) fourth-quarter 2013 operating earnings per share of $1.70
noticeably outpaced the Zacks Consensus Estimate of $1.38 and the
year-ago quarter figure of 59 cents.
Subsequently, operating net income surged over threefold to
$781 million from $289 million in the year-ago quarter. Including
extraordinary items, Allstate's reported net income stood at $810
million or $1.76 per share, up from $394 million or 81 cents per
share in the prior-year quarter.
Results for the quarter reflected higher premiums, lower
catastrophe (CAT) losses and underwriting results, all of which
boosted the operating income across segments, operating cash
flow, return on equity (ROE) and book value per share. However,
lower investment income, loss on disposition of Lincoln Benefit
Life Company (LBL) along with higher operating expenses partially
offset the upsides.
Property-liability insurance claims and claim expenses
declined 15.1% year over year to $4.28 billion, while operating
costs and expenses scaled up 14.9% year over year to $1.26
billion. Particularly, catastrophe losses for the reported
quarter plunged to $117 million from $1.06 billion in the
Allstate's net revenue grew 2.9% year over year to $8.79
billion. The results also topped the Zacks Consensus Estimate of
$8.58 billion substantially.
Quarter in Detail
earned premiums were $7.01 billion, up 4% from the prior-year
quarter, primarily driven by modest performance across the
Allstate, Encompass and Esurance brands as well as modest growth
in standard auto, homeowners' and emerging businesses.
Moreover, net written premiums grew 3.9% year over year within
the Allstate brand, whereas total policies inched up 0.4%.
Additionally, the Encompass brand witnessed an increase of 6.1%
in net written premiums and 6.5% growth in policies. Esurance
posted 23% growth in net written premiums and 26.7% in
The segment's combined ratio improved to 88.7% from 101.7% in
the year-ago quarter, reflecting radically lower catastrophe
However, the underlying combined ratio, which excludes
catastrophes and prior-year reserve estimates, was 87.5% in the
reported quarter, 0.8 points stronger than the year-ago quarter,
due to higher underwriting expenses. Nonetheless, this was
reasonably below management's outlook of underlying combined
ratio of 88% to 90% for 2013.
Meanwhile, underwriting income escalated to $794 million from
a loss of $116 million. Growth was driven by higher premiums
along with lower claims expense, operating costs and catastrophe
Subsequently, lower catastrophe losses along with higher
underwriting income boosted Property-Liability's net income to
$865 million from $280 million in the year-ago quarter. Operating
income for this segment also ascended to $793 million against
$200 million in the year-ago period. However, the
Property-Liability expense ratio for the reported quarter
deteriorated to 27.6% from 26.9% in the prior-year quarter.
On the other hand, operating income for
grew 11.1% year over year to $160 million. The increase reflected
higher premiums and contract charges, stable investment income,
slightly lower operating expenses and lower crediting rates.
These were partially offset by higher contract benefits.
However, net income narrowed to $119 million against $166
million, primarily due to the loss of $44 million related to the
disposition of LBL.
Corporate & Other
segment reported a net loss of $174 million, significantly
deteriorating from a loss of $52 million in the prior-year
quarter. The deterioration was primarily due to higher total
operating cost and expenses that stood at $258 million, as
opposed to $96 million in the year-ago quarter.
Highlights of Full-Year 2013
For full-year 2013, Allstate reported operating earnings per
share of $5.68, comfortably outpacing the Zacks Consensus
Estimate of $5.37 and the 2012 equivalent of $4.36 a share.
Operating earnings surged 24.3% year over year to $2.67 billion.
Including one-time items, GAAP net income escalated to $2.26
billion or $4.81 per share in 2013 versus $2.31 billion or $4.68
per share in 2012.
Total revenue for the reported quarter climbed 3.6% year over
year to $34.51 billion, also exceeding the Zacks Consensus
Estimate of $34.29 billion. Property-liability insurance claims
and claims expenses fell 3.1% to $17.91 billion, while operating
costs and expenses increased 6.5% to $4.39 billion.
Investment and Capital Position
As of Dec 31, 2013, Allstate's total investment portfolio
decreased to $81.16 billion from $97.28 billion at 2012-end,
reflecting annual investment returns of 1.8% driven by lower
valuations, primarily in fixed income portfolio. It also reflects
the reclassification of $11.98 billion of classified investments
due to the pending sale of LBL and decrease in net unrealized
capital gains worth $2.85 billion, driven by the significant rate
hikes since 2012-end.
Allstate's net investment income decreased 0.7% year over year
to $1.03 billion during the reported quarter, primarily
attributable to lower reinvestment rates. However, portfolio
yields stood, at par with the prior-year, at 4.6% as of Dec 31,
Book value per share increased 6.9% year over year to $45.31
in the reported quarter. Book value per share, excluding the
impact of unrealized net capital gains and losses on fixed income
securities, jumped 14.6% to $42.55 at the end of Dec 2013.
Additionally, annualized operating ROE improved to 14.5% against
12.4% in the year-ago quarter.
Operating cash flow surged 38.9% year over year to $4.24
billion at the end of Dec 2013, while cash stood at $675 million
against $806 million at 2012-end. Long-term debt increased to
$6.2 billion and total equity increased to $21.48 billion, while
total assets declined to $123.52 billion at the end of Dec 2013.
The company's statutory surplus, at the end of Dec 2013, stood at
$18.2 billion, higher than $17.2 billion at 2012-end.
Stock Repurchase Update
Allstate bought back shares worth about $449 million through
open market operations during the reported quarter and $1.84
billion in 2013. At the end of Dec 2013, Allstate had shares
worth $139 million available for repurchases under the total $2.0
Additionally, Allstate held $2.56 billion as deployable assets
as of Dec 31, 2013, higher than $2.06 at 2012-end.
On Jan 2, 2014, Allstate paid a regular quarterly dividend of
25 cents per share to shareholders of record as on Nov 29, 2013.
This dividend represented a hike of 13.6% in Feb 2013 from the
prior payout of 22 cents.
While Allstate carries a Zacks Rank #2 (Buy), some other
top-ranked insurers include
Endurance Specialty Holdings Ltd.
White Mountains Insurance Group Ltd.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
ALLSTATE CORP (ALL): Free Stock Analysis
ENDURANCE SPLTY (ENH): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
WHITE MTN INS (WTM): Free Stock Analysis
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