Allstate’s In Good Hands, Without the TARP (ALL)

The Allstate Corporation (NYSE: ALL) has decided to not participate in the Troubled Asset Relief Program, or the TARP, after a careful review by the company.  Management believes the company is strongly capitalized without the government funds. The insurer has declared a quarterly dividend of $0.20 per share of common stock.

After reviewing the TARP, Allstate decided that its “strong capital and liquidity positions” are sufficient to not require help from Uncle Sam.  The insurer probably also decided that answering to Congressional inquiries and getting instant scrutiny over pay wasn’t the best strategy for nation’s largest publicly held personal lines insurer.

Allstate said that its capital is broken down as being $12.2 billion in GAAP equity and $23.1 billion in cash or highly liquid assets in its investment portfolio at the end of the first quarter of 2009.

The company also noted that these positions reflect proactive capital management steps taken over the past year.  The company has already suspended its stock buyback program, while reducing investment risks and cutting its operating expenses.

Since the end of the last quarter, Allstate completed a $1 billion debt offering and reported a more than $1.5 billion improvement in its securities portfolio value as of May 13.  The dividend is payable in cash on July 1, 2009 to stockholders of record at the close of business on May 29, 2009.   Paying the dividend of $0.20 is the same as last quarter’s $0.20 payment, but that was $0.41 per quarter in 2008.  Maintaining the current rate is the company’s statement that it has adequate capital (and possibly earnings coverage) through time to maintain that rate.

Shares of Allstate are up 3.6% at $26.78 after about 35 minutes of trading, and the 52-week trading range is $13.77 to $51.55.

JON C. OGG
MAY 19, 2009