Allstate Continues To Prosper Despite Significant Cat Loss

 | Dec 13, 2017 09:00PM ET

The Allstate Corp. (NYSE:ALL) has performed quite well despite facing multiple challenges owing to the recent natural calamities.

For the first nine months of 2017, this property and casualty insurer incurred $2.64 billion loss due to the catastrophe, up 16.1% year over year. However, Allstate bottom line grew a whopping 70% year over year. The upside might have been driven by revenue growth (3.7%), which was higher than rise in expenses (0.4%).

Also, the company surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 57%.

What’s Buoying the Stock?

Allstate’s stellar performance was backed by decrease in the frequency of auto accidents and improved profitability in auto insurance, which reflects the profit improvement actions initiated in 2015.

Meanwhile, investments made for long-term growth in businesses such as Allstate Benefits, SquareTrade and its connected-car platform at Arity seems to be paying off, which is evident from an increase in the company’s current policies and higher premiums.

Also, the company is gradually gaining ground after suffering from declining income in its investment portfolio for the past many years due to market volatility and low interest rates. Net investment income rose 11% for the first nine months of 2017, reflecting higher performance-based results and stable income from market-based portfolios.

Bottom-line results also improved backed by Allstate’s share buybacks. Through the first nine months of 2017, the company repurchased 10 million shares or 2.7% of those outstanding at the beginning of the year. It further remains on track in executing the $2 billion repurchase program that was approved in August.

So far this year, the stock has gained 42% compared with the industry ’s growth of 19.4%. Additionally, the company scaled a 52-week high of $104.18 on Dec 13.