The Allstate Corporation (Allstate or 'the company') is engaged in the personal property and casualtyinsurance, life insurance, and retirement and investment products business. It is the largest publiclyheld personal lines insurance company in the US.The company's diversified product portfolio protectsit against demand fluctuations for certain offerings, and helps it compete against players in regionalmarkets. However, natural disasters and increasing competition could adversely affect the company'sprofit margins.
Allstate has a very slight economic moat based on brand reputation, captive agents and bundling strategies. The company competes in an extremely competitive marketplace and is exposed to various risks.
The dividend has recently been increased by 7%, to an annual rate of $1.20 a share, while management has been aggressively buying back shares. The quality of ALL's insurance book remainsstrong, as reflected by its healthy underwriting margin. Though frequency and severity trends are somewhat difficult to predict, we believe management's strong underwriting philosophy will help shore up bottom-line results over the next couple of years.
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Strong market position in the property andcasualty business
Diversified product portfolio and multi distribution channels increase brand loyaltyand customer retention
Efficient expense management helping inincreasing underwriting profitability
Exposure to mortgage backed securitiesaffecting investment income
Lack of international presence increases business risk
Intense competition likely to decrease market share and profitability
Rising fraudulent activities may keep margins under check
Increased incidence of natural disasters testing claims paying capability
Growth of global property and casualty insurance market likely to increase revenues
Strategic acquisitions and disposals may accelerate revenue expansion
Organic growth initiatives may help in benefitting from the US life insurance market expansion
The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.
The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.