On Nov 15, 2016, the stock of The Allstate Corp. (ALL - Free Report) climbed to a 52-week high of $71.41. The upside is believed to have been driven by a profitable third quarter reported last month as well as some recent announcements made by the company to accelerate share repurchase.
Investors favorably viewed the company’s third-quarter results, which included operating earnings per share of $1.26 per share that came ahead of the Zacks Consensus Estimate of $1.24. Also, top line of $9.22 billion beat the Zacks Consensus Estimate of $8.2 billion and increased 2.1% year over year on 29% growth in property-liability insurance premium and a 6.1% increase in Allstate Financial premiums and contract charges.
The quality of earnings was strong as evident by an improvement in the underlying auto margins, strong results for homeowners' business and a good total return generated on the investment portfolio.
The stock must also have received a boost from the profit improvement plan undertaken by the company in its auto business, which suffered from high auto claims for many quarters. One of the components of its profit improvement plan is claims operational excellence, wherein the company is looking for ways to improve claims processes and continue to settle claims fairly, deliver the best possible claims experience to its customers as well as settle claims as efficiently as possible. To have an efficient claims management process is one of the important features of an insurance company which gives it an upper hand in the industry.
Its strong balance sheet also arrests investors’ confidence in the stock. The company had a low debt to capital ratio of 19.6% as of Sep 30, 2016.
Its capital management via consistent share buyback and dividend payment also must have helped it to gain investors’ favor. In September, the company entered into a new accelerated share repurchase program worth $250 million of shares.
Allstate carries a Zacks Rank #3 (Hold).
Investors may also consider other players like Alleghany Corp. (Y - Free Report) , Arch Capital Group Limited (ACGL - Free Report) and NMI Holdings, Inc. (NMIH - Free Report) . Each of these stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alleghany delivered positive surprises in three of the last four quarters, with an average beat of 20.52%.
Arch Capital beat expectations in each of the last four quarters, with an average beat of 9.27%
NMI Holdings delivered positive surprises in each of the last four quarters, with an average beat of 62.8%.
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