Striding ahead with its proactive expansion approach,
Allstate Corp.
(
ALL
) announced its plans to employ about 85 new insurance agencies
across south-west of the US. The company plans to begin with the
appointments by the end of the second half of 2012.
Accordingly, Allstate intends to increase its agency owners by
20 in Oklahoma, 30 in Phoenix, 15 in Nevada, and 10 each in
Albuquerque and Salt Lake City. Earlier this year, the company had
laid out its aim of appointing about 28 new agency owners in
Michigan by the end of 2012, while about 140 were targeted to be
employed across the primary locations of Connecticut, Maine, New
Hampshire, Pennsylvania, Rhode Island and Vermont.
The recent surge in sales professionals along with the expansion
of agency owners reflect the company's capital efficiency, strong
operating leverage and its focus to generate an operating return on
equity (ROE) of 13% by 2014 through business growth and brand
management. This also complements Allstate's long-term growth
strategy to reposition products and distribution platforms to meet
the changing needs of consumers.
Earnings Review
Beginning this month, Allstate reported second-quarter 2012
operating earnings per share of 87 cents, which substantially
exceeded the Zacks Consensus Estimate of 52 cents and the year-ago
quarter's loss of $1.24. Allstate's net income for the reported
quarter came in at $423 million or 86 cents per share, as opposed
to a net loss of $624 million or $1.19 per share in the prior-year
quarter, witnessing a stark improvement.
Results for the quarter reflected lower catastrophe losses,
which further led to reduced claims expenses coupled with lower
operating expenses and higher premiums. Expansions in emerging
businesses and other personal lines along with higher investment
income also benefited the results.
These were offset by lower realized capital gains and
underperformance of Allstate Financial. Improved operating cash
flow and prudent capital management also drove return on equity
(ROE), book value per share and combined ratio.
The Zacks Consensus Estimate for the third quarter of 2012
earnings is currently pegged at 78 cents, which is about 390% above
the prior-year quarter's earnings results. Of the 20 firms covering
the stock, 10 revised their estimates upward in the last 30 days,
while 6 downward revisions were witnessed. The upside potential for
the second quarter currently stands at 2.56%.
Our Take
Overall, we believe that Allstate will persistently benefit due
to its diversification, superior financial strength rating and
tactical approach to investment. These factors have helped Allstate
gain the second-largest personal lines writer position in the US,
which also reflects its competitive strength against arch rivals
such as
Berkshire Hathaway-A
(
BRK.A
) and
The Travelers Companies
(
TRV
).
However, Allstate's exposure to catastrophe risks, capital
losses and volatility in pricing, interest and loss costs will
continue to impact the premiums and investment portfolio in the
upcoming quarters. Hence, we maintain a Neutral recommendation on
Allstate for the long-term, with a Zacks Rank #3, which translates
in to a short-term Hold rating.
(ALL): ETF Research Reports
(BRK.A): ETF Research Reports
(TRV): ETF Research Reports
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