There are many reasons for investors to own shares of the nation's largest publicly held personal lines insurer, with 16 million households. The company's business model is one of them. It sells a broad range of products through its own "captive" agents that can be bundled together to help increase customer retention. Its shares closed Monday at $59.16, up nearly 8.5% for the year to date.
In the age of smartphones and mobile devices, Allstate recently became the first major insurer to market a smartphone app to keep an eye on how younger drivers are performing when they're behind the wheel. Allstate knows families with teen drivers need to keep insurance costs down while monitoring whether their teens are driving safely.
This tool, called the Drivewise Mobile app, collects the driver's speed, time of day, and hard braking events along their route. It's an effective way for an insurance company and its customers to use technology to encourage safe driving while rewarding safe drivers with savings on their auto insurance.
Below is a one-year chart confirming that investors are pleased and have been driving the share price higher.
Since bottoming on Feb. 5 at $49.18 shares have rocketed over 21% to a 52-week high of $59.68 on June 6. The company's income from continuing operations and quarterly retained earnings growth rate remained robust during the first quarter of 2014.
Allstate is actively returning cash flow to investors via share buybacks which were recently boosted by proceeds from the sale of previously owned Lincoln Benefit Life. In the first quarter of 2014 Allstate paid out $113 million in dividends and repurchased $987 million in stock.
The company has about $1.5 billion available under its current $2.5 billion share repurchase authorization plan. This combined with a modest forward PE ratio of only 10 leads me to believe the stock could move 10% higher during the next 12 months to $65.
Word gets around when an insurance company offers technologies that help customers save money and protect loved ones. It's a big reason that this iconic brand will continue to attract new business by convincing prospects that too can be "in good hands with Allstate".
At the time of publication the author had no positions in any of the companies mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Marc Courtenay is the founder and owner of Advanced Investor Technologies LLC as well as the publisher and editor of www.ChecktheMarkets.com.