On Friday, Citi updated its outlook on Allstate (NYSE:ALL), raising the price target to $215 from $209 and maintaining a Buy rating on the insurance company's stock.
The revision follows a dinner event with Allstate's Property-Liability President Mario Rizzo and Director of Investor Relations Allister Gobin, which bolstered the firm's confidence in the insurer's risk/reward balance.
Citi's assessment points to structural changes within Allstate that could pave the way for multiple avenues of growth. A particular emphasis is placed on the expansion of Direct sales, which Citi sees as a critical factor for potential multiple expansion in the company's valuation.
The growth is expected to stem from an increased presence in both Direct sales and Independent Agents, with the latter likely to benefit from National General's consistent service to these agents.
The firm also highlighted Allstate's strategic position in the home insurance market, noting the company's readiness to write home policies even as regional competitors scale back. Additionally, Allstate's enhanced digital capabilities were recognized as a strength that could drive further growth. Management at Allstate is also considering expanding its exclusive agent footprint, which Citi views as a positive move.
Despite facing headwinds such as an increase in intra-renewal shopping, as indicated by a LexisNexis report, and regulatory challenges that may slow down price increases in New York and New Jersey, Citi believes that the underlying improvements in Allstate's business could lead to significant upside potential. The firm sees these structural improvements as more than compensating for the temporary uncertainties related to customer retention.
In other recent news, Allstate Corporation (NYSE:ALL) reported significant catastrophe losses in July, totaling an estimated $542 million, largely due to Hurricane Beryl. As a result of these losses, Keefe, Bruyette & Woods revised their Q3 and full-year 2024 earnings per share estimates for Allstate to $1.61 and $13.10, respectively, but maintained their Outperform rating on the insurance company.
In addition, Allstate has announced the sale of its employer voluntary benefits business to StanCorp Financial for $2 billion, expected to result in a $600 million profit for the company.
Barclays (LON:BARC) initiated coverage on Allstate with an Underweight rating and a price target of $175, citing potential growth challenges. They also noted that Allstate's current premiums to surplus ratio is approximately three times higher than historical levels, which could impact future share repurchases. Meanwhile, TD Cowen raised Allstate's price target from $193.00 to $224.00, maintaining a Buy rating on the stock and highlighting the company's attractive estimated price-to-earnings ratio for 2025.
However, Allstate was downgraded from Buy to Hold by CFRA, with a maintained price target of $200.00. Other firms, including Piper Sandler and Wells Fargo (NYSE:WFC) made adjustments to their ratings, acknowledging potential benefits from Allstate's recent divestiture and improvements in auto margins. These developments reflect recent changes in Allstate's operations and financial standing.
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