operating income for Allstate Financial declined 18.7% year over year to $139 million, due to lower net investment income and higher mortality loss.
However, net income grew to $179 million from $145 million in the year-ago quarter, primarily owing to higher realized capital gains.
Investment and Capital Position
As of Jun 30, 2015, Allstate’s total investment portfolio declined to $79.1 billion from $81.1 billion at 2014-end.
Book value of $47.96 per share remained unchanged year over year.
Additionally, operating return on shareholders' equity was 11.9% over the trailing 12 months.
Total equity fell to $21.3 billion from $22.3 billion at 2014 end, while total assets declined to $107.1 billion at Jun end from $108.5 billion at 2014 -end. Long-term debt remained at $5.2 billion, unchanged from the 2014-end level.
Stock Repurchase and Dividend Update
Overall, Allstate returned $642 million worth of capital through share buybacks and dividend payouts in the reported quarter.
Zacks Rank & Stocks to Consider
While Allstate carries a Zacks Rank #3 (Hold), players like AmTrust Financial Services, Inc. AFSI, Arch Capital Group Ltd. ACGL, RLI Corp. RLI each are better placed with a Zacks Rank #2 (Buy).
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