Calmer catastrophe conditions are helping insurance giant Allstate
Allstate's recently announced first-quarter results confirm the current tranquil industry conditions. Colder winter weather in the northeastern and central United States caused auto property-damage frequency to grow 4.8% compared with last year's first quarter, but a lack of major blizzards and other nature-related calamities helped the combined ratio come in at a favorable 84.6%. Return on equity was also impressive at 23.5%.
Allstate has also been reducing its exposure to coastal areas that are at higher risk of hurricanes. For the quarter, the number of auto and homeowner premiums written grew most rapidly in states other than the ones that management has deemed "hurricane exposure states." Higher interest rates are also helping to increase net investment income at Allstate Financial, which houses the company's life insurance, annuity, and investment activities.
Thanks to a stable insurance market, book value grew by double digits, and Allstate repurchased $700 million in stock during the quarter. It also pays current shareholders a 2.5% dividend yield, and the shares appear reasonably valued at less than 9 times analyst projections for the coming year.
Granted, other dominant insurance firms, such as Chubb
In Allstate's case, it is moving out of higher-risk areas and believes that its "highly successful marketing programs continue to distinguish us from our competition and deliver quantifiable results for our auto insurance business," which helps build awareness in other product categories. I don't know whether Allstate's recent marketing stacks up to Berkshire Hathaway's
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.