The Allstate (ALL), mcap=$35bn, price $131 vs $130

$ALL pitch:
– P&C insurer that has been under-earning in their U.S. personal auto business since mid-2021.
– Sold-off after Q2 earnings due to inflationary headwinds, however, the auto margins are likely to be at or near trough levels.
– Margins are set to expand given implemented rate adjustments to counter inflation, favorable macro indicators as well as reserves already being in line with best-in-class peers.
– Normalized auto margins and profitability levels are expected by early 2024.
– ALL expected to re-rate as investors see a cleaner roadmap back to normalized earnings power.

$ALL valuation:
– With 2024 EPS of $16 and 10.5x PE multiple – $170/share target in the base case.
– Bull case of $190/share.
– Peers $PGR and $KMPR trade at 14x and 13x through-the-cycle PEs.

Exp. gain: +30-45% to $170-%190/share.

Full ALL write-up (free guest account required):

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