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Allstate (ALL) Rises 19% YTD: Is There More Room to Run?

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Shares of The Allstate Corporation (ALL - Free Report) have gained 18.6% year to date compared with the industry’s rally of 16%. Meanwhile, the Finance sector and S&P 500 composite index declined 1.4% and 4.4%, respectively, in the same time frame.

With a market capitalization of $38.9 billion, the average volume of shares traded in the last three months was 2.5 million.

Sustained revenue growth, the acquisition of National General, prudent cost-reduction efforts and a solid financial standing continue to drive Allstate’s performance.

The property and casualty (P&C) insurer, currently carrying a Zacks Rank #3 (Hold), has a sound surprise history of beating earnings estimates  in three of the trailing four quarters and missing once, the average surprise being 7.72%.

Return on equity in the trailing 12 months stands at 16.6% for Allstate, which remains higher than the industry’s figure of 5.9%. This reflects the insurer’s efficiency in utilizing shareholders’ funds.

 

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Can It Retain the Momentum?

Witnessing a seven-year CAGR of 5.3%, revenues of Allstate continue to benefit on the back of continually rising P&C insurance premiums, a diversified product suite and pricing discipline. Tailwinds such as rate increases and product upgradations are expected to provide an impetus to ALL’s revenues in the days ahead.

Allstate has been pursuing buyouts to bolster capabilities and broaden its nationwide presence. Apart from boosting ALL’s market share in the personal property-liability business, the buyout of National General in January 2021 continued to drive its premiums throughout 2021 and is expected to sustain the trend in the future.

Allstate’s cost-curbing initiatives enable Allstate to pursue increased investments in growth and technology, through which it aims to boost its position as a cost-effective digital insurer. Consequently, the underwriting results of ALL have improved due to such continued cost savings.

Allstate has a solid financial standing, backed by a strong cash balance and robust cash-generating abilities. ALL had a strong cash balance in 2021, which more than doubled year over year. It generated cash from operations worth $5.1 billion in 2021.

Backed by a solid financial position, the insurer engages in the prudent deployment of capital via share buybacks or dividend payments from time to time. In August 2021, management approved a share repurchase program of $5 billion, likely to be completed within Mar 31 of next year. Further, out of the total authorization amount, $3.3 billion was left to be bought back as of Dec 31, 2021.

Solid Dividend History

Banking on solid cash flows, Allstate has uninterruptedly paid out dividends for the past 12 years. The dividend yield is 2.4%, better than the industry average of 0.3%, thus making the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked stocks in the insurance space are Kinsale Capital Group, Inc. (KNSL - Free Report) , Chubb Limited (CB - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . While Kinsale Capital currently flaunts a Zacks Rank #1 (Strong Buy), Chubb and Arch Capital carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Kinsale Capital Lending outpaced estimates in each of the last four quarters, the average being 32.04%. The Zacks Consensus Estimate for KNSL’s 2022 earnings suggests an improvement of 15.3% from the year-ago reported figure, whereas the same for revenues suggests growth of 20.8%. The consensus mark for Kinsale Capital’s 2022 earnings has moved 5.9% north in the past 60 days.

Chubb delivered a trailing four-quarter earnings surprise of 12.03%, on average. The Zacks Consensus Estimate for CB’s 2022 earnings suggests an improvement of 16% from the year-ago reported figure, whereas the same for revenues suggests growth of 1.3%. The consensus mark for  Chubb’s 2022 earnings has moved north by 3% in the past 60 days.

The bottom line of Arch Capital outpaced estimates in each of the last four quarters, the average being 35.84%. The Zacks Consensus Estimate for ACGL’s 2022 earnings suggests an improvement of 26.3% from the year-ago reported figure, whereas the same for revenues suggests growth of 17.4%. The consensus mark for Arch Capital’s 2022 earnings has moved 0.2% north in the past 30 days.

Shares of Chubb and Arch Capital have gained 12% and 9.4%, respectively, year to date. Meanwhile, Kinsale Capital stock has lost 2.4% in the same time frame.