Stock Breakdown Newsletter: Allstate - $ALL

Is this stock 'In good hands'?

Disclaimer: This is for education and information purposes. Do your own research before many any investment decision. The publisher is not responsible for any losses incurred and may own the investments discussed. More disclosure information can found at the end of this newsletter.

Newsletter Date: AUG 2024

Ticker Symbol: NYSE: ALL
Stock Price: $159.00
Website: https://www.allstate.com/
Headquarters: Northbrook, Illinois, USA
Incorporated: April 17, 1931
Industry: Insurance
Investor Relations: https://www.allstateinvestors.com/

PART 1: The Business

Overview

The Allstate business is a 90+ years old American insurance business offering a variety of insurance products including: home, vehicle, life and others. It began as part of the Sears, Roebuck and Co. and was officially spun off from Sears in 1993.

Number of employees = 53,200.

How does the company make money?

ALL is one the largest insurance providers and makes money via a traditional insurance model.

1. Underwriting Profit

   1. Policy Premiums: ALL collects a premium from policy holders in exchange for coverage.

   2. Risk Assessment: ALL uses actuarial science to assess risk and set premiums that are sufficient to cover the expected claims plus a margin for profit.

2. Investment Income

   1. Invested Premiums: The premiums collected are invested in various financial instruments such as bonds, stocks, real estate, and other assets. The income generated from these investments provides a significant portion of the insurance company's profits.

   2. Reserve Management: Insurance companies maintain reserves to ensure they can pay future claims. These reserves are invested to generate returns.

3. Fees and Charges:

   1. Administrative Fees: Insurance companies may charge policyholders administrative fees for managing the policies.

   2. Policy Fees: These can include initiation fees, renewal fees, and service charges.

4. Reinsurance

   1. ALL passes along a portion of their policy risk to reinsurance businesses.

5. Expense Management

   1. Operational Efficiency: By managing operational costs efficiently, insurance companies can maximize their profitability. This includes controlling expenses related to claims processing, policy administration, marketing, and other operational activities.

Who is the target customer for this business?

Allstate offers a range of products for a variety of consumers. Life insurance for married couples with children. Auto insurance for drivers and home insurance for home owners. The target customer is anyone who needs the insurance products they provide, but they generally target families and individuals located in local communities around the US.

History

When was the company founded?

The business of Allstate began in 1931, the height of the great depression, as a part of Sears organization. During this time in American history Sears was one of the most important retailers in America. Their primary way of delivering products to customers was through their popular magazine catalog.

In 1925 Sears launched their own brand of tires, which they named Allstate. The launch of this product was successful. It was Carl L. Odell, an insurance broker, who proposed to Sears Chairman Robert E. Wood, that Sears should start selling auto insurance to their customers through their mailing catalog.

During the 1950’s the majority of states had passed auto financial responsibility laws essentially mandating that Americas have auto insurance. This pushed more consumers to adopt the Allstate products.

The company's "You're in Good Hands with Allstate" slogan was created in 1950 by Allstate's general sales manager Davis W. Ellis. At the end of the decade, it was used in the company's first network-television advertising campaign, which featured actor Ed Reimers. In 1957, Allstate also began offering home and life insurance.

ALL began offering worker's-compensation insurance in 1964. ALL began offering surety bonds in 1966. ALL began offering inland-marine coverage in 1967, and a business package policy in 1969.

In 1952, an Allstate car was produced, but it was a flop; it was pulled from stores by 1953. The Allstate brand was eventually limited to insurance, tires, and car batteries by the late 1960s, before becoming insurance only in the mid-1970s.

When did the company go public?

The business finally went public in June 3, 1993 on the NYSE. The IPO was priced at $27.00 per share. This pricing valued Allstate at around $8.4 billion. After IPO Sears wound down its ownership in the business and it became completely independent by 1995.

The IPO gave the business the funds needed to invest in customer services, product expansions, acquisitions and new technology.

In 1996, ALL launched their website.

In 1999, Allstate unveiled a new business model that created a single contract for exclusive, independent agents selling Allstate insurance.

In 2003, actor Dennis Haysbert became Allstate's spokesman, using the tagline "That’s Allstate’s stand."

In 2010, actor Dean Winters became a part of Allstate's campaign "Mayhem", "personifying the pitfalls, like collisions and storm damage, that can befall drivers".

In May 2011, Allstate announced that it was purchasing Esurance and rate-comparison site Answer Financial for about $1 billion. At the time, Esurance was selling policies in 30 states and was in the midst of a five-year growth period that had them double the number of policies in force. Allstate, for its part, was losing policyholders to the three major online policy retailers: Esurance, Progressive, and GEICO.

In 2012, Allstate Solutions Private Limited (also called Allstate India) was inaugurated in Bangalore; it is a technology and operations center to provides software development and business process outsourcing services to its US parent. Allstate's Bangalore operation is focused on the areas of business intelligence, analytics, testing, and mobility.

In January 2017, Allstate acquired SquareTrade, a consumer electronics and appliance protection plan provider. The acquisition cost a reported $1.4 billion from a group of shareholders.

What could the future of this business look like?

In recent years Allstate has divested its life insurance business in order to focus on the growth of its personal and property insurance businesses. It has explored new areas of insurance like cyber insurance, pet, travel and collectibles.

Currently, Allstate is focused on serving only the United States and Canada.

They do have plans to incorporate more technology into business operations to make the business more efficient as well as offer consumers better insight into the their products via apps, digital information and customer service.

They will continue offer more niche insurance products and grow their existing customer base.