Allstate Is Smith Barney's Top Pick In 2004
NU Online News Service, Jan. 8, 4:06 p.m. EST?Smith Barney, a New York-based investment brokerage firm, today released its U.S. top picks for 2004, with The Allstate Corporation being named as its top pick in the property-casualty sector.[@@]
Ronald Frank, a Smith Barney analyst, said Allstate has produced "consistent positive earnings surprises" and has increased earnings guidance during 2003 on the strength of its p-c underwriting margins. "We see the potential for continued positive surprises over the next several quarters," Mr. Frank said.
Unit growth, long a cloud over Allstate, also appears to be gaining traction, and Smith Barney expects this pattern to continue without a sacrifice of profit discipline. "We see valuation as compelling," he said. "Allstate has very strong earnings visibility and potential for upside surprise, combined with sustainable and profitable unit growth."
But Allstate also has some risk factors to be looked at. As a personal-lines insurer, Allstate is exposed to weather-related earnings volatility and to adverse regulation. Also, Allstate has asbestos exposure in discontinued operations, Mr. Frank observed. If the impact from any of these risk factors turns out to be greater than anticipated, Allstate could still miss investors' expectations.
Allstate, based in Northbrook, Ill., is the second-largest p-c insurer in the country. It provides insurance products to more than 16 million households, utilizing some 12,300 exclusive agents and financial specialists in the United States and Canada. Smith Barney said it estimates Allstate's personal p-c insurance business to contribute 82 percent of 2003 pretax operating earnings, with Allstate Financial, which includes life insurance, retirement and investment products, making up the rest.
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