The Allstate Corporation, through its subsidiaries, engages in the personal property and casualty insurance business, as well as in the life insurance, retirement, and investment products business in the United States and Canada. It operates in two segments, Allstate Protection, and Allstate Financial. Allstate Protection segment sells private passenger auto and homeowner's insurance under 'Encompass' and 'Deerbrook' brand names primarily through agencies. This segment also sells various personal property and casualty insurance products, including landlords, personal umbrella, renters, condominium, residential fire, manufactured housing, boat owners, loan protection, and selected commercial property and casualty products; and provides emergency road services. Allstate Financial segment provides life insurance, retirement and investment products, and supplemental accident and health insurance products to individual and institutional customers. Its principal individual products comprise deferred and immediate fixed annuities, interest-sensitive, traditional and variable life insurance, and supplemental accident and health insurance. This segment markets its products through multiple intermediary distribution channels, including agencies, independent agents, banks, broker-dealers, and specialized structured settlement brokers. The Allstate Financial segment also offers various banking products and services consisting of certificates of deposit, money market accounts, savings accounts, checking accounts, first mortgage loans, home equity loans, and agency loans. The Allstate Corporation was founded in 1931 and is based in Northbrook, Illinois.

Financial Industry Analysis

WikiWealth.com Industry Description: The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises… Read More. Also see the Industry Analysis Home Page.

WikiWealth.com Industry Analysis: During economic recessions, consumers and businesses tend to cut back on expenses and investments to save money during tough economic times. This includes bank loans, raise equity or debt, general spending and many other financial activities. Less spending decreases business revenue and eventually decreases the stock prices of financial services companies. During economic recoveries, consumers have a greater desire to spend money and make business investments. Higher spending increases business revenue and eventually increases stock prices. During longer economic expansions, financial services may actually increase faster than the general market due to large investments by companies and mergers and acquisitions between companies. Consumers have more confidence in the stock market and increase stock investments and private business investments. Over-investment leads to higher inflation and higher interest rates, which make it harder to obtain money.

Financial services companies are also affected by interest rates. The return on money lent minus the expense of borrowing money equals the profits for many financial services companies. When interest rates increase, this raises the expense of borrowing money. Generally, interest rates increase near the end of the expansion phase of the business cycle to slow the potential for inflation. Interest rates are generally lowest during recessions, because inflation risk is lowest and the government wants to encourage business investments by making money relatively cheap to obtain.

¹ Investment potential (margin of safety) is a weighted average of the discounted cash flow analysis (DCF), the enterprise value (EV) market multiple analysis, and the Warren Buffett investment analysis. WikiWealth obtains 80% of their quantitative investment potential from fundamental investment analysis.
² The weighted average cost of capital (WACC) analysis for the industry is a broad representation of the WACC for each individual company. A sub-industry WACC analysis offers both stability and accuracy for each individual company.

WikiWealth.com Profit Analysis: The best way to profit from financial service stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street Analysis on left side), and have high Main Street Common Sense investment ratings (see Main Street Analysis on right side). Interest rates are also lowest during this time period, which decreases the cost of borrowing money for financial service companies.

When an economic recovery occurs, financial stocks tend to outperform the general stock market, because consumers and businesses quickly resume spending on items such as cars or business loans they wanted, but resisted obtaining during tougher economic times. Eventually financial stocks become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to sell financial stocks, because they are likely to decrease in price. Interest rates are highest at the end of recessions to fight inflation by making money for banks more expensive. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments. For more information on stock research ratings click here.

Investment Moats

Investment Moats are fundamental investing theories developed by Warren Buffett and adapted to the SWOT analysis. Investment moats are general characteristics that separate great investments from average stock investments. The wider the investment moat the better. Read more: Investment Moats. For company-specific investment moats: SWOT Analysis.

SWOT Strengths Increase Investor Moats: Below is a list of relevant industry investment characteristics, if any exist

SWOT Weaknesses Decrease Investor Moats: Below is a list of relevant industry investment characteristics, if any exist

Stock Price Triggers

Triggers were developed by WikiWealth.com to predict changes in stock price direction, which depend on events outside of the control of the company. In general, if SWOT opportunities are greater than SWOT threats, the stock price should raise; the opposite is also true. For more precise measures, examine each SWOT opportunity and threat, then rank them according to importance and timing. The more important the investment characteristic, the greater the impact on stock direction. The sooner a investment trigger may occur, the more influence it will have on stock price direction. Read more: Stock Price Triggers. For company-specific stock price triggers: SWOT Analysis.

SWOT Opportunities are Positive Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.

SWOT Threats are Negative Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.

Long Company Description (help)

The Allstate Corporation NYSE: ALL is the largest publicly held personal lines insurer in the United States and the second-largest of all personal lines insurers in the U.S. Allstate was founded in 1931 as part of Sears, Roebuck and Company.

The company slogan is "You're in good hands." The current advertising campaign, in use since 2004, asks, "Are you in good hands?" Their current English spokesperson is Dennis Haysbert, while their Spanish spokesperson is Esai Morales. Allstate sponsors various sporting events, including the Allstate Sugar Bowl, the Allstate 400 at the Brickyard NASCAR race, and the United States Olympic Committee.

Products

Allstate sells auto insurance, home insurance, life insurance, umbrella insurance, and commercial insurance, to name a few. Its advertising campaign is centered around its "Your Choice Auto" product, which offers accident forgiveness and lower deductibles.

Auto insurance claims

An article published on May 2006 in Business Week details how Allstate routinely tries to deny its policy-holders their full legitimate benefits, often paying out less than they're entitled to. Business Week writes:

"Claimants in the 'good hands' category may get swift reimbursement, but they will end up with less than they're entitled to," he says. Those who hold out for more — and retain a lawyer to help them get it — face battering in the courts and potentially years of delay. "You can get your claims resolved promptly or fairly," he argues, "but not both." Also according to the article, "Allstate deploys a variety of systems…to make sure it pays the minimum necessary — and it plays hardball with those who seek more."

An investigative report in February 2007 by CNN found that major car insurance companies, like Allstate, are increasingly fighting auto insurance claims from those who incurred injuries by their insured members.

Homeowners insurance

The PBS television program Now, in conjunction with Bloomberg Markets magazine, did an exposé regarding Allstate's home owners insurance policy change. The idea was to increase profit by not living up to the customers' policy expectations.

Allstate changed the terminology of the policy to "extended coverage", in order to convince the policy holders that coverage was still the same or even better. In reality the coverage was lowered.

Interviewed customers said insurance agents lied about what was covered with the policy change. When claims were filed, Allstate fought tooth and nail to avoid paying the full amount of the claims. Allstate used delaying tactics in court, attempting to cause the customer to give up.

The program also mentioned State Farm as having used the same consulting firm, McKinsey & Company, that came up with this idea. State Farm customers were complaining as well.

The unhappy insurance customers urged everyone to review their policies to make sure their coverage is adequate.

SWOT Analysis

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