Home and auto insurer,
The Allstate Corp.
) 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.
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,
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
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
White Mountains Insurance Group Ltd.
OneBeacon Insurance Group Ltd.
), each sporting a Zacks Rank #1 (Strong Buy).
ALLSTATE CORP (ALL): Free Stock Analysis
ONEBEACON INSUR (OB): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
WHITE MTN INS (WTM): Free Stock Analysis
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