Stock Review of the Day
Stock:  ALL (Allstate)
Summary:  ON SALE

Score:  17/20
MOS:  69%
Share Price:  $105
Sticker Price:  $338

The Allstate Corporation is an American insurance company founded in 1931 and headquartered in Northfield Township, IL.

Their insurance products include Auto, Home, Life, Motorcycle, Renters, Boat, and Off-Road Vehicles.

If you’re ever unsure what industry to invest in, insurance is typically a safe play.  Here are two primary reasons why…

  1. Insurance is a necessity.  Homeowners insurance is required by law in all US states and Auto insurance is required by law in most US states.  You have to love a business model that is mandated by law.
  2. Insurance is also a recurring business model.  This is great for cash flow.  As consumers we either pay premiums monthly, quarterly, or yearly.  A business model with recurring cash flow is extremely important (Insurance, SaaS, Internet Service, Cell Phone Service, etc).

This last summer of 2020 Allstate announced that it will be acquiring National General for $4B because of the National General independent insurance agent network.

Some insurance companies such as Farmers Insurance are classified as “Captive” insurance company which means their agents only sell Allstate products.  Insurance companies with captive agents can face sales challenges because the consumer is typically shopping based on price, not product.  If a Captive agent can’t match or beat a price, the customer may keep shopping.

The alternative to Captive agents are “Independent Agents”.  Independent Agents can sell multiple insurance companies.  This allows Independent Agents to match or beat prices which means they have a much higher sales closing ratio.  This is great for overall company revenues.

This acquisition will increase significant market share for All State and solidify it as one of the top insurance companies in the US.

Overall, Allstate has fantastic financials.  With a score of 17/20, this is proof on how well Allstate is operating.  Allstate is currently ranked #4 on the TOP 50 ON SALE.  With an MOS of 69% (Share Price of $105 vs Sticker Price of $338) this stock has excellent upside potential.

What do you think?

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Blog Post Author
Sean Tepper