) first-quarter 2014 operating earnings per share of $1.30
noticeably lagged the Zacks Consensus Estimate of $1.44 by 9.7%.
The reported figure also fell short of the year-ago quarter
figure of $1.35 by a nickel.
Subsequently, operating net income fell 9.1% to $588 million.
Including extraordinary items, Allstate's reported net income
stood at $587 million or $1.30 per share, plunging from $709
million or $1.47 per share in the prior-year quarter.
Property-liability insurance claims and claim expenses rose
6.7% year over year to $4.76 billion, while operating costs and
expenses inched down 0.7% year over year to $1.09 billion.
Particularly, catastrophe (CAT) losses for the reported quarter
soared 24% to $445 million, due to freeze and fire-related losses
in the winter.
Allstate's net revenue grew 2.6% year over year to $8.68
billion. The results also topped the Zacks Consensus Estimate of
Quarter in Detail
's earned premiums were $7.06 billion, up 4.3% from the
prior-year quarter, primarily driven by decent performance across
the Allstate, Encompass and Esurance brands and modest growth in
new business and customer retention across standard auto and
homeowners' businesses. However, policy rates continued to
decelerate in homeowners' segment.
Moreover, net written premiums grew 4.3% year over year within
the Allstate brand, whereas total policies inched up 1.1%.
Additionally, the Encompass brand witnessed an increase of 7.1%
in net written premiums and 5.9% growth in policies. Esurance
posted 18.7% growth in net written premiums and 21.1% in
The segment's combined ratio deteriorated to 94.7% from 93.2%
in the year-ago quarter, reflecting radically high CAT
However, the underlying combined ratio, which excludes
catastrophes and prior-year reserve estimates, was 88.4% in the
reported quarter, up 0.7 from the year-ago quarter, due to higher
underwriting expenses. Nonetheless, this was reasonably within
management's outlook of underlying combined ratio of 87% to 89%
Meanwhile, underwriting income fell 18.8% to $372 million
owing to higher claims, operating and other expenses as well as
higher catastrophe losses. However, the Property-Liability
expense ratio for the reported quarter was flat at 27.3% from the
Subsequently, higher catastrophe losses along with lower
underwriting and investment income weakened Property-Liability's
net income to $493 million from $616 million in the year-ago
quarter. Operating income for this segment also declined to $468
million from $556 million in the year-ago period.
On the other hand, operating income for
jumped 31.3% year over year to $162 million. The increase
reflected higher premiums and contract charges, stable investment
income, lower operating expenses and strong investment spreads.
These were partially offset by higher contract benefits and tax
Hence, net income grew 11% to $162 million, and included loss
of $16 million related to the disposition of LBL along with lower
realized capital gains.
Corporate & Other
segment reported a net loss of $69 million, wider than a loss of
$53 million in the prior-year quarter. The deterioration was
primarily due to preferred stock dividend payout, while other
factors remained stable.
Investment and Capital Position
As of Mar 31, 2014, Allstate's total investment portfolio
increased to $81.69 billion from $81.16 billion at 2013-end,
reflecting total investment returns of 2.1% driven by increased
fixed income valuations due to lower interest rates in 2014.
Allstate's net investment income dipped 2.4% year over year to
$959 million during the reported quarter. This also and included
$142 million from limited partnership interests and $41 million
related to prepayment fee income and litigation proceeds.
However, portfolio yields stood at 4.5% at Mar 2014-end, lower
than the prior-year quarter and 4.6% at 2013-end.
Book value per share increased 7.5% year over year to $46.70
in the reported quarter. Book value per share, excluding the
impact of unrealized net capital gains and losses on fixed income
securities, jumped 12.5% to $42.98 at the end of Mar 2014.
Additionally, annualized operating ROE improved to 14.4% from
11.9% in the year-ago quarter.
Operating cash flow plunged 36% year over year to $474 million
at the end of Mar 2014, while cash stood at $1.17 billion against
$675 million at 2013-end. Long-term debt remained flat at $6.2
billion and total equity increased to $22.11 billion from
2013-end, while total assets rose to $124.29 billion at the end
of Mar 2014.
The company's statutory surplus, at the end of Mar 2014, stood
at $17.7 billion, lower than $18.2 billion at 2013-end. Further,
total debt to capital ratio improved to 21.9% at Mar 2014-end
from 22.4% at 2013-end, primarily driven by appreciated
Stock Repurchase Update
On Feb 19, 2014, the board of Allstate approved a new share
repurchase of stock worth $2.5 billion, the largest one since
2006. The buyback is projected to be executed by Aug 2015.
Allstate bought back shares worth about $348 million through
open market operations during the reported quarter. Additionally,
shares worth $750 million were bought back under an accelerated
share repurchase agreement with
) in Mar 2014.
At the end of Mar 2014, Allstate had shares worth $1.65
million available for repurchases under the current
authorization. Additionally, Allstate held $3.4 billion as
deployable assets as of Mar 31, 2014, higher than $2.6 at
On Feb 19, 2014, the board of Allstate increased its regular
quarterly dividend by 12% to 28 cents per share from the prior 25
cents, now shelling out $1.12 per share annually. The raised
quarterly dividend was paid on Apr 1, 2014 to shareholders of
record as on Mar 3.
Previously in Feb 2013, the company had hiked its dividend by
13.6% from the prior payout of 22 cents.
Currently, Allstate carries a Zacks Rank #3 (Hold), while
Barclays bears a Zacks Rank #5 (Strong Sell). However, some
top-ranked insurers include
OneBeacon Insurance Group Ltd.
Aspen Insurance Holdings Ltd.
). Both these stocks sport a Zacks Rank #1 (Strong Buy).
ASPEN INS HLDGS (AHL): Free Stock Analysis
ALLSTATE CORP (ALL): Free Stock Analysis
BARCLAY PLC-ADR (BCS): Free Stock Analysis
ONEBEACON INSUR (OB): Free Stock Analysis
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