Allstate to Add New Agencies - Analyst Blog
May 15 2012 - 05:45AM
Zacks
Going ahead with its proactive investment approach,
Allstate Corp. (ALL) is in the process of
employing over 150 new insurance agencies across the Northern US
and Florida. However, the company has not disclosed a definite
time-line when it plans to complete the process.
Accordingly, Allstate plans to increase its agency owners in the
North of US by about 140, primarily in the regions of Connecticut,
Maine, New Hampshire, Pennsylvania, Rhode Island and Vermont. The
company positioned about 220 agents in these areas between 2009 and
2011. Hence, the latest addition goal appears to be
significant.
Moreover, Allstate plans to deploy more than 12 agency owners in
North and Central Florida, which is further expected to hire over
100 support professionals in 2012. Meanwhile, the company has been
aggressively building upon its business strength by deploying
agencies in other parts of the US as well.
Earlier this year, Allstate laid out its aim of appointing about
28 new agency owners in Michigan by the end of 2012. The company
also expects to deploy 35 agency owners in Ohio and another 20 in
Indiana. Besides, the Allstate agencies in Michigan and Ohio intend
to hire over 200 sales professionals in each of the states through
2012, while more than 100 sales representatives are projected to be
hired in Indiana.
Hiring Plans In Line with Growth Strategy
The recent surge in sales professionals along with the expansion
of agency owners reflect the company’s capital efficiency, strong
operating leverage and its aim to generate an operating return on
equity (ROE) of 13% by 2014 through business growth. This also
complements Allstate’s long-term growth strategy to reposition
products and distribution platforms to meet the changing needs of
consumers.
Meanwhile, Allstate continues to work relentlessly to maintain
its standard auto margins and improve returns in homeowners and
Allstate Financial along with managing capital aggressively. The
company is also taking strategic actions to reduce losses for
Allstate business from catastrophes through enhanced property
catastrophe reinsurance program, non-renewals, stricter
underwriting guidelines, increased deductibles and discontinuance
of selected lines of coverage, including earthquake.
Earnings Review
Beginning this month, Allstate reported operating earnings per
share of $1.42 that outpaced the Zacks Consensus Estimate of $1.12
as well as the year-ago quarter earnings of 93 cents. A prudent
capital management coupled with an impressive liquidity position
resulted in considerable improvement in book value per share and
combined ratio excluding the effect of catastrophes.
Besides, the Zacks Consensus Estimate for the second quarter of
2012 earnings is currently pegged at 92 cents, which is about 175%
above the prior-year quarter’s earnings results. Of the 22 firms
covering the stock, 12 revised their estimates upward in the last
30 days, while 4 downward revisions were witnessed. The upside
potential for the second quarter currently stands at 1.09%.
Our Take
Overall, we believe Allstate will continually benefit due to its
diversification, superior financial strength rating and proactive
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 rating on Allstate
in the long run, with a Zacks Rank #3, which translates in to a
short-term Hold recommendation.
ALLSTATE CORP (ALL): Free Stock Analysis Report
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
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