Allstate Buys SquareTrade, Forays into Electronic Warranty
The Allstate Corporation ALL has completed the previously announced acquisition of SquareTrade. The acquired company provides consumer protection across the U.S. With this acquisition, Allstate will be exposed to the business of providing warranty service to electronic devices.
This transaction reflects the efforts made by the company to diversify its business and product offering at a time when some of its business is facing friction. The company has also undertaken other growth initiatives such as the profit improvement plan in its auto business, which was suffering from high auto claims for many quarters. This is also reflected in its share price, which outperfromed the Zacks categorized P&C Insurance industry by returning 22.45% in 2016 compared with a gain of 21.99% for the industry.
Coming back, the acquisition of SquareTrade has been funded with corporate cash and debt issuance. Allstate believes that this transaction will have an impact on its existing share repurchase program. The transaction will be dilutive to the company’s earnings per share for the next three years.
The company’s protection plans are distributed by many of America's major retailers like Amazon, Costco, Sam's Club, Target, Staples and Office Depot.
Also, SquareTrade's commendable customer service, innovative product design, analytics and supply-chain logistics will boost AllState’s already strong revenue base and innovative strategies. In addition, this acquisition will expand Allstate's customer relationships with 25 million protection plans for consumer electronics and connected devices.
A day earlier, the company announced another growth plan which involved strengthening its sales force in Delaware, District of Columbia, Maryland, Virginia and West Virginia. This plan of boosting the sales force was mainly aimed at keeping pace with growing consumer demand for insurance, and financial products and services in the Mid-Atlantic region.
Allstate carries a Zacks Rank #4 (Sell).
Stocks to Consider
Investors can look at some better-ranked stocks from the Property & Casualty insurance market like, Axis Capital Holdings Ltd AXS, State National Companies, Inc. SNC and Arch Capital Group Ltd. ACGL. While Axis Capital and State National sport a Zacks Rank #1 (Strong Buy), Arch Capital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It posted positive surprises in the last four quarters with an average beat of 9.27%.
Axis Capital is one of the several insurance carriers formed to take advantage of the growing need for insurance following the 9/11 terrorist attacks. The company also posted positive surprises in the last four quarters with an average beat of 30.19%.
State National, another property, casualty and mortgage insurance provider in the U.S., posted positive surprises in two of the last four quarters with an average beat of 21.28%.
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Allstate Corporation (The) (ALL): Free Stock Analysis Report
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