Back to top

Analyst Blog

Home and auto insurer, The Allstate Corp.’s (ALL - Analyst Report) robust capital plan received the deserved applause as the share price went north by 3.2% to $53.47 per share on Feb 20.

Basking after solid fourth-quarter results and a smooth exit from 2013, the board of Allstate sanctioned a new share repurchase of stock worth $2.5 billion, the largest one since 2006. The buyback is projected to be executed in the next one and a half years.

After buying back shares for $1.84 billion in 2013 (significantly up from $910 million in 2012), the company held about $139 million worth of shares at 2013-end, under its previous $1.0 billion authorization that was authorized in Feb 2013, culminated both before expiry.

Dividend Up

Concurrently, Allstate also hiked 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 will be paid on Apr 1, 2014 to shareholders of record as on Mar 3.

At Thursday’s closing price, the company’s dividend yield stands at 2.09%, up from prior 1.89%, thereby increasing shareholder return. The latest hike is backed by dividend increases of 13.6% and 4.8% in Feb 2013 and Feb 2012, respectively.

Prudent capital management remains Allstate’s forte. The accretive impact of accelerated share repurchases and dividend hikes also enhances book value and earnings on a per share basis. Moreover, the inflated capital deployment reflects the company’s efficient operational synergies, yield expansion and aggressive risk management.

Armed with deployable asset of $2.56 billion and strong operating cash flow of $4.24 billion at 2013-end, Allstate boasts of returning wealth worth $2.5 billion to its shareholders via share buybacks and dividends in all of 2013 and Jan 2014.

CAT Loss: A Dampener

The catastrophe (CAT) loss estimate, for Jan 2014, issued by management may add some jitters to the first-quarter 2014 results. Allstate expects losses of over $277 million ($180 million pre-tax). The loss primarily includes the damages created by the recent winter freeze in the north-east of the US, among the six weather-related events, totaling $271 million. The remaining $6 million of loss is related to unfavorable reserve re-estimates from prior months.

The worst winters with record low-temperatures have cost the insurance industry CAT loss over $1 billion and higher claims, also affecting Allstate. In order to generate greater transparency, since 2012, Allstate started disclosing its quarterly and monthly CAT loss estimates if the amount exceeds $150 million for any month.

While Allstate carries a Zacks Rank #3 (Hold), other top-ranked insurers include RLI Corp. (RLI - Analyst Report), White Mountains Insurance Group Ltd. (WTM - Snapshot Report) and OneBeacon Insurance Group Ltd. (OB - Snapshot Report), each sporting a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%