On Friday, Evercore ISI adjusted its price target for Allstate Corporation (NYSE:ALL) shares, decreasing it to $178 from the previous $180, while maintaining an In Line rating for the stock. The revision follows Allstate's announcement of natural catastrophe (natcat) losses for May, which amounted to $1.4 billion.
This figure is worse than Evercore ISI's initial second-quarter estimate for 2024 but aligns with expectations set after Progressive disclosed approximately $800 million in May natcat losses. The majority of Allstate's losses were attributed to five wind and severe convective storm (SCS) events that occurred in Texas, Colorado, and Illinois.
Due to an active June for natural catastrophes, Evercore ISI has increased its estimate for Allstate's second-quarter natcat losses to $2.4 billion, which includes an estimated $500 million for June. This adjustment has led to a projected earnings per share (EPS) loss of $0.18, down from the previously estimated $2.45 EPS. The firm notes that with substantial losses already recorded in the second quarter of 2024 and predictions of an active hurricane season ahead, the focus may shift back to Allstate's capital position.
Evercore ISI estimates that Allstate's Risk-Based Capital (RBC) ratio will remain stable at around 213% in the second quarter of 2024. The net premiums written to surplus ratio, including holding company cash, is expected to slightly worsen to 2.4 times.
These metrics suggest that Allstate is in a better position entering the hurricane season than it was a year ago, with around a 180% RBC and a 2.6 times ratio in the second quarter of 2023. However, concerns arise that capital levels could become strained if the hurricane season is particularly severe.
The analysis by Evercore ISI concludes that Allstate has approximately $1 billion of buffer above the 200% RBC threshold as of the second quarter of 2024. Additionally, improvements in the auto insurance book are noted, which is now slightly profitable compared to the previous year.
This improvement, along with a substantial retention on its excess of loss (XOL) reinsurance treaty outside of Florida, is expected to push the capital conversation further away.
While the firm acknowledges less concern over Allstate's capital compared to last year, it emphasizes the need for the insurer to build capital to transition fully towards growth, a process that could be expedited with a potential sale of benefits.
In other recent news, Allstate Corporation disclosed estimated catastrophe losses for April, amounting to $494 million pre-tax, or $390 million after-tax, largely due to four significant weather-related incidents.
Despite this, Keefe, Bruyette & Woods maintained their Outperform rating on Allstate, with steady earnings projections for 2024 and 2025 at $14.80 and $17.65 per share, respectively. The firm anticipates Allstate will face $1.54 billion in catastrophe losses for the second quarter of 2024.
In other developments, Edward Jones reaffirmed its Buy rating on Allstate, citing strong underwriting results and above-average profitability. This comes despite recent inflationary pressures on Allstate's auto insurance segment, which the company is addressing through premium hikes.
Furthermore, Allstate declared a quarterly dividend of $0.92 per common share, payable in July 2024, continuing its practice of returning value to shareholders through regular dividends. These are some of the latest developments concerning Allstate Corporation.
InvestingPro Insights
As Allstate Corporation (NYSE:ALL) navigates through the financial implications of recent natural catastrophe losses, real-time data and insights from InvestingPro become particularly pertinent. According to InvestingPro data, Allstate has a market capitalization of $42.91 billion and is trading at a P/E ratio of 34.98, indicating investors are paying a premium for its earnings. This is slightly adjusted from the last twelve months as of Q1 2024, where the P/E ratio stands at 32.37. On a positive note, the company has experienced a revenue growth of 10.79% in the last twelve months, demonstrating its ability to increase sales.
InvestingPro Tips suggest that Allstate is a prominent player in the insurance industry, with a track record of maintaining dividend payments for 32 consecutive years, showcasing its commitment to providing shareholder value. Additionally, analysts predict the company will be profitable this year, which aligns with the observed improvement in Allstate's auto insurance book. However, it's worth noting that 7 analysts have revised their earnings downwards for the upcoming period, reflecting potential concerns over future profitability.
For readers looking to delve deeper into Allstate's financial health and future prospects, InvestingPro offers additional tips and metrics. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to comprehensive analysis and insights that could inform your investment decisions. Visit https://www.investing.com/pro/ALL for more details, including several additional InvestingPro Tips not covered in this brief overview.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.