This insurance company beat analysts’ earnings estimates, posting EPS of $6.11, compared to the estimate of $3.87. The shares have a current annual dividend yield of 2.38%, paid quarterly.
The Allstate Corporation (ALL)
From The Prudent Speculator
Allstate is the largest publicly traded personal lines insurance company in the U.S., primarily a direct writer of a full array of property and casualty products like auto and home insurance. Allstate has mildly reshaped some of its portfolio over the past year, spending $4 billion to acquire National General in 2020 and selling 80% of its life insurance business to Blackstone for $2.8 billion.
These moves seem logical given ALL’s competitive position within property and casualty insurance. And while the life insurance sale involved a $4 billion write-down in Q1, we think the long-dated nature of life insurance liabilities offset any diversification benefits. Despite issuing rebates to customers as traffic came to a halt last year, the loss ratio improved over 7% in Q1 to 83.3, although we expect this to normalize a bit going forward.
We still find the stock a solid value, trading for just 11 times NTM EPS estimates, with a nice dividend yield and a propensity to repurchase shares. Also of note is the passive stake (1% of outstanding shares) disclosed by prominent investor Carl Icahn. Allstate boasts a vast distribution network, scale and resulting cost advantages, and pricing sophistication.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, June 2, 2021