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Allstate (ALL) Scales 52-Week High: Any Upside Potential Left?

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Shares of the property and casualty insurer The Allstate Corp. ALL bumped up on the last trading day after Carl Icahn disclosed his investment in the insurer.

The stock hit a 52- week high of $140 in yesterday’s trading session after settling at $135.57.

The seasoned investor has invested $400 million into the insurer, which has a market capitalization of $40.5 billion. This shows his conviction in

Allstate’s the long-term prospects as management declares about direct selling of policies to its customers and taking cost-cutting initiatives to aid margin growth.

Notably, an iconic investor’s backing speaks volumes for the 29-year old insurance company, which flaunts a history of consistent performance to its credit.

In a year's time, the stock has risen 37.9% compared with its industry's growth of 40.8%.

The Road Ahead for the Stock

Allstate is all set on the path of long-term growth by focusing on increasing its personal property-liability market share and expanding protection services. Its axing of non-core business will also deepen its focus on higher return-generating businesses. The company also undertook a transformative growth plan, which is a multi-year initiative to build a low-cost digital insurer with broad distribution.

In sync with expanding its personal property-liability market share, the company acquired National General in January 2021. The transaction will increase its market share in the said space by more than one percentage point and enhance its independent agent-facing channel.

National General will significantly bolster the company’s distribution footprint, thereby positioning it as one of the top five personal line carriers in the independent agency distribution channel. The independent agency model will help the company save on commission costs.

The combination of Allstate's standard auto and homeowner insurance expertise with National General's knowhow in nonstandard auto insurance will give the company a real edge in the form of a broad portfolio of products to provide through independent agents.

Expansion of its Protection Services segment is another key catalyst. The company’s Protection Services segment accounted for 4.3% of its 2020 consolidated total revenues. It is boosting other protection businesses and widening its total addressable market. The company expects to achieve growth by further strengthening appliance, furniture and mobile phone protection, extending its geographic footprint outside the United States and developing innovative services, such as a two-day appliance repair.

Allstate is soon to close the sale of its life insurance business, which was affected by low interest rates and became a drag on the company’s growth. Thus, shedding this business will help it focus on its core property and casualty and service business.

The company is also investing in technology to digitize its processes and to this end, ramped up its utilization of virtual claims processes in response to the coronavirus outbreak. It is continuing to implement new technology forefficient operations.

Other companies in the insurance space are also rapidly adopting digital ways to operate. Some of the leading property and casualty companies in the United States are Berkshire Hathaway Inc. BRK.B, The Progressive Corporation PGR and The Travelers Companies, Inc. TRV.

Allstate’s strategies chart a clear growth path, which will push up its share price going forward.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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