On March 21, 2014, shares of The Allstate Corporation (ALL) touched a 52-week high of $56.41. The momentum was driven by solid earnings results and capital deployment plan. The share price has gained almost 13.7% since the company reported its results on Feb 5.
The fourth-quarter earnings figure at Allstate clocked a positive surprise beat of 23.2% while the top line exceeded the Zacks Consensus Estimate by 2.4%. This carries forward the company’s impressive earnings performance wherein it delivered positive earnings surprises in each of the last 4 quarters, with an average beat of 13.2%.
The solid fourth-quarter performance primarily accounts for higher premiums, lower catastrophe losses and better underwriting results, all of which boosted operating income across segments, operating cash flow, return on equity and book value per share.
With respect to returning value to shareholders, in 2013, Allstate bought back shares for $1.84 billion in 2013, significantly up from $910 million in 2012. Thereafter, on Feb 19, the board of Allstate sanctioned a new share repurchase program worth $2.5 billion to be executed in the next one and a half years. This sanction is the largest one since 2006.
The board also hiked its regular quarterly dividend by 12% to 28 cents per share. The company’s sturdy capital deployment reflects its efficient operational synergies, yield expansion and aggressive risk management. Since 2011, Allstate has returned over $1 billion in capital to its shareholders.
The year-to-date return from the stock came in at 2.79%, way ahead of the S&P’s return of 0.98%. The expected long-term earnings growth rate for the stock is 9%.
Allstate presently carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers worth considering include Alleghany Corp.oration (Y), AmTrust Financial Services, Inc. (AFSI) and Atlas Financial Holdings, Inc. (AFH). All these stocks sport a Zacks Rank #1 (Strong Buy).