A commercial property and casualty insurance company, Loews Corporation (L) offers specialty insurance products, such as surety and fidelity bonds, property insurance products, and casualty insurance products. On the other hand, The Allstate Corporation (ALL) provides property, casualty, and other insurance products. The company’s segments include Allstate Protection; Protection Services; Allstate Life; and Allstate Benefits.
The U.S. property and casualty insurance industry managed to stay afloat last year despite the pandemic. While overall premium volume declined, many insurers witnessed solid underwriting profitability. High inflation increased insurance premiums, benefiting the home insurance sector. Climate change is also contributing to higher rates. According to a Mordor Intelligence report, the U.S. property and casualty insurance market is expected to grow at a CAGR of 6% by 2025. Therefore, both L and ALL should benefit.
L has gained 7.1% over the past three months, while ALL has generated negative returns. Also, L’s 12.6% gains over the past nine months are significantly higher than ALL’s 2.4% returns. Moreover, L is the clear winner with 28.3% gains versus ALL’s 7% returns in terms of the past year’s performance.
But which of these two stocks is a better buy now? Let’s find out.
On October 12, 2021, Loews Hotels & Co, a wholly-owned subsidiary of L, officially broke ground on the new $550 million Loews Arlington Hotel and Convention Center. Jonathan Tisch, Chairman & CEO, Loews Hotels & Co., said, “Loews Arlington Hotel and Convention Center will allow us to capitalize on what we do best – combine a unique meetings and events destination with a best-in-class leisure resort.”
On November 29, 2021, ALL announced it had reached an agreement to sell the property making up the majority of its campus in Northbrook, Illinois, to Dermody Properties for approximately $232 million. The sale will also reduce real estate expenses and further advance Allstate’s multi-year Transformative Growth initiative to increase personal property-liability market share by building a low-cost insurer with broad distribution.
Recent Financial Results
L’s revenues decreased 2.8% year-over-year to $3.37 billion for the fiscal third quarter ended September 30, 2021. However, its net income grew 51.9% year-over-year to $246 million. Also, its EPS came in at $0.85, down 70% year-over-year.
ALL’s revenue increased 18% year-over-year to $12.48 billion for the fiscal third quarter ended September 30, 2021. However, its adjusted net income declined 75.9% year-over-year to $217 million. Also, its adjusted EPS came in at $0.73, down 74.6% year-over-year.
Past and Expected Financial Performance
L’s EBIT and EPS grew at CAGRs of 7.2% and 16%, respectively, over the past three years. L’s EPS is expected to grow at a rate of 14% per annum over the next five years.
On the other hand, ALL’s EBIT, and EPS grew at CAGRs of 19.9% and 25.1%, respectively, over the past three years. ALL’s EPS is expected to decline at a rate of 5% per annum over the next five years.
ALL’s trailing-12-month revenue is 3.51 times what L generates. However, L is more profitable with gross profit margin and net income margin of 39.39% and 11.12% compared to ALL’s 29.41% and 6.62%, respectively.
On the other hand, ALL’s ROE, ROA, and ROTC of 23.95%, 4.24%, and 15.82% are higher than L’s 9.37%, 2.08%, and 5.84%, respectively.
In terms of trailing-12-month EV/S, L is currently trading at 1.65x, 96.4% higher than ALL’s 0.84x. However, ALL’s trailing-12-month P/B ratio of 1.37x is 67.1% higher than L’s 0.82x.
L has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, ALL has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
L has a C grade for Growth and Sentiment, consistent with analysts’ expectations that its EPS will increase in the upcoming years. On the other hand, ALL has an F grade for Growth and Sentiment, in sync with analysts’ expectations that its EPS will decline in the long term.
Of the 55 stocks in the Insurance – Property & Casualty industry, L is ranked #8. In comparison, ALL is ranked #28.
Despite the resurgence of COVID-19 cases, the property and casualty insurance industry is well-positioned to grow. Therefore, both L and ALL should benefit. However, it is better to bet on L now because of its better growth prospects.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Insurance – Property & Casualty industry here.
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ALL shares were unchanged in after-hours trading Monday. Year-to-date, ALL has gained 10.44%, versus a 29.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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