Allstate: Reports That Activist Trian Has Built a Stake
There have been media reports that activist hedge fund Trian Fund Management has built a stake in no-moat Allstate ALL. We think Allstate’s recent run of poor results stems from unusually high catastrophe losses and negative industry trends within personal auto, and we don’t attribute recent losses to poor management. However, we have long had concerns that Allstate’s management was prioritizing growth over profitability, and its attempts to expand beyond its core captive agent channel have met with little success, in our view.
We believe shareholders might be better served if management simply accepted the company’s limited growth prospects and attempted to maximize profitability and capital return. As a result, we think the presence of an activist investor might be welcome in terms of imposing some discipline. However, at this point, we do not know whether Trian would share this view or what strategic changes they might suggest. As such, we will maintain our $122 fair value estimate. We see shares as roughly fairly valued at the moment.
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