One Insurer That Has Found Success

10/04/2012 12:13 pm EST

Focus: STOCKS

David Fried

Editor, The Buyback Letter

Many insurers have had a tough go of it, since their businesses follow the financials to a certain extent, but this one is an exception to the rule and worth a look for long-term investors, suggests David Fried of The Buyback Letter.

Allstate (ALL) is the nation's biggest publicly traded US home and auto insurer, and is a new addition to our model buyback portfolio.

Widely known for its "You're In Good Hands With Allstate" slogan, Allstate insures nearly 16 million consumers, who use its insurance products (auto, home, life, and retirement) and services.

It was created in 1931 by Sears, Roebuck & Co., went public in 62 years later, and became independent in 1995 when Sears spun off its interest to shareholders. It has a market cap of $18.08 billion.

Allstate's recent second-quarter report revealed that its property-liability ratio improved substantially, which means that more of the money taken in as premiums was retained. This shows that Allstate managed to avoid large payouts, despite damaging storms earlier this year, such as the destructive hailstorm in Texas in June. (We have not yet seen the insurance effects caused by Hurricane Isaac.)

Allstate is currently trading with a P/E below ten and sports a dividend yield around 2.3%. Allstate has raised homeowner premiums this year, and has written more policies than at the same time last year.

As low interest rates have drained the income insurance companies traditionally make from investments, other sources of income have had to fill in.

As a counterpoint to that, Allstate increased its dividend this year by a penny per share over that of 2011. In the last 12 months, management has reduced shares outstanding by 6.1%.

Subscribe to The Buyback Letter here...

Related Reading:

Elections and the Bond Market

No Longer for Widows and Orphans

An Upgraded Income Stream ETF

Related Articles on STOCKS

Keyword Image
11 Reasons to Buy Microsoft
7 hours ago

For our latest recommendation, we revisit one of the world's most prominent technology companies, Mi...

Keyword Image
A Trio of Top-Tier Biotechs
7 hours ago

We hold three biotech stocks in our growth portfolio — Biogen (BIIB), Bioverativ (BIVV), and R...

Keyword Image
Saudis, Oil and ETFs
7 hours ago

Under the guise of clamping down on “widespread corruption,” Prince Mohammed bin Salman ...