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Allstate: Reports That Activist Trian Has Built a Stake

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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.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Brett Horn

Senior Equity Analyst
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Brett Horn, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers insurers and credit bureaus. He also oversees the equity research team’s stewardship rating methodology.

Before joining Morningstar in 2006, Horn worked in the banking industry for about a decade, most recently as a commercial loan officer for First Bank, where he was responsible for underwriting loans and managing relationships with middle market clients. Before that, Horn worked for Mizuho Corporate Bank, where he managed loan portfolios and client relationships, primarily with Fortune 500 companies.

Horn holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Wisconsin and a master’s degree in business administration from the University of Illinois. He also holds the Chartered Financial Analyst® designation. He ranked first in the business and industrial services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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